Buyer Beware: Aiding and Abetting Breaches of Fiduciary Duties May Lead to Purchaser Liability
June 2010
Jorge L. Freeland, Oliver C. Brahmst, John M. Reiss
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In today's volatile stock market, shareholders are acutely focused on the timing of the board of directors' decision to sell the company, particularly if share prices are below historic highs. Shareholder suits against boards of directors for breaches of fiduciary duties in connection with the directors' management of, and response to, potential purchasers' bids for their companies is not new. However, shareholders are increasingly filing these complaints together with claims against bidders, purchasers and majority shareholders for aiding and abetting these alleged fiduciary breaches. Purchasers can protect themselves from such claims by negotiating with the target board solely on an arm's-length basis, but when purchasers begin to offer disproportionate consideration to individual members of the target board or executive officers, aiding and abetting liability becomes a palpable risk.
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