Fiduciary duties are fundamental concepts in Delaware corporate law. Directors and officers owe duties of care and loyalty, and from these obligations flows a duty to disclose information to stockholders, as in In re Wayport Litigation, 76 A.3d 296, 314 (Del. Ch. 2013). In Heng Ren Silk Road Investments v. Hamlin Chen and China Automotive Systems, 2019-0010-JTL (Del. Ch. July 16, 2019), the Delaware Court of Chancery relied on these principles to support an order denying a motion to dismiss breach of fiduciary duty claims emanating from disclosure obligations when soliciting stockholder action or offering statements regarding the business or affairs of a corporation.

Background

China Automotive Systems is a publicly traded Delaware corporation managed by a five-member board of directors (the board and, together with the company, the defendants). Three of the directors are nonemployees. Of the remaining two directors, one serves as the board’s chairman and the other serves as the company’s CEO and holds more than 56% of the company’s stock.

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