MR. JUSTICE SULLIVAN

delivered the opinion of the court.

This is an appeal from a dismissal of plaintiff’s amended complaint on motion of the defendants. The action was a stockholders’ derivative suit against the directors for negligence and mismanagement. The corporation was also made a defendant. Plaintiff sought damages *175and an order that defendants cause the installation of lights in Wrigley Field and the scheduling of night baseball games.

Plaintiff is a minority stockholder of defendant corporation, Chicago National League Ball Club (Inc.), a Delaware corporation with its principal place of business in Chicago, Illinois. Defendant corporation owns and operates the major league professional baseball team known as the Chicago Cubs. The corporation also engages in the operation of Wrigley Field, the Cubs’ home park, the concessionaire sales during Cubs’ home games, television and radio broadcasts of Cubs’ home games, the leasing of the field for football games and other events and receives its share, as visiting team, of admission moneys from games played in other National League stadia. The individual defendants are directors of the Cubs and have served for varying periods of years. Defendant Philip K. Wrigley is also president of the corporation and owner of approximately 80% of the stock therein.

Plaintiff alleges that since night baseball was first played in 1935 nineteen of the twenty major league teams have scheduled night games. In 1966, out of a total of 1,620 games in the major leagues, 932 were played at night. Plaintiff alleges that every member of the major leagues, other than the Cubs, scheduled substantially all of its home games in 1966 at night, exclusive of opening days, Saturdays, Sundays, holidays and days prohibited by league rules. Allegedly this has been done for the specific purpose of maximizing attendance and thereby maximizing revenue and income.

The Cubs, in the years 1961-65, sustained operating losses from its direct baseball operations. Plaintiff attributes those losses to inadequate attendance at Cubs’ home games. He concludes that if the directors continue to refuse to install lights at Wrigley Field and schedule *176night baseball games, the Cubs will continue to sustain comparable losses and its financial condition will continue to deteriorate.

Plaintiff alleges that, except for the year 1963, attendance at Cubs’ home games has been substantially below that at their road games, many of which were played at night.

Plaintiff compares attendance at Cubs’ games with that of the Chicago White Sox, an American League club, whose weekday games were generally played at night. The weekend attendance figures for the two teams were similar; however, the White Sox week-night games drew many more patrons than did the Cubs’ weekday games.

Plaintiff alleges that the funds for the installation of lights can be readily obtained through financing and the cost of installation would be far more than offset and recaptured by increased revenues and incomes resulting from the increased attendance.

Plaintiff further alleges that defendant Wrigley has refused to install lights, not because of interest in the welfare of the corporation but because of his personal opinions “that baseball is a ‘daytime sport’ and that the installation of lights and night baseball games will have a deteriorating effect upon the surrounding neighborhood.” It is alleged that he has admitted that he is not interested in whether the Cubs would benefit financially from such action because of his concern for the neighborhood, and that he would be willing for the team to play night games if a new stadium were built in Chicago.

Plaintiff alleges that the other defendant directors, with full knowledge of the foregoing matters, have acquiesced in the policy laid down by Wrigley and have permitted him to dominate the board of directors in matters involving the installation of lights and scheduling of night games, even though they knew he was not motivated *177by a good faith concern as to the best interests of defendant corporation, but solely by his personal views set forth above. It is charged that the directors are acting for a reason or reasons contrary and wholly unrelated to the business interests of the corporation; that such arbitrary and capricious acts constitute mismanagement and waste of corporate assets, and that the directors have been negligent in failing to exercise reasonable care and prudence in the management of the corporate affairs.

The question on appeal is whether plaintiff’s amended complaint states a cause of action. It is plaintiff’s position that fraud, illegality and conflict of interest are not the only bases for a stockholder’s derivative action against the directors. Contrariwise, defendants argue that the courts will not step in and interfere with honest business judgment of the directors unless there is a showing of fraud, illegality or conflict of interest.

The cases in this area are numerous and each differs from the others on a factual basis. However, the courts have pronounced certain ground rules which appear in all cases and which are then applied to the given factual situation. The court in Wheeler v. The Pullman Iron & Steel Co., 143 Ill 197, 207, 32 NE 420 said:

“It is, however, fundamental in the law of corporations, that the majority of its stockholders shall control the policy of the corporation, and regulate and govern the lawful exercise of its franchise and business. . . . Every one purchasing or subscribing for stock in a corporation impliedly agrees that he will be bound by the acts and proceedings done or sanctioned by a majority of the shareholders, or by the agents of the corporation duly chosen by such majority, within the scope of the powers conferred by the charter, and courts of equity will not undertake to control the policy or business methods of a corpo*178ration, although it may be seen that a wiser policy might be adopted and the business more successful if other methods were pursued. The majority of shares of its stock, or the agents by the holders thereof lawfully chosen, must be permitted to control the business of the corporation in their discretion, when not in violation of its charter or some public law, or corruptly and fraudulently subversive of the rights and interests of the corporation or of a shareholder.”

The standards set in Delaware are also clearly stated in the cases. In Davis v. Louisville Gas & Electric Co., 6 NJ Misc 706, 142 A 654, a minority shareholder sought to have the directors enjoined from amending the certificate of incorporation. The court said on page 659:

“We have then a conflict in view between the responsible managers of a corporation and an overwhelming majority of its stockholders on the one hand and a dissenting minority on the other — a conflict touching matters of business policy, such as has occasioned innumerable applications to courts to intervene and determine which of the two conflicting views should prevail. The response which courts make to such applications is that it is not their function to resolve for corporations questions of policy and business management. The directors are chosen to pass upon such questions and their judgment unless shown to be tainted with fraud is accepted as final. The judgment of the directors of corporations enjoys the benefit of a presumption that it was formed in good faith and was designed to promote the best interests of the corporation they serve.” (Emphasis supplied.)

Similarly, the court in Toebelman v. Missouri-Kansas Pipe Line Co., 41 F Supp 334, said at page 339:

*179“The general legal principle involved is familiar. Citation of authorities is of limited value because the facts of each case differ so widely. Reference may be made to the statement of the rule in Helfman v. American Light & Traction Company, 121 NJ Eq 1, 187 A 540, 550, in which the Court stated the law as follows: Tn a purely business corporation . . . the authority of the directors in the conduct of the business of the corporation must be regarded as absolute when they act within the law, and the court is without authority to substitute its judgment for that of the directors.’ ”

Plaintiff argues that the allegations of his amended complaint are sufficient to set forth a cause of action under the principles set out in Dodge v. Ford Motor Co., 204 Mich 459, 170 NW 668. In that case plaintiff, owner of about 10% of the outstanding stock, brought suit against the directors seeking payment of additional dividends and the enjoining of further business expansion. In ruling on the request for dividends the court indicated that the motives of Ford in keeping so much money in the corporation for expansion and security were to benefit the public generally and spread the profits out by means of more jobs, etc. The court felt that these were not only far from related to the good of the stockholders, but amounted to a change in the ends of the corporation and that this was not a purpose contemplated or allowed by the corporate charter. The court relied on language found in Hunter v. Roberts, Throp & Co., 83 Mich 63, 47 NW 131, 134, wherein it was said:

“Courts of equity will not interfere in the management of the directors unless it is clearly made to appear that they are guilty of fraud or misappropriation of the corporate funds, or refuse to declare a dividend when the corporation has a surplus of net profits which it can, without detriment to its busi*180ness, divide among its stockholders, and when a refusal to do so would amount to such an abuse of discretion as would constitute a fraud or breach of that good faith which they are bound to exercise toward the stockholders.”

From the authority relied upon in that case it is clear that the court felt that there must be fraud or a breach of that good faith which directors are bound to exercise toward the stockholders in order to justify the courts entering into the internal affairs of corporations. This is made clear when the court refused to interfere with the directors’ decision to expand the business. The following appears on page 684:

“We are not, however, persuaded that we should interfere with the proposed expansion of the business of the Ford Motor Company. In view of the fact that the selling price of products may be increased at any time, the ultimate results of the larger business cannot be certainly estimated. The judges are not business experts. It is recognized that plans must often be made for a long future, for expected competition, for a continuing as well as an immediately profitable venture. ... We are not satisfied that the alleged motives of the directors, in so far as they are reflected in the conduct of the business, menace the interests of the shareholders.” (Emphasis supplied.)

Plaintiff in the instant case argues that the directors are acting for reasons unrelated to the financial interest and welfare of the Cubs. However, we are not satisfied that the motives assigned to Philip K. Wrigley, and through him to the other directors, are contrary to the best interests of the corporation and the stockholders. For example, it appears to us that the effect on the surrounding neighborhood might well be considered by a *181director who was considering the patrons who would or would not attend the games if the park were in a poor neighborhood. Furthermore, the long run interest of the corporation in its property value at Wrigley Field might demand all efforts to keep the neighborhood from deteriorating. By these thoughts we do not mean to say that we have decided that the decision of the directors was a correct one. That is beyond our jurisdiction and ability. We are merely saying that the decision is one properly before directors and the motives alleged in the amended complaint showed no fraud, illegality or conflict of interest in their making of that decision.

While all the courts do not insist that one or more of the three elements must be present for a stockholder’s derivative action to lie, nevertheless we feel that unless the conduct of the defendants at least borders on one of the elements, the courts should not interfere. The trial court in the instant case acted properly in dismissing plaintiff’s amended complaint.

We feel that plaintiff’s amended complaint was also defective in failing to allege damage to the corporation. The well pleaded facts must be taken as true for the purpose of judging the sufficiency of the amended complaint. (Highway Ins. Co. v. Korman, 40 Ill App2d 439, 442, 190 NE2d 124.) However, one need not accept conclusions drawn by the pleader. (Nagel v. Northern Illinois Gas Co., 12 Ill App2d 413, 420, 139 NE2d 810.) Furthermore, pleadings will be construed most strongly against the pleader prior to a verdict or judgment on the merits. New Amsterdam Cas. Co. v. Gerin, 9 Ill App2d 545, 133 NE2d 723.

There is no allegation that the night games played by the other nineteen teams enhanced their financial position or that the profits, if any, of those teams were directly related to the number of night games scheduled. There is an allegation that the installation of lights and *182scheduling of night games in Wrigley Field would have resulted in large amounts of additional revenues and incomes from increased attendance and related sources of income. Further, the cost of installation of lights, funds for which are allegedly readily available by financing, would be more than offset and recaptured by increased revenues. However, no allegation is made that there will be a net benefit to the corporation from such action, considering all increased costs.

Plaintiff claims that the losses of defendant corporation are due to poor attendance at home games. However, it appears from the amended complaint, taken as a whole, that factors other than attendance affect the net earnings or losses. For example, in 1962, attendance at home and road games decreased appreciably as compared with 1961, and yet the loss from direct baseball operation and of the whole corporation was considerably less.

