Delaware courts have recently had opportunities to address the dual conditions for management of controlling stockholder conflict transactions under Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (“MFW”) and its progeny. That MFW structure provides a valuable tool for deal planners seeking to avoid litigation risk despite the presence of a controlling stockholder. The courts’ analysis under MFW provides extensive guidance regarding the effective implementation of measures for conflict management at both the board- and stockholder-levels, and that guidance may be applied in the context of transactions with and without a controlling stockholder conflict.
Delaware courts have recently had the opportunity to evaluate and discuss management of potential conflicts. That guidance may be particularly salient in the context of insider transactions and down-rounds, which may animate potential conflicts and lead to difficult litigation for corporate fiduciaries. This post focuses on guidance gleaned from Delaware cases regarding measures for conflict management at the stockholder level, including the effect of equal treatment or a rights offering, exercise of consent rights, and the use of a disinterested stockholder vote.
Equal Treatment and Rights Offerings
Significant stockholders or groups of stockholders, when alleged to have caused a company … Read more
Recent Delaware case law offers useful guidance regarding options for management of potential conflicts. Those cases demonstrate that conflicts can be mitigated by board or stockholder actions and that such measures for managing conflicts should be thoughtfully tailored to the circumstances. This post focuses on guidance from Delaware courts regarding measures that can be implemented at the board-level for management of potential conflicts, including the role of disinterested and independent directors, the effect of abstentions and recusals, and the use of an independent committee. The courts’ guidance is particularly valuable in light of the current market challenges driving at least … Read more