Board of Directors Fiduciary Duty

News & Analysis as of

Commercial Restructuring & Bankruptcy Alert - October 2016

Welcome to the October 2016 issue of the CR&B Alert, the newsletter produced by Reed Smith's Commercial Restructuring & Bankruptcy Group. Excerpt from newsletter: DELAWARE AND NEW YORK AT ODDS OVER RECLAMATION...more

Court Of Chancery Dismisses Post-Closing Claims Under Corwin

Under the recent Corwin decision, a fully-informed vote by uncoerced and disinterested stockholders to approve a merger invokes the business judgment rule and effectively precludes almost any claim the merger was improper. ...more

Court Applies 'Corwin' and Upholds Board's Adoption of Dissolution Plan

Contract and fiduciary duty law intersect when how a board acts, including the vote required, is affected by a shareholder agreement. Such agreements are common to enable investors to protect their investment, either through...more

Court Of Chancery Details Application of M&F Worldwide Criteria

A merger approved in accordance with the criteria set out in the M&F Worldwide decision is subject to the business judgment standard of review, and vulnerable to attack only if its terms are so extreme as to constitute waste....more

Court Of Chancery Holds Revlon Does Not Apply In Dissolution

This decision holds that Revlon duties are not implicated by a decision to liquidate a company. Hence, the Court will not scrutinize whether the board sought to get the best possible deal for company assets....more

Delaware District Court Examines An Officer’s Fiduciary Duties When Projecting Revenues

Revenue projections are an inexact science, but they should have some basis in fact. Where they are alleged to be without a basis in reality, and indeed contrary to reality, a court may, as here, find that an officer’s...more

Gavel to Gavel: The insolvency dilemma for directors

In light of a recent swell of bankruptcies in Oklahoma and surrounding areas – predominantly triggered by the turbulent energy market – directors should fortify their understanding of fiduciary duties owed to companies in...more

Corporate Law & Governance Update - September 2016

The following developments from the past month offer guidance on corporate law and governance law as they may be applied to nonprofit health care organizations: BUSINESS ROUNDTABLE GOVERNANCE GUIDELINES - In an...more

Court Of Chancery Explains When Prior Dismissal Does Not Preclude Another Derivative Case

This is an important decision because it explains when a prior dismissal of a derivative complaint does not preclude a second complaint alleging a wrong close to that alleged in the dismissed case. It distinguishes a...more

Managing the Transition to Transformation: Corporate Governance and the Transition to Transformation

McDermott’s Managing the Transition to Transformation series is designed to help health systems and other health care industry leaders address the many challenges presented by the transformation in payment and care delivery...more

Court Of Chancery Again Explains Scope Of The Corwin Doctrine

This is one of two recent Court of Chancery decisions explaining that the Corwin case really does mean that there is an “irrebuttable business judgment rule” that bars challenges to a merger approved by a majority of the...more

Court Rules in Favor of Investment Adviser after Trial in Section 36(b) Excessive Fee Case

In a case closely watched by the mutual fund industry, the federal district court in New Jersey ruled on Thursday in favor of a mutual fund’s investment adviser and against the shareholders who had brought the lawsuit under...more

In re Volcano Corporation Stockholder Litigation, C.A. No. 10485-VCMR (Del. Ch. June 30, 2016) (Montgomery-Reeves, V.C.).

In this memorandum opinion, the Court of Chancery dismissed claims for breach of fiduciary duty under Chancery Rule 12(b)(6), holding that an irrebuttable business judgment rule standard applies to a merger effected under...more

Delaware Law Updates – Court of Chancery Puts Boards of Directors on Notice that Contracting Away Derivative Claims in a Merger...

Vice Chancellor Glasscock has held that a merger designed to eliminate derivative claims against a majority of directors justified the application of the entire fairness standard of review in a direct challenge to the merger....more

Obeid v. Hogan, C.A. No. 11900-VCL (Del. Ch. June 10, 2016) (Laster,VC)

In this memorandum opinion, the Court of Chancery held that it was an improper abdication of authority for the board of directors of a Delaware limited liability company that had adopted the governance structure of a...more

Corporate Law & Governance Update - August 2016

The Hershey Governance Settlement - On Friday, July 29, the Pennsylvania Attorney General, the Hershey Trust Company and the Milton Hershey School, entered into a written settlement resolving an investigation conducted...more

Delaware Chancery Court Finds that Director Defendants Can Not “Merge Their Way Out of” Breach of Fiduciary Claims

On July 28, 2016, the Delaware Chancery Court allowed claims of unfair dealing against the Board of property management company Riverstone National Inc. to survive where the directors facilitated a merger that forestalled a...more

SEC Approves Nasdaq “Golden Leash” Disclosure Rule

On July 1, 2016, the Securities and Exchange Commission approved Nasdaq’s proposal for a “golden leash” disclosure rule (Rule 5250(b)(3)) requiring listed companies to publicly disclose benefits given by investors or other...more

U.S. Court for District of Minnesota Dismisses Target Data Breach Shareholder Derivative Suits

On July 7, 2016, the United States District Court for the District of Minnesota granted Target’s unopposed motion to dismiss the derivative actions filed by a number of shareholders against the company relating to the...more

Court Of Chancery Dismisses Previously Dismissed Case

What happens when a derivative claim is filed outside of Delaware and then is dismissed by that other court? Well even if the other complaint might have stood up in Delaware, the subsequently filed Delaware case will also be...more

Court Of Chancery Applies Business Judgment Rule After Majority Tender Shares

In what might be one of the most important decisions this year, the Court held that the tender of their shares by a majority of the stockholders invokes an “irrebuttable” presumption that the business judgment rule applies...more

Tenth Circuit Upholds Nevada Law By Denying Stockholders Standing to Bring Claims on Behalf of Nevada Corporation

In In re Zagg Inc. Shareholder Derivative Action, No. 15-4001, 2016 U.S. App. LEXIS 11095 (10th Cir. June 20, 2016), the United States Court of Appeals for the Tenth Circuit held that stockholders of a Utah-based, Nevada...more

Are A Breach Of Fiduciary Duty And A Breach Of Governing Documents “Non Bis In Idem”?

Last week, I discussed the Court of Appeal’s consideration of whether the business judgment rule protects a director from claims based on breach of the corporation’s governing documents. See Does The Business Judgment Rule...more

Delaware Chancery Court Rejects MBO Merger Price as Best Evidence of Fair Value in Appraisal Proceeding

In In re Appraisal of Dell Inc., No. 9322 VCL, 2016 Del. Ch. LEXIS 81 (Del. Ch. May 31, 2016) (Laster, V.C.), the Delaware Court of Chancery determined that the fair value of the common stock of Dell Inc. (“Dell” or the...more

Blog: DE Court Comments on Block-Holder Rights in OptimisCorp

The Delaware Supreme Court issued an Order this week in OptimisCorp v. Waite that could have implications for VC-backed or other companies with so-called “block-holder” directors – or directors who are appointed by a...more

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