The record shows that plaintiff did not feel he could allege that the increased revenues would be sufficient to cure the corporate deficit. The only cost plaintiff was at all concerned with was that of installation of lights. No mention was made of operation and maintenance of the lights or other possible increases in operating costs of night games and we cannot speculate as to what other factors might influence the increase or decrease of profits if the Cubs were to play night home games.

Nagel v. Northern Illinois Gas Co., supra, was a stockholder’s derivative action for the rescission of a contract of the corporation. The court said on page 421:

“They allege that by these transactions ‘Edison gave to Northern assets, rights and benefits of a value in excess of $5,000,000’ and received in return, under the Final Separation Contract, assets, rights and benefits of a net value of less than $50,000. These allegations are mere conclusions of the pleader and not an averment of the fact of gross inadequacy of *183consideration, unless warranted by the provisions of the contract and the well pleaded facts in the amended complaint consistent with the contract.”

Similarly, in the instant case, plaintiff’s allegation that the minority stockholders and the corporation have been seriously and irreparably damaged by the wrongful conduct of the defendant directors is a mere conclusion and not based on well pleaded facts in the amended complaint.

Finally, we do not agree with plaintiff’s contention that failure to follow the example of the other major league clubs in scheduling night games constituted negligence. Plaintiff made no allegation that these teams’ night schedules were profitable or that the purpose for which night baseball had been undertaken was fulfilled. Furthermore, it cannot be said that directors, even those of corporations that are losing money, must follow the lead of the other corporations in the field. Directors are elected for their business capabilities and judgment and the courts cannot require them to forego their judgment because of the decisions of directors of other companies. Courts may not decide these questions in the absence of a clear showing of dereliction of duty on the part of the specific directors and mere failure to “follow the crowd” is not such a dereliction.

For the foregoing reasons the order of dismissal entered by the trial court is affirmed.

Affirmed.

DEMPSEY, P. J. and SCHWARTZ, J., concur.

MOORE, Justice:

In the wake of Zapata Gorp. v. Maldonado, Del.Supr., 430 A.2d 779 (1981), this Court left a crucial issue unanswered: when is a stockholder’s demand upon a board of directors, to redress an alleged wrong to the corporation, excused as futile prior to the filing of a derivative suit? We granted this interlocutory appeal to the defendants, Meyers Parking System, Inc. (Meyers), a Delaware corporation, and its directors, to review the Court of Chancery’s denial of their motion to dismiss this action, pursuant to Chancery Rule 23.1, for the *808plaintiffs failure to make such a demand or otherwise demonstrate its futility.1 The Vice Chancellor ruled that plaintiff’s allegations raised a “reasonable inference” that the directors’ action was unprotected by the business judgment rule. Thus, the board could not have impartially considered and acted upon the demand. See Lewis v. Aronson, Del.Ch., 466 A.2d 375, 381 (1983).

We cannot agree with this formulation of the concept of demand futility. In our view demand can only be excused where facts are alleged with particularity which create a reasonable doubt that the directors’ action was entitled to the protections of the business judgment rule. Because the plaintiff I failed to make a demand, and to allege ' facts with particularity indicating that such demand would be futile, we reverse the I Court of Chancery and remand with in- ' structions that plaintiff be granted leave to amend the complaint.

I.

The issues of demand futility rest upon the allegations of the complaint. The plaintiff, Harry Lewis, is a stockholder of Meyers. The defendants are Meyers and its ten directors, some of whom are also company officers.

In 1979, Prudential Building Maintenance Corp. (Prudential) spun off its shares of Meyers to Prudential’s stockholders. Prior thereto Meyers was a wholly owned subsidiary of Prudential. Meyers provides parking lot facilities and related services throughout the country. Its stock is actively traded over-the-counter.

This suit challenges certain transactions between Meyers and one of its directors, Leo Fink, who owns 47% of its outstanding stock. Plaintiff claims that these transac-\ tions were approved only because Fink per-1 sonally selected each director and officer of Meyers.2

Prior to January 1, 1981, Fink had an employment agreement with Prudential which provided that upon retirement he was to become a consultant to that company for ten years. This provision became operable when Fink retired in April 1980.3 Thereafter, Meyers agreed with Prudential/ to share Fink’s consulting services and reimburse Prudential for 25% of the fees paid Fink. Under this arrangement Meyers paid Prudential $48,332 in 1980 and $45,832 in 1981.

On January 1, 1981, the defendants approved an employment agreement between Meyers and Fink for a five year term with provision for automatic renewal each year thereafter, indefinitely. Meyers agreed to pay Fink $150,000 per year, plus a bonus of 5% of its pre-tax profits over $2,400,000. Fink could terminate the contract at any time, but Meyers could do so only upon six months’ notice. At termination, Fink was to become a consultant to Meyers and be paid $150,000 per year for the first three years, $125,000 for the next three years, and $100,000 thereafter for life. Death benefits were also included. Fink agreed to devote his best efforts and substantially his entire business time to advancing Meyers’ interests. The agreement also provided *809that Fink’s compensation was not to be affected by any inability to perform services on Meyers’ behalf. Fink was 75 years old when his employment agreement with Meyers was approved by the directors. There is no claim that he was, or is, in poor health.

Additionally, the Meyers board approved and made interest-free loans to Fink total-ling $225,000. These loans were unpaid and outstanding as of August 1982 when the complaint was filed. At oral argument defendants’ counsel represented that these loans had been repaid in full.

The complaint charges that these transactions had “no valid business purpose”, and were a “waste of corporate assets” because the amounts to be paid are “grossly excessive”, that Fink performs “no or little services”, and because of his “advanced age” cannot be “expected to perform any such services”. The plaintiff also charges that the existence of the Prudential consulting agreement with Fink prevents him from providing his “best efforts” on Meyers’ behalf. Finally, it is alleged that the loans to Fink were in reality “additional compensa-* tion” without any “consideration” or “benefit” to Meyers.

The complaint alleged that no demand had been made on the Meyers board because:

13. ... such attempt would be futile for the following reasons:

(a) All of the directors in office are named as defendants herein and they have participated in, expressly approved and/or acquiesced in, and are personally liable for, the wrongs complained of herein.

(b) Defendant Fink, having selected each director, controls and dominates every member of the Board and every officer of Meyers.

(c) Institution of this action by present directors would require the defendant-directors to sue themselves, thereby placing the conduct of this action in hostile hands and preventing its effective prosecution.

Complaint, at ¶ 13.

The relief sought included the cancellation of the Meyers-Fink employment contract and an accounting by the directors, including Fink, for all damage sustained by Meyers and for all profits derived by the directors and Fink.

II.

Defendants moved to dismiss for plaintiff’s failure to make demand on the Meyers board prior to suit, or to allege with factual particularity why demand is excused. See Del.Ch.Ct.R. 23.1, supra.

After recounting the allegations, the trial judge noted that the demand requirement of Rule 23.1 is a rule of substantive right designed to give a corporation the opportunity to rectify an alleged wrong without litigation, and to control any litigation which does arise. Lewis, 466 A.2d at 380. According to the Vice Chancellor, the test of futility is “whether the Board, at the time of the filing of the suit, could have impartially considered and acted upon the demand”. Id. at 381.

As part of this formulation, the trial judge stated that interestedness is one factor affecting impartiality, and indicated that the business judgment rule is a potential defense to allegations of director interest, and hence, demand futility. Id. However, the court observed that to establish demand futility, a plaintiff need not allege that the challenged transaction could never be deemed a product of business judgment. Id. Rather, the Vice Chancellor maintained that a plaintiff “must only allege facts which, if true, show that there is a reasonable inference that the business judgment rule is not applicable for purposes of considering a pre-suit demand pursuant to Rule 23.1”. Id. The court concluded that this transaction permitted such an inference. Id. at 384-86.

Upon these formulations, the Court of Chancery addressed the plaintiff’s argu*810ments as to the futility of demand. Id. at 381-84. The trial judge correctly noted that futility is gauged by the circumstances existing at the commencement of a derivative suit. This disposed of plaintiff’s argument that defendants’ motion to dismiss established board hostility and the futility of demand. Id. at 381.

The Vice Chancellor then dealt with plaintiff’s contention that Fink, as a 47% shareholder of Meyers, dominated and controlled each director, thereby making demand futile. Id. at 381-83. Plaintiff also argued that Fink’s interest, when combined with the shareholdings of four other defendants, amounted to 57.5% of Meyers’ outstanding shares. Id. at 381. After noting the presumptions under the business judgment rule that a board’s actions are taken in good faith and in the best interests of the corporation, the Court of Chancery ruled that mere board approval of a transaction benefiting a substantial, but non-majority, shareholder will not overcome the presumption of propriety. Id. at 382. Specifically, the court observed that:

A plaintiff, to properly allege domination of the Board, particularly domination based on ownership of less than a majority of the corporation’s stock, in order to excuse a pre-suit demand, must allege ownership plus other facts evidencing control to demonstrate that the Board could not have exercised its independent business judgment.

Id.

As to the combined 57.5% control claim, the court stated that there were no factual allegations regarding the alignment of the four directors with Fink, such as a claim that they were beneficiaries of the Meyers-Fink agreement. Id. at 382, 383. Because it was not alleged in the complaint, the court rejected plaintiff’s argument that, as evidence of alignment with Fink, two of the directors have “similar” compensation agreements with Meyers. Id. at 383.

Turning to plaintiff’s allegations of board approval, participation in, and/or acquiescence in the wrong, the trial court focused. on the underlying_trana&gtifiBj;o determine whether líEiTiÓard’s action was wrongful and not protected by the business judgment rule. Id. [citing Dann v. Chrysler, Del.Ch., 174 A.2d 696 (1961) ]. The Vice Chancellor indicated that if the underlying transaction supported a reasonable inference that the business judgment rule did not apply, then the directors who approved the transaction were potentially liable for a breach of their fiduciary duty, and thus, could not impartially consider a stockholder’s demand. Id.

The trial court then stated that board approval of the Meyers-Fink agreement, allowing Fink’s consultant compensation to remain unaffected by his ability to perform any services, may have been a transaction wasteful on its face. Id. [citing Fidanque v. American Maracaibo Co., Del.Ch., 92 A.2d 311 (1952) ]. Consequently, demand was excused as futile, because the Meyers’ directors faced potential liability for waste and could not have impartially considered the demand. Id. at 384.

III.

