Snap Inc. Hit With Challenge to Co-Founder Liability Shield

Snap. Inc. is facing investor litigation in Delaware over claims that the company’s co-founders exploited its multi-class stock structure to adopt a liability shield for themselves without the required shareholder approvals.

The lawsuits target an August amendment to Snap’s charter that eliminates fiduciary breach liability for its executives to the maximum extent permitted by a new statute enacted in August. State law previously permitted such “exculpatory” clauses only for board members, not for management.

Clauses limiting board member liability to situations involving bad faith or disloyalty have become standard since they were first allowed in 1986, and Delaware court watchers ...