Texas Lawyer Guest Article: Don't Let the Board Get Hammered: A Pair of Tools for Controlling Shareholder Takeovers

04/07/2014

On March 14, the Delaware Supreme Court issued an opinion, Kahn v. M&F Worldwide Corp., that's a game-changer in breach of fiduciary duty litigation.

The business judgment standard, rather than the more stringent entire fairness standard, will apply in breach of fiduciary duty cases involving a corporate takeover by a controlling shareholder, held the court, so long as the defendants establish before trial that two procedural protections for minority shareholders were in place as mandatory conditions precedent to the transaction.

Those protections are: approval by an independent, adequately empowered special committee of the board of directors, which in fact fulfilled its duty of care in approving the transaction; and approval of the transaction by the uncoerced, informed vote of a majority of the minority stockholders.

Excerpted from the Texas Lawyer, April 7, 2014.

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