The defendants make two arguments, one policy-oriented and the other, factual. First, they assert that the demand require- > ment embraces the policy that directors, | rather than stockholders, manage the affairs of the corporation. They contend that ‘ this fundamental principle requires the strict construction and enforcement of Chancery Rule 23.1. Second, the defendants point to four of plaintiff’s basic allegations and argue that they lack the factual particularity necessary to excuse demand. Concerning the allegation that Fink dominated and controlled the Meyers board, the defendants point to the absence of any facts explaining how he “selected each director”. With respect to Fink’s 47% stock interest, the defendants say that absent other facts this is insufficient to indicate domination and control. Regarding the claim of hostility to the plaintiff’s suit, because defendants would have to sue themselves, the latter assert that this bootstrap argument ignores the possibility that the directors have other *811alternatives, such as cancelling the challenged agreement. As for the allegation that directorial approval of the agreement excused demand, the defendants reply that such a claim is insufficient, because it would obviate the demand requirement in almost every case. The effect would be to subvert the managerial power of a board of directors. Finally, as to the provision guaranteeing Fink’s compensation, even if he is unable to perform any services, the defendants contend that the trial court read this out of context. Based upon the foregoing, the defendants conclude that the plaintiff’s allegations fall far short of the factual particularity required by Rule 23.1.

IV.

A.

— [2,3] A cardinal precept of the General Corporation Law of the State of Delaware is that directors, rather than shareholders, manage the business and affairs of the corporation. 8 Del.C. § 141(a). Section 141(a) states in pertinent part:

“The business and affairs of a corporation organized under this chapter shall be managed by or under the direction of a board of directors except as may be otherwise provided in this chapter or in its certificate of incorporation.”

8 Del.C. § 141(a) (Emphasis added). The existence and exercise of this power carries with it certain fundamental fiduciary obligations to the corporation and its shareholders.4 Loft, Inc. v. Guth, Del.Ch., 2 A.2d 225 (1938), aff’d, Del.Supr., 5 A.2d 503 (1939). Moreover, a stockholder is not powerless to challenge director action which results in harm to the corporation. The machinery of corporate democracy and the derivative suit are potent tools to redress the conduct of a torpid or unfaithful management. The derivative action developed in equity to enable shareholders to sue in the corporation’s name where those in control of the company refused to assert a claim belonging to it. The nature of the action is two-fold. First, it is the equivalent of a suit by the shareholders to compel the corporation to sue. Second, it is a suit by the corporation, asserted by the shareholders on its behalf, against those liable to it.

By its very nature the derivative action j impinges on the managerial freedom of directors. 5 Hence, the demand requirement*of Chancery Rule 23.1 exists at the threshold, first to insure that a stockholder exhausts his intracorporate remedies, and *812then to provide a safeguard against strike suits. Thus, by promoting this form of alternate dispute resolution, rather than immediate recourse to litigation, the demand requirement is a recognition of the fundamental precept that directors manage the business and affairs of corporations.

In our view the entire question of demand futility is inextricably bound to issues of business judgment and the standards of that doctrine’s applicability. The business judgment rule is an acknowledgment of the managerial prerogatives of Delaware directors under Section 141(a). See Zapata Corp. v. Maldonado, 430 A.2d at 782. It is a presumption that in making a business decision the directors of a corporation acted on an informed hasis, in..good, faith and in the honest bejief that the action taken was in the best interests of the company. Kaplan v. Centex Corp., Del.Ch., 284 A.2d 119, 124 (1971); Robinson v. Pittsburgh Oil Refinery Corp., Del.Ch., 126 A. 46 (1924). Absent an abuse of discretion, that judgment will be respected by the courts. The burden is on the party challenging the decision to establish facts rebutting the presumption. See Puma v. Marriott, Del.Ch., 283 A.2d 693, 695 (1971).

The function of the business judgment rule is of paramount significance in the context of a derivative action. It comes into play in several ways — in addressing a demand, in the ■ determination of demand futility, in efforts by independent disinterested directors to dismiss the action as inimical to the corporation’s best interests, and generally, as a defense to the merits of the suit. However, in each of these circumstances there are certain common principles governing the application and operation of the rule.

First, its protections can only be claimed by disinterested directors whose conduct otherwise meets the tests of business judgment. From the standpoint of interest, this means that directors can neither appear on both sides of a transaction nor expect to derive any personal financial benefit from it in the sense of self-dealing, as opposed to a benefit which devolves upon the corporation or all stockholders generally. Sinclair Oil Corp. v. Levien, Del.Supr., 280 A.2d 717, 720 (1971); Cheff v. Mathes, Del.Supr., 199 A.2d 548, 554 (1964); David J. Greene & Co. v. Dunhill International, Inc., Del.Ch., 249 A.2d 427, 430 (1968). See also 8 Del.C. § 144. Thus, if such director interest is present, and the transaction is not approved by a majority consisting of the disinterested directors, then the business judgment rule has no application whatever in determining demand futility. See 8 DelC. § 144(a)(1).

Second, to invoke the rule’s protection directors have a duty to inform themselves, prior to making a business decision, of all material information reasonably available to them. Having become so informed, they must then act with requisite care in the discharge of their duties. While the Delaware cases use a variety of terms to describe the applicable standard of care, our analysis satisfies us that under the business judgment rule director liability is predicated upon concepts of gross negligence.6 See Yeasey & Manning, Codified Stan *813 dard—Safe Harbor or Uncharted Reef? 35 Bus.Law. 919, 928 (1980).

However, it should be noted that the business judgment rule operates only in the context of director action. Technically speaking, it has no role where directors have either abdicated their functions, or absent a conscious decision, failed to act.7 But it also follows that under applicable principles, a conscious decision to refrain from acting may nonetheless be a valid exercise of business judgment and enjoy the protections of the rule.

The gap in our law, which we address today, arises from this Court’s decision in Zapata Corp. v. Maldonado. There, the Court defined the limits of a board’s managerial power granted by Section 141(a) and restricted application of the business judgment rule in a factual context similar to this action. Zapata Corp. v. Maldonado, 430 A.2d at 782-86, rev’g, Maldonado v. Flynn, Del.Ch., 413 A.2d 1251 (1980).

By way of background, this Court’s review in Zapata was limited to whether an independent investigation committee of disinterested directors had the power to cause the derivative action to be dismissed. Preliminarily, it was noted in Zapata that “[directors of Delaware corporations derive their managerial decision making power, which encompasses decisions whether to initiate, or refrain from entering, litigation, from 8 Del.C. § 141(a)”. Zapata, 430 A.2d at 782 (footnotes omitted). In that context, this Court observed that the business judgment rule has no relevance to corporate decision making until after a decision has been made. Id. In Zapata, we stated that a shareholder does not possess an independent individual right to continue a derivative action. Moreover, where demand on a board has been made and refused, we apply the business judgment rule in reviewing the board’s refusal to act pursuant to a stockholder’s demand. Id. at 784 & n. 10. Unless the business judgment rule does not protect the refusal to sue, the shareholder lacks the legal managerial power to continue the derivative action, since that power is terminated by the refusal. Id. at 784. We also concluded that where demand is excused a shareholder possesses the ability to initiate a derivative action, but the right to prosecute it may be terminated upon the exercise of applicable standards of business judgment. Id. The thrust of Zapata is that in either the demand-refused or the demand-excused case, the board still retains its Section 141(a) managerial authority to make decisions regarding corporate litigation. Moreover, the board may delegate its managerial authority to a committee of independent disinterested directors. Id. at 786. See 8 Del.C. § 141(c). Thus, even in a demand-excused case, a board has the power to appoint a committee of one or more independent disinterested directors to determine whether the derivative action should be pursued or dismissal sought. Zapata, 430 A.2d at 786. Under Zapata, the Court of Chancery, in passing on a committee’s motion to dismiss a derivative action in a demand excused case, must apply a two-step test. First, the court must inquire into the independence and good faith of the committee and review the reasonableness and good faith of the committee’s investigation. Id. at 788. Second, the court must apply its own independent business judgment to decide whether the motion to dismiss should be granted. Id. at 789.

After Zapata numerous derivative suits were filed without prior demand upon boards of directors. The complaints in such actions all alleged that demand was excused because of board interest, approval or acquiescence in the wrongdoing. In any event, the Zapata demand-excused/de*814mand-refused bifurcation, has left a crucial issue unanswered: when is demand futile and, therefore, excused?

Delaware courts have addressed the issue of demand futility on several earlier occasions. See Sohland v. Baker, Del.Supr., 141 A. 277, 281-82 (1927); McKee v. Rogers, Del.Ch., 156 A. 191, 193 (1931); Miller v. Loft, Del.Ch., 153 A. 861, 862 (1931); Fleer v. Frank H. Fleer Corp., Del.Ch., 125 A. 411, 414 (1924); Harden v. Eastern States Public Service Co., Del.Ch., 122 A. 705, 707 (1923); Ellis v. Penn Beef Co., Del.Ch., 80 A. 666, 668 (1911). Cf. Mayer v. Adams, Del.Supr., 141 A.2d 458, 461 (1958) (minority demand on majority shareholders). The rule emerging from these decisions is that where officers and directors are under an influence which sterilizes their discretion, they cannot be considered proper persons to conduct litigation on behalf of the corporation. Thus, demand would be futile. See, e.g., McKee v. Rogers, Del.Ch., 156 A. 191, 192 (1931) (holding that where a defendant controlled the board of directors, “[i]t is manifest then that there can be no expectation that the corporation would sue him, and if it did, it can hardly be said that the prosecution of the suit would be entrusted to proper hands”). But see, e.g., Fleer v. Frank H. Fleer Corp., Del.Ch., 125 A. 411, 415 (1924) (“[w]here the demand if made would be directed to the particular individuals who themselves are the alleged wrongdoers and who therefore would be invited to sue themselves, the rule is settled that a demand and refusal is not requisite”); Miller v. Loft, Inc., Del.Ch., 153 A. 861, 862 (1931) (“if by reason of hostile interest or guilty participation in the wrongs complained of, the directors cannot be expected to institute suit, ... no demand upon them to institute suit is requisite”).

However, those cases cannot be taken to mean that any board approval of a challenged transaction automatically connotes “hostile interest” and “guilty participation” by directors, or some other form of sterilizing influence upon them. Were that so, the demand requirements of our law would be meaningless, leaving the clear mandate of Chancery Rule 23.1 devoid of its purpose and substance.

The trial court correctly recognized that demand futility is inextricably bound to issues of business judgment, but stated the test to be based on allegations of fact, which, if true, “show that there is a reasonable inference” the business judgment rule is not applicable for purposes of a pre-suit demand. Lewis, 466 A.2d at 381.

The problem with this formulation is the concept of reasonable inferences to be drawn against a board of directors based on allegations in a complaint. As is clear from this case, and the conclusory allegations upon which the Vice Chancellor relied, demand futility becomes virtually automatic under such a test. Bearing in mind the presumptions with which director action is cloaked, we believe that the matter must be approached in a more balanced way.

