Delaware Supreme Court Clarifies Standards in Corporate Takeovers

On May 6, 2016, the Delaware Supreme Court upheld a merger between Zale Corporation (“Zales”) and Signet Jewelers Limited (“Signet”) when it affirmed a lower court’s dismissal of a shareholder class action that sought to enjoin the merger, thereby allowing the merger to go forward.1 In so ruling, the court gave some comfort to boards of directors and their financial advisors by clarifying the limits of liability when a corporate sale is approved by an informed majority of disinterested shareholders. In that situation, when a corporate change in control has been approved by a majority of informed, disinterested shareholders, Delaware courts will almost always dismiss claims seeking to avert the transaction.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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