In Stewart v. Wilmington Trust (March 26, 2015), the Delaware Chancery Court characterized the outside auditor and the administrative management company for certain captive insurance companies as having a “gatekeeping role” for the companies. On that basis, the court refused to dismiss claims against them for aiding and abetting the alleged breaches of fiduciary duties of the companies’ directors. The decision expands the Chancery Court’s recent focus on the gatekeeper concept, underscoring the potential for aiding and abetting liability for advisors.
Focus on advisors who have a “gatekeeper” role. An advisor to a board may have aiding and … Read more
Proposed amendments to the Delaware appraisal statute announced recently are expected to be adopted by the Delaware Legislature. The stated purpose of the amendments is to reduce the recent rise in the volume of appraisal petitions. If adopted, the amendments would apply to merger agreements entered into on and after August 1, 2015.
The proposed amendments.
- Option for companies to reduce interest cost (the “Interest Reduction Amendment”). This Amendment would provide an option for a company in an appraisal proceeding to pay a cash amount to the dissenting shareholders before the appraisal proceeding ends (an “Upfront Payment”). Statutory interest would
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Recent Delaware decisions have reinforced the expansive power and authority of a board to adopt and enforce corporate bylaws. Advance notice bylaws have become commonplace; exclusive forum bylaws are becoming more prevalent; and adoption of fee shifting bylaws generally awaits action by the Delaware legislature, which is expected in the upcoming 2015 session.
Exclusive Forum Bylaws
An exclusive forum bylaw typically requires that intra-corporate litigation (such as stockholder suits) be brought only in the courts of a specified state (generally where the corporation is incorporated, and sometimes where it is headquartered). The purpose is to increase the predictability and efficiency … Read more
In In re Zhongpin Inc. Stockholders Litigation (Nov. 26, 2014), the Delaware Chancery Court found that the plaintiffs had pled sufficient facts to raise an inference that Xianfu Zhu, who was the company’s founder, Chairman and CEO, was a controlling stockholder, even though he owned only 17% of the company’s stock and had not controlled the directors’ decision relating to his going-private bid. Vice Chancellor Noble’s decision appears to have been based on a conclusion that the unusual degree to which Zhu was indispensable to the company as a practical matter precluded the special committee from functioning effectively because—without Zhu’s … Read more
From 2004 through 2010, the number of appraisal petitions filed in Delaware rose and fell roughly in parallel with the overall level of merger activity, with appraisal rights being asserted in about 5% of the transactions for which they were available. In 2011, however, the rate of petitions more than doubled (to 10%) and it has continued to increase. In 2013, 28 appraisal petitions were filed in Delaware, representing about 17% of appraisal eligible transactions. In 2014, so far, more than 20 appraisal claims already have been filed in Delaware. The amounts at stake in appraisal actions have increased as … Read more