Our view is that in determining demand futility the Court of Chancery in the proper exercise of its discretion must decide whether, under the particularized facts alleged, a reasonable doubt is created that: (1) the directors are disinterested and independent and (2) the challenged transaction was otherwise the product of a valid exercise of business judgment. Hence, the Court of Chancery must make two inquiries, one into the independence and disinterestedness of the directors and the other into the substantive nature of the challenged transaction and the board’s approval thereof. As to the latter inquiry the court does not assume that the transaction is a wrong to the corporation requiring corrective steps by the board. Rather, the alleged wrong is substantively reviewed against the factual background alleged in the complaint. As to the former inquiry, directorial independence and disinterestedness, the court reviews the factual allegations to decide whether they raise a reasonable doubt, as a threshold matter, that the protections of the business judgment rule are available to the board. *815Certainly, if this is an “interested” director transaction, such that the business judgment rule is inapplicable to the board majority approving the transaction, then the inquiry ceases. In that event futility of demand has been established by any objective or subjective standard.8 See, e.g., Bergstein v. Texas Internad Co., Del.Ch., 453 A.2d 467, 471 (1982) (because five of nine directors approved stock appreciation rights plan likely to benefit them, board was interested for demand purposes and demand held futile). This includes situations involving self-dealing directors. See Sinclair Oil Corp. v. Levien, Del.Supr., 280 A.2d 717 (1971); Sterling v. Mayflower, Del.Supr., 93 A.2d 107 (1952); Trans World Airlines, Inc. v. Surnma Corp., Del.Ch., 374 A.2d 5 (1977); David J. Greene & Co. v. Dunhill International, Inc., Del.Ch., 249 A.2d 427 (1968).

However, the mere threat of personal liability for approving a questioned transaction, standing alone, is insufficient to challenge either the independence or disinterestedness of directors, although in rare cases a transaction may be so egregious on its face that board approval cannot meet the test of business judgment, and a substantial likelihood of director liability therefore exists. See Gimbel v. Signal Cos., Inc., Del.Ch., 316 A.2d 599, aff’d, Del.Supr., 316 A.2d 619 (1974); Cottrell v. Pawcatuck Co., Del.Supr., 128 A.2d 225 (1956). In sum the entire review is factual in nature. The Court of Chancery in the exercise of its sound discretion must be satisfied that a plaintiff has alleged facts with particularity which, taken as true, support a reasonable doubt that the challenged transaction was the product of a valid exercise of business judgment. Only in that context is demand excused.

B.

Having outlined the legal framework within which these issues are to be determined, we consider plaintiff’s claims of futility here: Fink’s domination and control of the directors, board approval of the Fink-Meyers employment agreement, and board hostility to the plaintiff’s derivative action due to the directors’ status as defendants.

Plaintiff’s claim that Fink dominates and controls the Meyers’ board is based on: (1) Fink’s 47% ownership of Meyers’ outstanding stock, and (2) that he “personally selected” each Meyers director. Plaintiff also alleges that mere approval of the employment agreement illustrates Fink’s domination and control of the board. In addition, plaintiff argued on appeal that 47% stock ownership, though less than a majority, constituted control given the large number of shares outstanding, 1,245,-745.

Such contentions do not support any claim under Delaware law that these directors lack independence. In Kaplan v. Centex Corp., Del.Ch., 284 A.2d 119 (1971), the Court of Chancery stated that “[s]tock ownership alone, at least when it amounts to less than a majority, is not sufficient proof of domination or control”. Id. at 123. Moreover, in the demand context even proof of majority ownership of a company does not strip the directors of the presumptions of independence, and that their acts have been taken in good faith and in the best interests of the corporation. There must be coupled with the allegation of control such facts as would demonstrate that through personal or other relationships the directors are beholden to the controlling person. See Mayer v. Adams, Del.Ch., 167 A.2d 729, 732, aff’d, Del.Supr., 174 A.2d 313 (1961). To date the principal decisions deal*816ing with the issue of control or domination arose only after a full trial on the merits. Thus, they are distinguishable in the demand context unless similar particularized facts are alleged to meet the test of Chancery Rule 23.1. See e.g., Kaplan, 284 A.2d at 123; Ghasin v. Gluck, Del.Ch., 282 A.2d 188 (1971); Greene v. Allen, Del.Ch., 114 A.2d 916 (1955); Loft, Inc. v. Guth, Del.Ch., 2 A.2d 225, 237 (1938), aff’d, Del.Supr., 5 A.2d 503 (1939).

The requirement of director independence inhers in the conception and rationale of the business judgment rule. The presumption of propriety that flows from an exercise of business judgment is based in part on this unyielding precept. Independence means that a director’s decision is based on the corporate merits of the subject before the board rather than extraneous considerations or influences. While directors may confer, debate, and resolve their differences through compromise, or by reasonable reliance upon the expertise of their colleagues and other qualified persons, the end result, nonetheless, must be that each director has brought his or her own informed business judgment to bear with specificity upon the corporate merits of the issues without regard for or succumbing to influences which convert an otherwise valid business decision into a faithless act.

Thus, it is not enough to charge that a director was nominated by or elected at the behest of those controlling the outcome of a corporate election. That is the usual way a person becomes a corporate director. It is the care, attention and sense of individual responsibility to the performance of one’s duties, not the method of election, that generally touches on independence.

We conclude that in the demand-futile context a plaintiff charging domination and control of one or more directors must allege particularized facts manifesting “a direction of corporate conduct in such a way as to comport with the wishes or interests of the corporation (or persons) doing the controlling”. Kaplan, 284 A.2d at 123. The shorthand shibboleth of “dominated and controlled directors” is insufficient. In recognizing that Kaplan was decided after trial and full discovery, we stress that the plaintiff need only allege specific facts; he need not plead evidence. Otherwise, he would be forced to make allegations which may not comport with his duties under Chancery Rule 11.9

Here, plaintiff has not alleged any facts sufficient to support a claim of control. The personal-selection-of-directors allegation stands alone, unsupported. At best it is a conclusion devoid of factual support. The causal link between Fink’s control and approval of the employment agreement is alluded to, but nowhere specified. The director’s approval, alone, does not establish control, even in the face of Fink’s 47% stock ownership. See Kaplan v. Centex Corp., 284 A.2d at 122, 123. The claim that Fink is unlikely to perform any services under the agreement, because of his age, and his conflicting consultant work with Prudential, adds nothing to the control claim.10 Therefore, we cannot conclude that the *817complaint factually particularizes any circumstances of control and domination to overcome the presumption of board independence, and thus render the demand futile.

C.

Turning to the board’s approval of the Meyers-Pink employment agreement, plaintiff’s argument is simple: all of the Meyers directors are named defendants, because they approved the wasteful agreement; if plaintiff prevails on the merits all the directors will be jointly and severally liable; therefore, the directors’ interest in avoiding personal liability automatically and absolutely disqualifies them from passing on a shareholder’s demand.

Such allegations are conclusory at best. In Delaware mere directorial approval of a transaction, absent particularized facts supporting a breach of fiduciary duty claim, or otherwise establishing the lack of independence or disinterestedness of a majority of the directors, is insufficient to excuse demand.11 Here, plaintiff’s suit is premised on the notion that the Meyers-Pink employment agreement was a waste of corporate assets. So, the argument goes, by approving such waste the directors now face potential personal liability, thereby rendering futile any demand on them to bring suit. Unfortunately, plaintiff’s claim falls in its initial premise. The complaint does not allege particularized facts indicating that the agreement is a waste of corporate assets. Indeed, the complaint as now drafted may not even state a cause of action, given the directors’ broad corporate power to fix the compensation of officers.12

In essence, the plaintiff alleged a lack of consideration flowing from Pink to Meyers, since the employment agreement provided that compensation was not contingent on Fink’s ability to perform any services. The bare assertion that Fink performed “little or no services” was plaintiff’s conclusion based solely on Fink’s age and the existence of the Fink-Prudential employment agreement. As for Meyers’ loans to Fink, beyond the bare allegation that they were made, the complaint does not allege facts indicating the wastefulness of such arrangements. Again, the mere existence of such loans, given the broad corporate powers conferred by Delaware law, does not even state a claim.13

In sustaining plaintiff’s claim of demand futility the trial court relied on Fidanque v. American Maracaibo Go., Del. Ch., 92 A.2d 311, 321 (1952), which held that a contract providing for payment of consulting fees to a retired president/director was a waste of corporate assets. Id. In Fidanque, the court found after trial that the contract and payments were in reality compensation for past services. Id. at 320. This was based upon facts not present here: the former president/director was a 70 year old stroke victim, neither the agreement nor the record spelled out his consulting duties at all, the consulting salary equalled the individual’s salary when he was president and general manager of the corporation, and the contract was silent as to continued employment in the event that the retired president/director again became incapacitated and unable to perform his duties. Id. at 320-21. Contrasting the facts of Fidanque with the complaint here, it is apparent that plaintiff has not alleged *818facts sufficient to render demand futile on a charge of corporate waste, and thus create a reasonable doubt that the board’s action is protected by the business judgment rule. Cf. Beard v. Elster, Del.Supr., 160 A.2d 731 (1960); Lieberman v. Koppers Company Line, Inc., Del.Ch., 149 A.2d 756, aff’d, Lieberman v. Becker, Del.Supr., 155 A.2d 596 (1959).

D.

Plaintiff’s final argument is the incantation that demand is excused because the directors otherwise would have to sue themselves, thereby placing the conduct of the litigation in hostile hands and preventing its effective prosecution. This bootstrap argument has been made to and dismissed by other courts. See, e.g., Lewis v. Graves, 701 F.2d 245, 248-49 (2d Cir.1983); Heit v. Baird, 567 F.2d 1157, 1162 (1st Cir.1977); Lewis v. Anselmi, 564 F.Supp., 768, 772 (S.D.N.Y.1983). Its acceptance would effectively abrogate Rule 23.1 and weaken the managerial power of directors. Unless facts are alleged with particularity to overcome the presumptions of independence and a proper exercise of business judgment, in which case the directors could not be expected to sue themselves, a bare claim of this sort raises no legally cognizable issue under Delaware corporate law.

V.

In sum, we conclude that the plaintiff has failed to allege facts with particularity indicating that the Meyers directors were tainted by interest, lacked independence, or took action contrary to Meyers’ best interests in order to create a reasonable doubt as to the applicability of the business judgment rule. Only in the presence of such a reasonable doubt may a demand be deemed futile. Hence, we reverse the Court of Chancery’s denial of the motion to dismiss, and remand with instructions that plaintiff be granted leave to amend his complaint to bring it into compliance with Rule 23.1 based on the principles we have announced today.

REVERSED AND REMANDED.

HORSEY, Justice

(for the majority):

This appeal from the Court of Chancery involves a class action brought by shareholders of the defendant Trans Union Corporation (“Trans Union” or “the Company”), originally seeking rescission of a cash-out merger of Trans Union into the defendant New T Company (“New T”), a wholly-owned subsidiary of the defendant, Marmon Group, Inc. (“Marmon”). Alternate relief in the form of damages is sought against the defendant members of the Board of Directors of Trans Union, *869New T, and Jay A. Pritzker and Robert A. Pritzker, owners of Mamón.1

Following trial, the former Chancellor granted judgr-ent for the defendant directors by unreported letter opinion dated fuly 6, 1982.2 Judgment was based on two ’hidings: (1) that the Board of Directors lad acted in an informed manner so as to >e entitled to protection of the business udgment rule in approving the cash-out nerger; and (2) that the shareholder vote pproving the merger should not be set side because the stockholders had been fairly informed” by the Board of Diectors before voting thereon. The plain-ffs appeal.

