On May 29, 2013, the Delaware Chancery Court (Strine, C.) held that when a controlling stockholder merger has, from the time of the controller’s first overture, been subject to (1) negotiation and approval by a special committee of independent directors fully empowered to say no to the controlling stockholder and which has met its duty ofcare, and (2) approval by an uncoerced, fully informed vote of a majority-of-the-minority stockholders, the business judgment rule standard of review applies. Accordingly, under such a standard, a Delaware court would be (a) precluded from inquiring into the substantive fairness of the transaction and (b) required to dismiss the challenge to the merger, unless the merger’s terms were so disparate that no rational person acting in good faith could have thought the merger was fair to the minority.
The MFW decision is significant as it addresses the question of whether a merger with a controlling stockholder could be subject to a standard of review other than entire fairness.
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