News & Analysis as of

Business Judgment Rule

Delaware Court Of Chancery Holds That Addition Of MFW Protections Following Initial Controller Proposal But Before Negotiations...

by Shearman & Sterling LLP on

On February 2, 2018, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery dismissed a stockholder challenge to the buyout of Synutra International Inc. (“Synutra”) in a squeeze-out merger by a controlling...more

Directors Fail To Escape Liability For Approving Dividend

by Allen Matkins on

I last wrote about FDIC v. Ching, 2014 U.S. Dist. LEXIS 92687 (E.D. Cal. July 8, 2014) in July of 2014. That post concerned Judge Kimberly J. Mueller's ruling that California's statutory restrictions on distributions to...more

Accountant and Attorney Liability NewsBrief - Winter 2018

by LeClairRyan on

Our attorneys have published the Winter 2018 edition of LeClairRyan's Accountant and Attorney Liability NewsBrief, available. Please see full Publication below for more information....more

New considerations for director compensation awards in light of Delaware Supreme Court's recent decision in In re Investors...

by Hogan Lovells on

The subject of director compensation awards has been moving up the corporate governance agenda of many public companies since December 2017. ...more

Impact of Compensation-Related Litigation on Public Companies

Compensation-related litigation and threats of litigation continued to significantly impact public companies in 2017. These companies should be mindful of issues that were raised in recent litigation: proxy disclosure,...more

Judge Kaplan Declines to Apply Business Judgment Rule Where Corporate Board’s Decision Lacked Rational Support

Key Takeaway: Where there were “serious questions” about the independence of a board and the good faith of its decision not to pursue a derivative suit against a former director, Judge Kaplan refused to apply the...more

Delaware Court of Chancery Extends Business Judgment Deference to Controller-Driven Stock Reclassification Transaction

by Polsinelli on

Recent Delaware court decisions have underscored the value of procedural safeguards in controlling stockholder transactions—which, at least when involving minority freeze-outs, historically were subject to entire fairness...more

Hot Topic for 2018 Proxy Season: Director Compensation in Wake of New Delaware Supreme Court Ruling

by Pepper Hamilton LLP on

In an important recent opinion, the Delaware Supreme Court ruled in In re Investors Bancorp, Inc. Stockholder Litigation that certain director compensation decisions would be reviewed under the “entire fairness” standard...more

Better Part of Valor: Delaware Supreme Court Rules No Ratification Defense for Director Grants under Discretionary Plans

by Farrell Fritz, P.C. on

What happens when corporate directors approve their own awards under an equity incentive plan? Under Delaware law, so long as the plan is approved by a majority of the fully informed, uncoerced and disinterested stockholders,...more

“You’re Not Fully Clean”: § 220 Inspection Demands Under Corwin

by Shearman & Sterling LLP on

On December 29, 2017, the Delaware Court of Chancery declined to extend the ruling in Corwin by finding that the approval of a merger by a vote of the disinterested stockholders does not act as an impediment to a properly...more

Delaware Supreme Court Imposes New Limits on Stockholder Ratification Defense In Connection With Equity Incentive Plans

In In re Investors Bancorp, Inc. Stockholder Litigation, No. 169, 2017, 2017 WL 6374741 (Del. Dec. 13, 2017), the Delaware Supreme Court limited the ability of directors to assert the stockholder ratification defense when...more

Discretionary Director Compensation Subject to Entire Fairness Review

by White & Case LLP on

On December 13, 2017, on appeal from the Chancery Court, the Delaware Supreme Court in In re Investors Bancorp, Inc. Stockholder Litigation, Del. Supr., No. 169, 2017, Strine, C.J. (Dec. 13, 2017) ("Bancorp"), denied a motion...more

Delaware Chancery Court Extends Application of MFW Standard to Conflicted Stock Issuances

by Hogan Lovells on

In a recent decision, the Delaware Court of Chancery granted a motion to dismiss a complaint asserting breach of fiduciary duty claims arising out of a stock issuance proposed by a controlling stockholder. IRA Trust f/b/o...more

Delaware Supreme Court Limits Stockholder Ratification Defense for Director Compensation Decisions

by Shearman & Sterling LLP on

Last week, the Delaware Supreme Court, in In re Investors Bancorp, Inc. Stockholder Litigation (“Bancorp”), reversed the Delaware Court of Chancery and held that awards granted to directors under a stockholder-approved equity...more

Boards Beware: Delaware Supreme Court Limits Application of Deferential Standard for Reviewing Director Equity Awards

On December 13, 2017, the Delaware Supreme Court issued an opinion, In re Investors Bancorp, Inc. Stockholder Litigation, Case No. 169, holding that, except under limited circumstances, the court will not apply the...more

The Businesses Judgment Rule: Time for Conceptual Clarity

I wager that most readers of this post misunderstand the “business judgment rule” in some important regard, regardless of years of practice experience and whether you are a transactional or litigation corporate lawyer. It is...more

Court Of Chancery Expands MFW To Recapitalization

by Morris James LLP on

IRA Trust FBO Bobbie Ahmed v. Crane, C.A.. 12742-CB (December 11, 2017) - This is an important decision because it extends the holding of MFW to a stock reclassification. Under the 6-part test of MFW, the business judgment...more

Court Of Chancery Applies Corwin And Test For Control

by Morris James LLP on

Peter Van Der Fluit v. Yates, C.A. No. 12553-VCMR (Nov. 30, 2017) - Briefly, under Corwin, the informed vote of a majority of the disinterested stockholders subjects a transaction to the business judgment rule when the...more

Fifth Circuit Affirms Dismissal of Claims Relating to Pre-Petition Payments to D&O’s

The Fifth Circuit, in In the Matter of: ATP Oil & Gas Corp. (Tow v. Bulmahn, et. al.), dismissed breach of fiduciary duty claims and fraudulent transfer claims brought by a chapter 7 trustee relating to cash bonuses and...more

Court of Chancery Confirms MFW Applies to Controlled-Company Sale With Disparate Consideration

In 2014, the Delaware Supreme Court affirmed in Kahn v. M&F Worldwide Corp., 88 A.3d 635 (MFW II), that the business judgment rule would apply to controlling stockholder “squeeze-out” mergers if the transaction is conditioned...more

To Demand or Not Demand, “Futility” is the Question

by Farrell Fritz, P.C. on

Under Delaware law, the decision to commence litigation on behalf of a corporation is, of course, a fundamental exercise of business judgment, which decision rests with the Board of Directors. A shareholder, therefore,...more

Am I My Director’s Keeper?

by Gray Reed & McGraw on

Board of directors member Y.I. Gnough, who is also president of Algae Company, is in a pickle. Although denying any knowledge of sexual harassment and misconduct by the company founder and deal-maker Iam Algae, three co-board...more

Corporate Communicator - Fall 2017

by Snell & Wilmer on

Recent changes to Nevada corporate law reaffirm Nevada’s commitment to providing directors and officers with maximum deference in the exercise of their fiduciary duties on behalf of Nevada corporations. Specifically, Nevada...more

Q&A with Jake Krattiger

by GableGotwals on

Q: Does joining a corporate board impose any personal liability on board members? A: Joining a board doesn’t impose any personal liability on an individual per se, but improper actions taken while serving on a board can...more

Does California Side With Delaware Or New York On Special Litigation Committee Reviews?

by Allen Matkins on

As discussed in the two preceding posts, Nevada’s Supreme Court last week decided to adopt New York’s standard of review of special litigation committee recommendations to dismiss stockholder derivative suits. In re Dish...more

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