Speaking for the majority of the Court, e conclude that both rulings of the Court E Chancery are clearly erroneous. There->re, we reverse and direct that judgment 5 entered in favor of the plaintiffs and gainst the defendant directors for the fair due of the plaintiffs’ stockholdings in •ans Union, in accordance with Weinberger v. UOP, Inc., Del.Supr., 457 A.2d 1 (1983).3

We hold: (1) that the Board’s decision, ached September 20,1980, to approve the oposed cash-out merger was not the oduct of an informed business judgment; that the Board’s subsequent efforts to lend the Merger Agreement and take íer curative action were ineffectual, both ;ally and factually; and (3) that the ard did not deal with complete candor with the stockholders by failing to disclose all material facts, which they knew or should have known, before securing the stockholders’ approval of the merger.

I.

The nature of this case requires a detailed factual statement. The following facts are essentially uncontradicted:4

-A-

Trans Union was a publicly-traded, diversified holding company, the principal earnings of which were generated by its railcar leasing business. During the period here involved, the Company had a cash flow of hundreds of millions of dollars annually. However, the Company had difficulty in generating sufficient taxable income to offset increasingly large investment tax credits (ITCs). Accelerated depreciation deductions had decreased available taxable income against which to offset accumulating ITCs. The Company took these deductions, despite their effect on usable ITCs, because the rental price in the railcar leasing market had already impounded the purported tax savings.

In the late 1970’s, together with other capital-intensive firms, Trans Union lobbied in Congress to have ITCs refundable in cash to firms which could not fully utilize the credit. During the summer of 1980, defendant Jerome W. Van Gorkom, Trans Union’s Chairman and Chief Executive Of-*871fjcer, testified and lobbied in Congress for refundability of ITCs and against further accelerated depreciation. By the end of August, Van Gorkom was convinced that Congress would neither accept the refunda-bility concept nor curtail further aecelerat-ed depreciation.

Beginning in the late 1960’s, and continuing through the 197Q’s, Trans Union pursued a program of acquiring small companies in order to increase available taxable income. In July 1980, Trans Union Management prepared the annual revision of the Company’s Five Year Forecast. This report was presented to the Board of Directors at its July, 1980 meeting. The report projected an annual income growth of about 20%. The report also concluded that Trans Union would have about $195 million in spare cash between 1980 and 1985, “with the surplus growing rapidly from 1982 onward.” The report referred to the ITC situation as a “nagging problem” and, given that problem, the leasing company “would still appear to be constrained to a tax breakeven.” The report then listed four alternative uses of the projected 1982-1985 equity surplus: (1) stock repurchase; (2) dividend increases; (3) a major acquisition program; and (4) combinations of the above. The sale of Trans Union was not among the alternatives. The report emphasized that, despite the overall surplus, the operation of the Company would consume all available equity for the next several years, and concluded: “As a result, we have sufficient time to fully develop our course of action.”

-B-

On August 27, 1980, Van Gorkom met with Senior Management of Trans Union. Van Gorkom reported on his lobbying efforts in Washington and his desire to find a solution to the tax credit problem more permanent than a continued program of acquisitions. Various alternatives were suggested and discussed preliminarily, including the sale of Trans Union to a company with a large amount of taxable income. Donald Romans, Chief Financial Officer of Trans Union, stated that his department had done a “very brief bit of work on the possibility of a leveraged buy-out.” This work had been prompted by a media article which Romans had seen regarding a leveraged buy-out by management. The work consisted of a “preliminary study” of the cash which could be generated by the Company if it participated in a leveraged buyout. As Romans stated, this analysis “was very first and rough cut at seeing whether a cash flow would support what might be considered a high price for this type of transaction.”

On September 5, at another Senior Management meeting which Van Gorkom attended, Romans again brought up the idea of a leveraged buy-out as a “possible strategic alternative” to the Company’s acquisition program. Romans and Bruce S. Chel-berg, President and Chief Operating Officer of Trans Union, had been working on the matter in preparation for the meeting. According to Romans: They did not “come up” with a price for the Company. They merely “ran the numbers” at $50 a share and at $60 a share with the “rough form” of their cash figures at the time. Their “figures indicated that $50 would be very easy to do but $60 would be very difficult to do under those figures.” This work did not purport to establish a fair price for either the Company or 100% of the stock. It was intended to determine the cash flow needed to service the debt that would “probably” be incurred in a leveraged buyout, based on “rough calculations” without “any benefit of experts to identify what the limits were to that, and so forth.” These computations were not considered extensive and no conclusion was reached.

At this meeting, Van Gorkom stated that he would be willing to take $55 per share for his own 75,000 shares. He vetoed the suggestion of a leveraged buy-out by Management, however, as involving a potential conflict of interest for Management. Van Gorkom, a certified public accountant and lawyer, had been an officer of Trans Union *873t 24 years, its Chief Executive Officer t more than 17 years, and Chairman of > Board for 2 years. It is noteworthy in is connection that he was then approach-g 65 years of age and mandatory retire-ent.

For several days following the Septem-r 5 meeting, Van Gorkom pondered the ?a of a sale. He had participated in my acquisitions as a manager and di:tor of Trans Union and as a director of ter companies. He was familiar with imisition procedures, valuation methods, a negotiations; and he privately con-ered the pros and eons of whether Trans ion should seek a privately or publicly-¡d purchaser.

»Tan Gorkom decided to meet with Jay A. tzker, a well-known corporate takeover “cialist and a social acquaintance. How-;r, rather than approaching Pritzker sim-to determine his interest in acquiring ms Union, Van Gorkom assembled a proved per share price for sale of the Com-;y and a financing structure by which to omplish the sale. Van Gorkom did so bout consulting either his Board or any mbers of Senior Management except : Carl Peterson, Trans Union’s Control-Telling Peterson that he wanted no er person on his staff to know what he = doing, but without telling him why, i Gorkom directed Peterson to calculate feasibility of a leveraged buy-out at an anted price per share of $55. Apart n the Company’s historic stock market and Van 5 Gorkom’s long association : Trans Union, the record is devoid of competent evidence that $55 represent-he per share intrinsic value of the Com-y.

aving thus chosen the $55 figure, based ly on the availability of a leveraged -out, Van Gorkom multiplied the price share by the number of shares out-iding to reach a total value of the Company of $690 million. Van Gorkom told Peterson to use this $690 million figure and to assume a $200 million equity contribution by the buyer. Based on these assumptions, Van Gorkom directed Peterson to determine whether the debt portion of the purchase price could be paid off in five years or less if financed by Trans Union’s cash flow as projected in the Five Year Forecast, and by the sale of certain weaker divisions identified in a study done for Trans Union by the Boston Consulting Group (“BCG study”). Peterson reported that, of the purchase price, approximately $50-80 million would remain outstanding after five years. Van Gorkom was disappointed, but decided to meet with Pritzker nevertheless.

Van Gorkom arranged a meeting with Pritzker at the latter’s home on Saturday, September 13, 1980. Van Gorkom prefaced his presentation by stating to Pritzker: “Now as far as you are concerned, I can, I think, show how you can pay a substantial premium over the present stock price and pay off most of the loan in the first five years. * * * If you could pay $55 for this Company, here is a way in which I think it can be financed.”

Van Gorkom then reviewed with Pritzker his calculations based upon his proposed price of $55 per share. Although Pritzker mentioned $50 as a more attractive figure, no other price' was mentioned. However, Van Gorkom stated that to be sure that $55 was the best price obtainable, Trans Union should be free to accept any better offer. Pritzker demurred, stating that his organization would serve as a “stalking horse” for an “auction contest” only if Trans Union would permit Pritzker to buy 1,750,000 shares of Trans Union stock at market price which Pritzker could then sell to any higher bidder. After further discussion on this point, Pritzker told Van Gorkom that he would give him a more definite reaction soon.

*875On Monday, September 15, Pritzker ad-Van Gorkom that he was interested ¡f. the S55 cash-out merger proposal and re'jynKted more information on Trans Un-jor, Van Gorkom agreed to meet privately y/ilfr Pritzker, accompanied by Peterson, Chelberg, and Michael Carpenter, Trans Onion's consultant from the Boston Con-aüiúrig Group. The meetings took place on 16 and 17. Van Gorkom was "a.-,Hounded that events were moving with puch amazing rapidity.”

On Thursday, September 18, Van Gor-kom met again with Pritzker. At that time, Van Gorkom knew that Pritzker intended to make a cash-out merger offer at Van Gorkom’s proposed $55 per share. Pritzker instructed his attorney, a merger and acquisition specialist, to begin drafting merger documents. There was no further discussion of the $55 price. However, the number of shares of Trans Union’s treasury stock to be offered to Pritzker was negotiated down to one million shares; the price was set at $38 — 75 cents above the per share price at the close of the market on September 19. At this point, Pritzker insisted that the Trans Union Board act on his merger proposal within the next three days, stating to Van Gorkom: “We have to have a decision by no later than Sunday [evening, September 21] before the opening of the English stock exchange on Monday morning.” Pritzker’s lawyer was then instructed to draft the merger documents, to be reviewed by Van Gorkom’s lawyer, "sometimes with discussion and sometimes not. in the haste to get it finished.”

On Friday, September 19, Van Gorkom, Chelberg, and Pritzker consulted with Trans Union’s lead bank regarding the financing of Pritzker’s purchase of Trans Union. The bank indicated that it could form a syndicate of banks that would finance the transaction. On the same day, \an Gorkom retained James Brennan, Esquire. to advise Trans Union on the legal aspects of the merger. Van Gorkom did not consult with William Browder, a Vice-President and director of Trans Union and termer head of its legal department, or with William Moore, then the head of Trans Union’s legal staff.

On Friday, September 19, Van Gorkom called a special meeting of the Trans Union Board for noon the following day. He also called a meeting of the Company’s Senior Management to convene at 11:00 a.m., prior to the meeting of the Board. No one, except Chelberg and Peterson, was told the purpose of the meetings. Van Gorkom did not invite Trans Union’s investment banker, Salomon Brothers or its Chicago-based partner, to attend.

Of those present at the Senior Management meeting on September 20, only Chel-berg and Peterson had prior knowledge of Pritzker’s offer. Van Gorkom disclosed the offer and described its terms, but he furnished no copies of the proposed Merger Agreement. Romans announced that his department had done a second study which showed that, for a leveraged buy-out, the price range for Trans Union stock was between $55 and $65 per share. Van Gor-kom neither saw the study nor asked Romans to make it available for the Board meeting.

