Delaware Court of Chancery Will Evaluate Third-Party Sales of Controlled Companies Under the Enhanced Scrutiny Standard of Review
The Delaware Court of Chancery recently held that a stockholder plaintiff pleaded facts sufficient to support a reasonable inference that a target company’s board of directors could have achieved a higher deal price had the company’s financial advisor not, unbeknownst to the board, tipped the buyer about the price of another bid during the sale process.
California Court Upholds Delaware Corporation’s Exclusive Federal Forum Charter Provision
The Superior Court of California, County of San Mateo, recently enforced a Delaware corporation’s charter provision mandating that claims brought under the Securities Act of 1933 be filed in a federal court. This marked the first decision outside of Delaware to enforce an exclusive federal forum provision since the Delaware Supreme Court decided in March 2020 that such provisions are valid under Delaware law.
Management of a Delaware Corporation Cannot Unilaterally Withhold Privileged Information From Directors
The Delaware Chancery Court recently found that directors serving on a special committee were entitled to privileged communications between management and company counsel because there was no formal board process to wall off those directors or other actions at the board level demonstrating “manifest adversity” between the company and those directors.
Entire Fairness Standard Applied When Controlling Stockholder Negotiated Economic Terms With a Minority Stockholder Before MFW Protections Were in Place
The Delaware Chancery Court recently held that a going-private transaction was not entitled to the deferential business judgment standard of review because the controlling stockholder failed to condition the transaction on special committee and minority stockholder approval before engaging in substantive economic discussions with a minority stockholder. In re HomeFed Corp. S’holder Litig., C.A. No. 2019-0592-AGB (Del. Ch. July 13, 2020).
Delaware Supreme Court Revives Stockholder Suit Challenging CEO’s Failure to Disclose Proposed Post-Merger Compensation Increase to the Board
The Delaware Supreme Court held that the Chancery Court erred in finding that a proposed compensation package that would substantially increase a CEO’s compensation post-merger was not material to the other directors’ approval of the merger.