Delaware Court of Chancery Finds Business Judgment Rule Review Standard Applicable to Controlling Stockholder Merger Conditioned on the Approval of Both an Independent Special Committee and a Majority-of-the-Minority Stockholder Vote
A recent decision of the Delaware Court of Chancery, In re MFW Shareholder Litigation, held that the business judgment rule standard of review applies in cases where a going-private transaction has been conditioned on both the approval of a special committee comprised of independent directors with the absolute authority to reject the deal and a fully-informed, uncoerced majority-of-the-minority stockholder vote. In this case, Chancellor Leo E. Strine, Jr. answered the question that practitioners have been asking for years, which is whether a going-private merger with a controlling stockholder can be structured to be subject to the business judgment rule, a lower standard of judicial review.
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