Senior Management’s reaction to the Pritzker proposal was completely negative. No member of Management, except Chel-berg and Peterson, supported the proposal. Romans objected to the price as being too low;6 he was critical of the timing and suggested that consideration should be given to the adverse tax consequences of an all-cash deal for low-basis shareholders; and he took the position that the agreement to sell Pritzker one million newly-issued shares at market price would inhibit other offers, as would the prohibitions against soliciting bids and furnishing inside infor-*877stion to other bidders. Romans argued at the Pritzker proposal was a “lock up” d amounted to “an agreed merger as posed to an offer.” Nevertheless, Van >rkom proceeded to the Board meeting as aeduled without further delay.

Ten directors served .on the Trans Union iard, five inside (defendants Bonser, Boyle, Browder, Chelberg, and Van Gor-in) and five outside (defendants Wallis, hnson, Lanterman, Morgan and Renek-i. All directors were present at the meet-r, except O’Boyle who was ill. Of the tside directors, four were corporate chief ecutive officers and one was the former ian of the University of Chicago Busi-ss School. None was an investment nker or trained financial analyst. All imbers of the Board were well informed out the Company and its operations as a ing concern. They were familiar with i current financial condition of the Com-ny, as well as operating and earnings Sections reported in the recent Five Year recast. The Board generally received jular and detailed reports and was kept reast of the accumulated investment tax ¡dit and accelerated depreciation prob-n.

Van Gorkom began the Special Meeting the Board with a twenty-minute oral jsentation. Copies of the proposed ;rger Agreement were delivered too late • study before or during the meeting.7 ! reviewed the Company’s ITC and depretion problems and the efforts thereto-•e made to solve them. He discussed his tial meeting with Pritzker and his motition in arranging that meeting. Van >rkom did not disclose to the Board, how-er, the methodology by which he alone d arrived at the $55 figure, or the fact it he first proposed the $55 price in his gotiations with Pritzker.

Van Gorkom outlined the terms of the Pritzker offer as follows: Pritzker would pay $55 in cash for all outstanding shares of Trans Union stock upon completion of which Trans Union would be merged into New T Company, a subsidiary wholly-owned by Pritzker and formed to implement the merger; for a period of 90 days, Trans Union could receive, but could not actively solicit, competing offers; the offer had to be acted on by the next evening, Sunday, September 21; Trans Union could only furnish to competing bidders published information, and not proprietary information; the offer was subject to Pritzker obtaining the necessary financing by October 10, 1980; if the financing contingency were met or waived by Pritzker, Trans Union was required to sell to Pritzker one million newly-issued shares of Trans Union at $38 per share.

Van Gorkom took the position that putting Trans Union “up for auction” through a 90-day market test would validate a decision by the Board that $55 was a fair price. He told the Board that the “free market will have an opportunity to judge whether $55 is a fair price.” Van Gorkom framed the decision before the Board not as whether $55 per share was the highest price that could be obtained, but as whether the $55 price was a fair price that the stockholders should be given the opportunity to accept or reject.8

Attorney Brennan advised the members of the Board that they might be sued if they failed to accept the offer and that a fairness opinion was not required as a matter of law.

Romans attended the meeting as chief financial officer of the Company. He told the Board that he had not been involved in the negotiations with Pritzker and knew nothing about the merger proposal until *879the morning of the meeting; that his studies did not indicate either a fair price for the stock or a valuation of the Company; that he did not see his role as directly addressing the fairness issue; and that he and his people “were trying to search for ways to justify a price in connection with such a [leveraged buy-out] transaction, rather than to say what the shares are worth.” Romans testified:

I told the Board that the study ran the numbers at 50 and 60, and then the subsequent study at 55 and 65, and that was not the same thing as saying that I have a valuation of the company at X dollars. But it was a way — a first step towards reaching that conclusion.

Romans told the Board that, in his opinion, $55 was “in the range of a fair price,” but “at the beginning of the range.”

Chelberg, Trans Union’s President, supported Van Gorkom’s presentation and representations. He testified that he “participated to make sure that the Board members collectively were clear on the details of the agreement or offer from Pritzker;” that he “participated in the discussion with Mr. Brennan, inquiring of him about the necessity for valuation opinions in spite of the way in which this particular offer was couched;” and that he was otherwise actively involved in supporting the positions being taken by Van Gorkom before the Board about “the necessity to act immediately on this offer,” and about “the adequacy of the $55 and the question of how that would be tested.”

The Board meeting of September 20 lasted about two hours. Based solely upon Van Gorkom’s oral presentation, Chel-berg’s supporting representations, Romans’ oral statement, Brennan’s legal advice, and their knowledge of the market history of the Company’s stock,9 the directors approved the proposed Merger Agreement. However, the Board later claimed to have attached two conditions to its acceptance: (1) that Trans Union reserved the right to accept any better offer that was made during the market test period; and (2) that Trans Union could share its proprietary information with any other potential bidders. While the Board now claims to have reserved the right to accept any better offer received after the announcement of the Pritzker agreement (even though the minutes of the meeting do not reflect this), it is undisputed that the Board did not reserve the right to actively solicit alternate offers.

The Merger Agreement was executed by Van Gorkom during the evening of September 20 at a formal social event that he hosted for the opening of the Chicago Lyric Opera. Neither he nor any other director read the agreement prior to its signing and delivery to Pritzker.

On Monday, September 22, the Company issued a press release announcing that Trans Union had entered into a “definitive” Merger Agreement with an affiliate of the Marmon Group, Inc., a Pritzker holding company. Within 10 days of the public announcement, dissent among Senior Management over the merger had become widespread. Faced with threatened resignations of kqy officers, Van Gorkom met with Pritzker who agreed to several modifications of the Agreement. Pritzker was willing to do so provided that Van Gorkom could persuade the dissidents to remain on the Company payroll for at least six months after consummation of the merger.

Van Gorkom reconvened the Board on October 8 and secured the directors’ approval of the proposed amendments — sight unseen. The Board also authorized the employment of Salomon Brothers, its in*881vestment banker, to solicit other offers for Trans Union during the proposed “market test” period.

The next day, October 9, Trans Union issued a press release announcing: (1) that Pritzker had obtained “the financing commitments necessary to consummate” the merger with Trans Union; (2) that Pritzker had acquired one million shares of Trans Union common stock at $38 per share; (3) that Trans Union was now permitted to actively seek other offers and had retained Salomon Brothers for that purpose; and (4) that if a more favorable offer were not received before February 1, 1981, Trans Union’s shareholders would thereafter meet to vote on the Pritzker proposal.

It was not until the following day, October 10, that the actual amendments to the Merger Agreement were prepared by Pritzker and delivered to Van Gorkom for execution. As will be seen, the amendments were considerably at variance with Van Gorkom’s representations of the amendments to the Board on October 8; and the amendments placed serious constraints on Trans Union’s ability to negotiate a better deal and withdraw from the Pritzker agreement. Nevertheless, Van Gorkom proceeded to execute what became the October 10 amendments to the Merger Agreement without conferring further with the Board members and apparently without comprehending the actual implications of the amendments.

Salomon Brothers’ efforts over a three-month period from October 21 to January 21 produced only one serious suitor for Trans Union — General Electric Credit Corporation (“GE Credit”), a subsidiary of the General Electric Company. However, GE Credit was unwilling to make an offer for Trans Union unless Trans Union first rescinded its Merger Agreement with Pritzker. When Pritzker refused, GE Credit terminated further discussions with Trans Union in early January. ,

In the meantime, in early December, the investment firm of Kohlberg, Kravis, Roberts & Co. (“KKR”), the only other concern to make a firm offer for Trans Union, withdrew its offer under circumstances hereinafter detailed.

On December 19, this litigation was commenced and, within four weeks, the plaintiffs had deposed eight of the ten directors of Trans Union, including Van Gorkom, Chelberg and Romans, its Chief Financial Officer. On January 21, Management’s Proxy Statement for the February 10 shareholder meeting was mailed to Trans Union’s stockholders. On January 26, Trans Union’s Board met and, after a lengthy meeting, voted to proceed with the Pritzker merger. The Board also approved for mailing, “on or about January 27,” a Supplement to its Proxy Statement. The Supplement purportedly set forth all information relevant to the Pritzker Merger Agreement, which had not been divulged in the first Proxy Statement.

On February 10, the stockholders of Trans Union approved the Pritzker merger proposal. Of the outstanding shares, 69.9% were voted in favor of the merger; 7.25% were voted against the merger; and 22.85% were not voted.

II.

We turn to the issue of the application of the business judgment rule to the September 20 meeting of the Board.

The Court of Chancery concluded from the evidence that the Board of Directors’ approval of the Pritzker merger proposal fell within the protection of the business judgment rule. The Court found that the Board had given sufficient time and attention to the transaction, since the directors had considered the Pritzker proposal on three different occasions, on September 20, and on October 8, 1980 and finally on January 26, 1981. On that basis, the Court reasoned that the Board had acquired, over the four-month period, sufficient information to reach an informed business judg-*883inent on the cash-out merger proposal. The Court ruled:

... that given the market value of Trans Union’s stock, the business acumen of the members of the board of Trans Union, the substantial premium over market offered by the Pritzkers and the ultimate effect on the merger price provided by the prospect of other bids for the stock in question, that the board of directors of Trans Union did not act recklessly or improvidently in determining on a course of action which they believed to be in the best interest of the stockholders of Trans Union.

The Court of Chancery made but one finding; i.e., that the Board’s conduct over the entire period from September 20 through January 26, 1981 was not reckless or improvident, but informed. This ultimate conclusion was premised upon three subordinate findings, one explicit and two implied. The Court’s explicit finding was that Trans Union’s Board was “free to turn down the Pritzker proposal” not only on September 20 but also on October 8, 1980 and on January 26, 1981. The Court’s implied, subordinate findings were: (1) that no legally binding agreement was reached by the parties until January 26; and (2) that if a higher offer were to be forthcoming, the market test would have produced it,10 and Trans Union would have been contractually free to accept such higher offer. However, the Court offered no factual basis or legal support for any of these findings; and the record compels contrary conclusions.

This Court’s standard of review of the findings of fact reached by the Trial Court following full evidentiary hearing is as stated in Levitt v. Bouvier, Del.Supr., 287 A.2d 671, 673 (1972):

[In an appeal of this nature] this court has the authority to review the entire record and to make its own findings of fact in a proper case. In exercising our power of review, we have the duty to review the sufficiency of the evidence and to test the propriety of the findings below. We do not, however, ignore the findings made by the trial judge. If they are sufficiently supported by the record and are the product of an orderly and logical deductive process, in the exercise of judicial restraint we accept them, even though independently we might have reached opposite conclusions. It is only when the findings below are clearly wrong and the doing of justice requires their overturn that we are free to make contradictory findings of fact.

