Covers state and federal laws  governing
corporate loans to insiders

• Sarbanes-Oxley Act banned personal loans to directors and executive officers by public companies and other issuers

Delaware GCL § 143

Ronsdorf v Jacobson (Del Ch 2004)

• Controlling stockholder must prove the entire fairness of his receipt of unauthorized loans
• Interest-free loans to corporate officers and directors are not per se prohibited under Delaware law
• Motion to dismiss granted in part, denied in part

Maclary v Pleasant Hills (Del Ch 1954)

Armstrong v Pomerance (Del 1980)

Aronson v Lewis (Del 1984)

Theodora Holding v Henderson (Del Ch 1969)

Statutory ban on personal loans to directors and executive officers by issuers

• Codified as Exchange Act § 13(k)
• Effective July 30, 2002, without need for SEC rule-making

Applies to "any director or executive officer
(or equivalent thereof) of that issuer"

Applies to material modification or renewal of
any pre-existing loan

• Makes exceptions for financial institution issuers
• Doesn't apply to registered investment companies
  per Sox Act § 405

25 firm joint interpretive memo (2002)
Addresses interpretive issues for § 402, including:

SEC_CODE_REF_0090001192884

Latham & Watkins memo statutory construction of § 402

Exemption for foreign banks

Developments

Delaware General Corporation Law