In Le Clair v. KnowBe4, Inc., the Delaware Court of Chancery recently dismissed a putative class action brought by former stockholders who claimed that two institutional investors and KnowBe4’s CEO had joined forces as a control group, and that the directors who approved the deal breached their fiduciary duties. The Court of Chancery rejected the control-group theory outright and held that, even assuming the board was conflicted, a fully informed stockholder vote cleansed the transaction.

The decision illustrates the fact-specific showing that plaintiffs need in order to plead the existence of a control group, as well as to plead a disclosure deficiency sufficient to challenge a stockholder vote approving a transaction.