Applying that standard and governing principles of law to the record and the decision of the Trial Court, we conclude that the Court’s ultimate finding that the Board’s conduct was not “reckless or imprudent” is contrary to the record and not the product of a logical and deductive reasoning process.

The plaintiffs contend that the Court of Chancery erred as a matter of law by exonerating the defendant directors under the business judgment rule without first determining whether the rule’s threshold condition of “due care and prudence” was satisfied. The plaintiffs assert that the Trial Court found the defendant directors to have reached an informed business judgment on the basis of “extraneous considerations and events that occurred after September 20, 1980.” The defendants deny that the Trial Court committed legal error in relying upon post-September 20, 1980 events and the directors’ later acquired knowledge. The defendants further submit that their decision to accept $55 per share was informed because: (1) they were “highly qualified;” (2) they were “well-informed;” and (3) they deliberated over the “proposal” not once but three times. On *885:ssentially this evidence and under our tandard of review, the defendants assert hat affirmance is required. We must disa-;ree.

Under Delaware law, the business adgment rule is the offspring of the fun-amental principle, codified in 8 Del.C. 141(a), that the business and affairs of a )elaware corporation are managed by or nder its board of directors.11 Pogostin v. Rice, Del.Supr., 480 A.2d 619, 624 (1984); Aronson v. Lewis, Del.Supr., 473 A.2d 805, 11 (1984); Zapata Corp. v. Maldonado, del.Supr., 430 A.2d 779, 782 (1981). In arrying out their managerial roles, diactors are charged with an unyielding fi-uciary duty to the corporation and its fiareholders. Loft, Inc. v. Guth, Del.Ch., A.2d 225 (1938), aff'd, Del.Supr., 5 A.2d 03 (1939). The business judgment rule ¡cists to protect and promote the full and ree exercise of the managerial power ranted to Delaware directors. Zapata Corp. v. Maldonado, supra at 782. The lie itself “is a presumption that in making business decision, the directors of a eor-oration acted on an informed basis, in ood faith and in the honest belief that the ation taken was in the best interests of íe company.” Aronson, supra at 812. hus, the party attacking a board decision 3 uninformed must rebut the presumption íat its business judgment was an in-)rmed one. Id.

The determination of whether a usiness judgment is an informed one irns on whether the directors have informed themselves “prior to making a business decision, of all1 material information reasonably available to them.” Id 12

Under the business judgment rule there is no protection for directors who have made “an unintelligent or unadvised judgment.” Mitchell v. Highland-Western Glass, Del.Ch., 167 A. 831, 833 (1933). A director’s duty to inform himself in preparation for a decision derives from the fiduciary capacity in which he serves the corporation and its stockholders. Lutz v. Boas, Del.Ch., 171 A.2d 381 (1961). See Weinberger v. UOP, Inc., supra; Guth v. Loft, supra. Since a director is vested with the responsibility for the management of the affairs of the corporation, he must execute that duty with the recognition that he acts on behalf of others. Such obligation does not tolerate faithlessness or self-dealing. But fulfillment of the fiduciary function requires more than the mere absence of bad faith or fraud. Representation of the financial interests of others imposes on a director an affirmative duty to protect those interests and to proceed with a critical eye in assessing information of the type and under the circumstances present here. See Lutz v. Boas, supra; Guth v. Loft, supra.at 510. Compare Donovan v. Cunningham, 5th Cir., 716 F.2d 1455, 1467 (1983); Doyle v. Union Insurance Company, Neb.Supr., 277 N.W.2d 36 (1979); Continental Securities Co. v. Belmont, N.Y. App., 99 N.E. 138, 141 (1912).

Thus, a director’s duty to exercise an informed business judgment is in *887the nature of a duty of care, as distinguished from a duty of loyalty. Here, there were no allegations of fraud, bad faith, or self-dealing, or proof thereof. Hence, it is presumed that the directors reached their business judgment in good faith, Allaun v. Consolidated Oil Co., Del. Ch., 147 A. 257 (1929), and considerations of motive are irrelevant to the issue before us.

The standard of care applicable to a director’s duty of care has also been recently restated by this Court. In Aron-son, supra, we stated:

While the Delaware cases use a variety of terms to describe the applicable standard of care, our analysis satisfies us that under the business judgment rule director liability is predicated upon concepts of gross negligence, (footnote omitted)

473 A.2d at 812.

We again confirm that view. We think the concept of gross negligence is also the proper standard for determining whether a business judgment reached by a board of directors was an informed one.13

In the specific context of a proposed merger of domestic corporations, a director has a duty under 8 Del.C. 251(b),14 along with his fellow directors, to act in an informed and deliberate manner in determining whether to approve an agreement of merger before submitting the proposal to the stockholders. Certainly in the merger context, a director may not abdicate that duty by leaving to the shareholders alone the decision to approve or disapprove the agreement. See Beard v. Elster, Del.Supr., 160 A.2d 731, 737 (1960). Only an agreement of merger satisfying the requirements of 8 Del.C. § 251(b) may be submitted to the shareholders under § 251(c). See generally Aronson v. Lewis, supra at 811-13; see also Pogostin v. Rice, supra.

It is against those standards that the conduct of the directors of Trans Union must be tested, as a matter of law and as a matter of fact, regarding their exercise of an informed business judgment in voting to approve the Pritzker merger proposal.

III.

The defendants argue that the determination of whether their decision to accept $55 per share for Trans Union represented an informed business judgment requires consideration, not only of that which they knew and learned on September 20, but also of that which they subsequently learned and did over the following four-*889lonth period before the shareholders met > vote on the proposal in February, 1981. he defendants thereby seek to reduce the ignificance of their action on September D and to widen the time frame for deter-lining whether their decision to accept the ritzker proposal was an informed one. hus, the defendants contend that what the rectors did and learned subsequent to sptember 20 and through January 26, )81, was properly taken into account by te Trial Court in determining whether the oard’s judgment was an informed one. re disagree with this post hoc approach.

The issue of whether the directors ached an informed decision to “sell” the nnpany on September 20, 1980 must be itermined only upon the basis of the in-rmation then reasonably available to the rectors and relevant to their decision to cept the Pritzker merger proposal. This not to say that the directors were pre-nded from altering their original plan of tion, had they done so in an informed anner. What we do say is that the ques->n of whether the directors reached an formed business judgment in agreeing to 11 the Company, pursuant to the terms of e September 20 Agreement presents, in ality, two questions: (A) whether the dietors reached an informed business judg-mt' on September 20, 1980; and (B) if sy did not, whether the directors’ actions ten subsequent to September 20 were equate to cure any infirmity in their ac-n taken on September 20. We first con-ler the directors’ September 20 action in •ms of their reaching an informed busi-ss judgment.

-A-

On the record before us, we must iclude that the Board of Directors did t reach an informed business judgment September 20, 1980 in voting to “sell” 5 Company for $55 per share pursuant to the Pritzker cash-out merger proposal. Our reasons, in summary, are as follows:

The directors (1) did not adequately inform themselves as to Van Gorkom’s role in forcing the “sale” of the Company and in establishing the per share purchase price; (2) were uninformed as to the intrinsic value of the Company; and (3) given these circumstances, at a minimum, were grossly negligent in approving the “sale” of the Company upon two hours’ consideration, without prior notice, and without the exigency of a crisis or emergency.

As has been noted, the Board based its September 20 decision to approve the cash-out merger primarily on Van Gorkom’s representations. None of the directors, other than Van Gorkom and Chelberg, had any prior knowledge that the purpose of the meeting was to propose a cash-out merger of Trans Union. No members of Senior Management were present, other than Chelberg, Romans and Peterson; and the latter two had only learned of the proposed sale an hour earlier. Both general counsel Moore and former general counsel Browder attended the meeting, but were equally uninformed as to the purpose of the meeting and the documents to be acted upon.

Without any documents before them concerning the proposed transaction, the members of the Board were required to rely entirely upon Van Gorkom’s 20-minute oral presentation of the proposal. No written summary of the terms of the merger was presented; the directors were given no documentation to support the adequacy of $55 price per share for sale of the Company; and the Board had before it nothing more than Van Gorkom’s statement of his understanding of the substance of an agreement which he admittedly had never read, nor which any member of the Board had ever seen.

Under 8 Del.C. § 141(e),15 “directors are fully protected in relying in *891good faith on reports made by officers.” Michelson v. Duncan, Del.Ch., 386 A.2d 1144, 1156 (1978); aff'd in part and rev’d in part on other grounds, Del.Supr., 407 A.2d 211 (1979). See also Graham v. Allis-Chalmers Mfg. Co., Del.Supr., 188 A.2d 125, 130 (1963); Prince v. Bensinger, Del. Ch., 244 A.2d 89, 94 (1968). The term "report” has been liberally construed to include reports of informal personal investigations by corporate officers, Cheff v. Mathes, Del.Supr., 199 A.2d 548, 556 (1964). However, there is no evidence that any "report,” as defined under § 141(e), concerning the Pritzker proposal, was presented to the Board on September 20.16 Van Gorkom’s oral presentation of his understanding of the terms of the proposed Merger Agreement, which he had not seen, and Romans’ brief oral statement of his preliminary study regarding the feasibility of a leveraged buy-out of Trans Union do not qualify as § 141(e) “reports” for these reasons: The former lacked substance because Van Gorkom was basically uninformed as to the essential provisions of the very document about which he was talking. Romans’ statement was irrelevant to the issues before the Board since it did not purport to be a valuation study. At a minimum for a report to enjoy the status conferred by § 141(e), it must be pertinent to the subject matter upon which a board is called to act, and otherwise be entitled to good faith, not blind, reliance. Considering all of the surrounding circumstances — hastily calling the meeting without prior notice of its subject matter, the proposed sale of the Company without any prior consideration of the issue or necessity therefor, the urgent time constraints imposed by Pritzker, and the total absence of any documentation whatsoever — the directors were duty bound to make reasonable inquiry of Van Gorkom and Romans, and if they had done so, the inadequacy of that upon which they now claim to have relied would have been apparent.

The defendants rely on the following factors to sustain the Trial Court’s finding that the Board’s decision was an informed one: (1) the magnitude of the premium or spread between the $55 Pritzker offering price and Trans Union’s current market price of $38 per share; (2) the amendment of the Agreement as submitted on September 20 to permit the Board to accept any better offer during the “market test” period; (3) the collective experience and expertise of the Board’s “inside” and "outside” directors;17 and (4) their reliance on Brennan’s legal advice that the directors might be sued if they rejected the Pritzker proposal. We discuss each of these grounds seriatim:

(1)

A substantial premium may provide one reason to recommend a merger, but in the absence of other sound valuation information, the fact of a premium alone does not provide an adequate basis upon which to assess the fairness of an offering price. Here, the judgment reached as to the adequacy of the premium was based on a comparison between the historically depressed Trans Union market price and the amount of the Pritzker offer. Using market price as a basis for concluding that the premium adequately reflected the true val*893ue of the Company was a clearly faulty, indeed fallacious, premise, as the defendants’ own evidence demonstrates.

