Author: Kanak Vashisth
To the point
By 2025, a cybersecurity breach will not be considered merely a technical failure but will instead be regarded as a failure related to law and governance, with consequences that keep piling on. Potential consequences are now not limited to administrative sanctions but also shareholder derivative suits, indemnity contractual disputes, criminal liability in such jurisdictions as: and personal liability for executives and directors. Under the reverse approach of obligation to perform security measures where any failure to prevent certain foreseeable threats would be a breach of their duty to perform.
Use of legal jargon
A corporation in 2025 would have to navigate a legal landscape blending strict liability under certain statutes, negligence per se, and fiduciary oversight doctrines. Under the Caremark standard (applying Delaware corporate law), boards of directors are under a fiduciary duty of oversight requiring them to ensure the establishment of adequate information reporting and compliance systems. The proximate cause analysis in cyber litigation now often considers whether the corporate omission (passing on patching a security vulnerability when there was a known solution) was a substantial factor in bringing about the loss. Vicarious liability will arise whenever contractors cause a breach within the scope of their agency or outsourcing agreement.
THE PROOF
SEC has penalized public companies who failed to report a major data breach within four business days with fines exceeding $120 million. A technology company was fined $18 million just 11 days after the hack, despite receiving alerts. Companies that commit to providing high-security measures are being penalized by the FTC, including an online retailer that stored passwords without proper encryption. California’s new privacy laws allow businesses to sue for breaching security measures, including the discovery of invasive virus tests on unusual laptops and the publication of patient records, even if customers have not provided any evidence. In one of the hacks that involved retrieving millions more of customer records, hackers charged a telecom company this amount. India will implement the DPDH Act by 2025. A prominent technology firm was fined 150 crore (about $18 million) for failing to disclose the personal and financial details of more than 4 million individuals through an online platform. The company’s failure to report a data breach before an Indian Data Protection Board contributed to the fine, in addition. Meanwhile, cyber insurance companies are making it more challenging to collect payment following a security breach.’ A significant number of people are hesitant to disclose information about foreign governments’ attacks, insider threats, or illegal ransomware payments. Effective measures, such as established security standards like NIST CSF or ISO 27001, must be followed by companies to ensure effective measures.
Abstract
Various sources can contribute to the problem, such as the government charging an individual for breaching privacy regulations or taking legal action against shareholders who drop their shares after breaches, business partners who violate contracts and company leaders who face criminal charges. Additionally? The statement demonstrates that cybersecurity is no longer solely a technical issue, and now companies must handle it legally. They can be personally liable for any breach of the company’s data protection policies. According to the article, cyber insurance no longer provides a safety net like it did before, with insurance companies now charging less and not offering coverage for certain attacks. The article also highlights real-world instances of companies being held accountable for breaches. It provides an explanation of how a company can be held accountable even if unauthorized access to one of its vendors causes infringement, why the law requires companies to constantly look for cyber threats, and how it is becoming more difficult for companies in court to defend themselves after committing to breach.
Case law
SEC v. SolarEdge Technologies, Inc. (S.D.N.Y, 2025)
Personal data of around 2.4 million customer accounts was compromised by SolarEdge Technologies in a cybersecurity breach. Investors were notified of the breach by the company, who failed to report it immediately due only to 11 days after the new cybersecurity disclosure rule (effective Dec 2024).
The company cited the need for time to investigate the incident and confirm the extent of the breach before making it public. This was their reason for the delay. Would it be reasonable to disregard the SEC’s reporting deadline of 4 business days if necessary, as asked by the court?
Court decision ruled that there was no legal justification for the delay. Only those situations where the disclosure of a breach could be postponed due to the potential for serious national security or law enforcement investigation, not this case. That meant the SEC paid out an $18 million penalty.
The effect of internal investigations in companies was demonstrated by this case, which also clarified that they cannot use them as a tool to delay breach disclosures. The four-day rule is rigorous, and the penalty indicates that SEC will enforce it with great intensity.
2. Reaction to Meta Platforms Data Breach Litigation (N.D.” ). Cal, 2025)
Within a span of 18 months, Meta Platforms, the parent company of Facebook, was exposed to multiple data breaches. Meta’s board of directors was sued by shareholders for not having proper systems in place to monitor cybersecurity risks, leading to a derivative lawsuit. This lawsuit was filed on behalf of the company.
The Court granted permission for the lawsuit to proceed under the Caremark standard, a legal doctrine that requires corporate directors to establish and monitor systems that inform them of risks impacting their organization. According to the court, cybersecurity is now an essential governance responsibility that cannot be delegated solely to IT departments.
This ruling has established that directors and officers can be held personally liable for not actively monitoring and managing cyber risks. Similarly, cybersecurity oversight becomes just as important to boards because it raises the stakes.
Conclusion
A cybersecurity breach in 2025 is not limited to a computer issue, as it can pose significant legal and leadership challenges. Companies can face various consequences if their data is stolen, such as significant government fines, shareholder lawsuits and legal disputes with business partners or even criminal charges against company leaders in some countries. In the real world, such as with SolarEdge, Meta and QuantumCloud, this has become a serious issue. SolarEdge was fined for allegedly postponing the disclosure of a breach to investors. Meta’s
FAQs
Q1: Can an executive be jailed for a breach?
Yes, in certain jurisdictions like Singapore and under U.S. criminal statutes where willful neglect or fraud is proven.
Q2: Are we liable if a vendor is breached?
Usually yes, unless liability is clearly and enforceably shifted in contract, and due diligence is demonstrably performed.
Q3: How quickly must we report a breach?
SEC: 4 business days (for public companies, material incidents).
EU NIS2: Initial notice within 24 hours.
Some state and sectoral rules are stricter.
Q4: Will cyber insurance always pay?
No. Exclusions, compliance failures, and policy caps mean full recovery is rare.
Q5: Can disclaimers protect us?
Not from statutory duties or gross negligence — courts regularly strike down overbroad waivers.
