Delaware Court Applies Entire Fairness Standard to MultiPlan de-SPAC

The decision adopts enhanced scrutiny of director fiduciary duties for de-SPAC transactions, but suggests dismissal may be appropriate when stockholders exercise redemption rights on a fully informed basis.

On January 3, 2022, Vice Chancellor Lori Will of the Delaware Court of Chancery issued a much-anticipated ruling in the MultiPlan stockholder litigation. This is the first time any court has addressed the applicable standard of review for breach of fiduciary duty claims in the context of a de-SPAC merger. The court focused primarily on the incentives associated with founder’s shares - a common feature of SPACs through which SPAC sponsors, and often SPAC directors, receive economic benefits that are not shared by all SPAC common stockholders - and held that the transaction involved inherent conflicts that required the application of the heightened entire-fairness standard of review.

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