Virginia is for Lovers and Directors: Important Differences Between Fiduciary Duties in Virginia and Delaware

Virginia and Delaware have different approaches to a director’s fiduciary duties. The Virginia Stock Corporation Act imposes a deferential subjective standard of conduct that allows the more-frequent application of its business judgment rule. Virginia courts have followed the Virginia Stock Corporation Act and have shown even more deference to the decisions of directors than the Virginia Stock Corporation Act may require. In addition, Virginia courts have been reluctant to hold that additional constituencies, beyond the corporation and shareholders as a class, are owed fiduciary duties.

Finally, Virginia courts have not imposed “enhanced scrutiny” on the decisions of directors involving hostile takeovers or changes of corporate control analogous to those fashioned by Delaware in Unocol Corp. v. Mesa Petroleum Co. and Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. Virginia does not impose fiduciary duties between shareholders or between the board and minority shareholders, while Delaware has fashioned such duties. The statutory and judicial deference in Virginia, the narrower set of constituencies to attack a director’s action or inaction, and the absence of any enhanced scrutiny in the hostile takeover and change of control context gives Virginia a strong argument that it is more director-friendly than Delaware.