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ARTICLE · 17 MAY 2020

Another Caremark Claim Survives Dismissal

Cooley LLP
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Kandi, which is based in China and went public through a reverse merger, sells parts to a joint venture, which uses the parts to manufacture electric vehicles.

United StatesAccounting and Audit
Cydney Posner
Cydney Posner
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Are the allegations in Hughes v. Hu an example of the SEC/PCAOB's recent cautionary Statement on emerging market risks come to life? (See this PubCo post.) The case involves a Caremark claim against the audit committee and various executives of Kandi Technologies, a publicly traded Delaware company listed on the Nasdaq Global Select Market and based in an emerging market country. The complaint alleged that they consciously failed "to establish a board-level system of oversight for the Company's financial statements and related-party transactions, choosing instead to rely blindly on management while devoting patently inadequate time to the necessary tasks." You might recall that, in Marchand v. Barnhill (June 18, 2019), then-Chief Justice Strine, writing for the Delaware Supreme Court, started out his analysis with the recognition that "Caremark claims are difficult to plead and ultimately to prove out," and constitute "possibly the most difficult theory in

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