Despite Lack of Control Stockholder, Chancery Court Applies M&F’s “Ab Initio” Requirement in Determining Whether Independent Committee Recommendation Cleansed Transaction Approved by Conflicted Board
Salladay discusses the options available to corporate dealmakers and their legal counsel to obtain business judgment review—and ultimately pleading-stage dismissal—of conflicted transactions. If a controlling stockholder is to receive benefits from the transaction not shared with the other stockholders (e.g., a controlling stockholder-led buyout), both an independent board committee and obtaining disinterested stockholder approval are necessary to satisfy the Dual Protections of the M&F Framework. In the absence of a controlling stockholder but where at least 50% of the target board is interested in the transaction,either of M&F’s Dual Protections will suffice: (i) fully-informed, uncoerced approval by the disinterested stockholders underCorwin, or (ii) approval by a fully empowered, independent board committee under Trados II.
Robert S. Reder and Colton Tyler Haney