The record is clear that before September 20, Van Gorkom and other members of Trans Union’s Board knew that the market had consistently undervalued the worth of Trans Union’s stock, despite steady increases in the Company’s operating income in the seven years preceding the merger. The Board related this occurrence in large part to Trans Union’s inability to use its ITCs as previously noted. Van Gor-kom testified that he did not believe the market price accurately reflected Trans Union’s true worth; and several of the directors testified that, as a general rule, most chief executives think that the market undervalues their companies’ stock. Yet, on September 20, Trans Union’s Board apparently believed that the market stock price accurately reflected the value of the Company for the purpose of determining the adequacy of the premium for its sale.

In the Proxy Statement, however, the directors reversed their position. There, they stated that, although the earnings prospects for Trans Union were “excellent,” they found no basis for believing that this would be reflected in future stock prices. With regard to past trading, the Board stated that the prices at which the Company’s common stock had traded in recent years did not reflect the “inherent” value of the Company. But having referred to the “inherent” value of Trans Union, the directors ascribed no number to it. Moreover, nowhere did they disclose that they had no basis on which to fix “inherent” worth beyond an impressionistic reaction to the premium over market and an unsubstantiated belief that the value of the assets was “significantly greater” than book value. By their own admission they could not rely on the stock price as an accurate measure of value. Yet, also by their own admission, the Board members assumed that Trans Union’s market price was adequate to serve as a basis upon which to assess the adequacy of the premium for purposes of the September 20 meeting.

The parties do not dispute that a publicly-traded stock price is solely a measure of the value of a minority position and, thus, market price represents only the value of a single share. Nevertheless, on September 20, the Board assessed the adequacy of the premium over market, offered by Pritzker, solely by comparing it with Trans Union’s current and historical stock price. (See supra note 5 at 866.)

Indeed, as of September 20, the Board had no other information on which to base a determination of the intrinsic value of Trans Union as a going concern. As of September 20, the Board had made no evaluation of the Company designed to value the entire enterprise, nor had the Board ever previously considered selling the Company or consenting to a buy-out merger. Thus, the adequacy of a premium is indeterminate unless it is assessed in terms of other competent and sound valuation information that reflects the value of the particular business.

Despite the foregoing facts and circumstances, there was no call by the Board, either on September 20 or thereafter, for any valuation study or documentation of the |55 price per share as a measure of the fair value of the Company in a cash-out context. It is undisputed that the major asset of Trans Union was its cash flow. Yet, at no time did the Board call for a valuation study taking into account that highly significant element of the Company’s assets.

We do not imply that an outside valuation study is essential to support an informed business judgment; nor do we state that fairness opinions by independent investment bankers are required as a matter of law. Often insiders familiar with the business of a going concern are in a better position than are outsiders to gather relevant information; and under appropriate circumstances, such directors may be fully protected in relying in good faith upon the valuation reports of their management. *895 See 8 Del. C. § 141(e). See also Cheff v. Mathes, supra.

Here, the record establishes that the Board did not request its Chief Financial Officer, Romans, to make any valuation study or review of the proposal to determine the adequacy of $55 per share for sale of the Company. On the record before us: The Board rested on Romans’ elicited response that the $55 figure was within a “fair price range” within the context of a leveraged buy-out. No director sought any further information from Romans. No director asked him why he put $55 at the bottom of his range. No director asked Romans for any details as to his study, the reason why it had been undertaken or its depth. No director asked to see the study; and no director asked Romans whether Trans Union’s finance department could do a fairness study within the remaining 36-hour 18 period available under the Pritzker offer.

Had the Board, or any member, made an inquiry of Romans, he presumably would have responded as he testified: that his calculations were rough and preliminary; and, that the study was not designed to determine the fair value of the Company, but rather to assess the feasibility of a leveraged buy-out financed by the Company’s projected cash flow, making certain assumptions as to the purchaser’s borrowing needs. Romans would have presumably also informed the Board of his view, and the widespread view of Senior Management, that the timing of the offer was wrong and the offer inadequate.

The record also establishes that the Board accepted without scrutiny Van Gor-kom’s representation as to the fairness of the $55 price per share for sale of the Company — a subject that the Board had never previously considered. The Board thereby failed to discover that Van Gorkom had suggested the $55 price to Pritzker and, most crucially, that Van Gorkom had arrived at the $55 figure based on calculations designed solely to determine the feasibility of a leveraged buy-out.19 No questions were raised either as to the tax implications of a cash-out merger or how the price for the one million share option granted Pritzker was calculated.

We do not say that the Board of Directors was not entitled to give some credence to Van Gorkom’s representation that $55 was an adequate or fair price. Under § 141(e), the directors were entitled to rely upon their chairman’s opinion of value and adequacy, provided that such opinion was reached on a sound basis. Here, the issue is whether the directors informed themselves as to all information that was reasonably available to them. Had they done so, they would have learned of the source and derivation of the $55 price and could not reasonably have relied thereupon in good faith.

None of the directors, Management or outside, were investment bankers or financial analysts. Yet the Board did not consider recessing the meeting until a later hour that day (or requesting an extension of Pritzker’s Sunday evening deadline) to give it time to elicit more information as to the sufficiency of the offer, either from *897e Management (in particular Romans) rom Trans Union’s own investment :er, Salomon Brothers, whose Chicago ialist in merger and acquisitions was vn to the Board and familiar with s Union’s affairs.

ms, the record compels the conclusion on September 20 the Board lacked ition information adequate to reach an •med business judgment as to the fair-of $55 per share for sale of the Com-20

(2)

is brings us to the post-September 20 'ket test” upon which the defendants lately rely to confirm the reasonable-of their September 20 decision to ac-the Pritzker proposal. In this connee-the directors present a two-part argu-(a) that by making a “market test” ritzker’s $55 per share offer a condi-of their September 20 decision to ac-his offer, they cannot be found to have 1 impulsively or in an uninformed man-on September 20; and (b) that the uacy of the $17 premium for sale of Company was conclusively established the following 90 to 120 days by the ; reliable evidence available — the mar-lace. Thus, the defendants impliedly md that the “market test” eliminated need for the Board to perform any r form of fairness test either on Sep>er 20, or thereafter.

fain, the facts of record do not support lefendants’ argument. There is no evi-e: (a) that the Merger Agreement was :tively amended to give the Board free-to put Trans Union up for auction sale íe highest bidder; or (b) that a public ion was in fact permitted to occur, minutes of the Board meeting make no rence to any of this. Indeed, the rd compels the conclusion that the dims had no rational basis for expecting a market test was attainable, given terms of the Agreement as executed ng the evening of September 20. We rely upon the following facts which are essentially uncontradicted:

The Merger Agreement, specifically identified as that originally presented to the Board on September 20, has never been produced by the defendants, notwithstanding the plaintiffs’ several demands for production before as well as during trial. No acceptable explanation of this failure to produce documents has been given to either the Trial Court or this Court. Significantly, neither the defendants nor their counsel have made the affirmative representation that this critical document has been produced. Thus, the Court is deprived of the best evidence on which to judge the merits of the defendants’ position as to the care and attention which they gave to the terms of the Agreement on September 20.

Van Gorkom states that the Agreement as submitted incorporated the ingredients for a market test by authorizing Trans Union to receive competing offers over the next 90-day period. However, he concedes that the Agreement barred Trans Union from actively soliciting such offers and from furnishing to interested parties any information about the Company other than that already in the public domain. Whether the original Agreement of September 20 went so far as to authorize Trans Union to receive competitive proposals is arguable. The defendants’ unexplained failure to produce and identify the original Merger Agreement permits the logical inference that the instrument would not support their assertions in this regard. Wilmington Trust Co. v. General Motors Corp., Del.Supr., 51 A.2d 584, 593 (1947); II Wigmore on Evidence § 291 (3d ed. 1940). It is a well established principle that the production of weak evidence when strong is, or should have been, available can lead only to the conclusion that the strong would have been adverse. Interstate Circuit v. United States, 306 U.S. *899208, 226, 59 S.Ct. 467, 474, 83 L.Ed. 610 (1939); Deberry v. State, Del.Supr., 457 A.2d 744, 754 (1983). Van Gorkom, conceding that he never read the Agreement, stated that he was relying upon his understanding that, under corporate law, directors always have an inherent right, as well as a fiduciary duty, to accept a better offer notwithstanding an existing contractual commitment by the Board. (See the discussion infra, part III B(3) at p. 55.)

The defendant directors assert that they “insisted” upon including two amendments to the Agreement, thereby permitting a market test: (1) to give Trans Union the right to accept a better offer; and (2) to reserve to Trans Union the right to distribute proprietary information on the Company to alternative bidders. Yet, the defendants concede that they did not seek to amend the Agreement to permit Trans Union to solicit competing offers.

Several of Trans Union’s outside directors resolutely maintained that the Agreement as submitted was approved on the understanding that, “if we got a better deal, we had a right to take it.” Director Johnson so testified; but he then added, “And if they didn’t put that in the agreement, then the management did not carry out the conclusion of the Board. And I just don’t know whether they did or not.” The only clause in the Agreement as finally executed to which the defendants can point as “keeping the door open” is the following underlined statement found in subpara-graph (a) of section 2.03 of the Merger Agreement as executed:

The Board of Directors shall recommend to the stockholders of Trans Union that they approve and adopt the Merger Agreement (‘the stockholders’ approval’) and to use its best efforts to obtain the requisite votes therefor. GL acknowledges that Trans Union directors may have a competing fiduciary obligation to the shareholders under certain circumstances.

Clearly, this language on its fa'ce cannot be construed as incorporating either of the two “conditions” described above: either the right to accept a better offer or the right to distribute proprietary information to third parties. The Lgical witness for the defendants to call to confirm their construction of this clause of the Agreement would have been Trans Union’s outside attorney, James Brennan. The defendants’ failure, without explanation, to call this witness again permits the logical inference that his testimony would not have been helpful to them. The further fact that the directors adjourned, rather than recessed, the meeting without incorporating in the Agreement these important “conditions” further weakens the defendants’ position. As has been noted, nothing in the Board’s Minutes supports these claims. No reference to either of the so-called “conditions” or of Trans Union’s reserved right to test the market appears in any notes of the Board meeting or in the Board Resolution accepting the Pritzker offer or in the Minutes of the meeting itself. That evening, in the midst of a formal party which he hosted for the opening of the Chicago Lyric Opera, Van Gorkom executed the Merger Agreement without he or any other member of the Board having read the instruments.

The defendants attempt to downplay the significance of the prohibition against Trans Union’s actively soliciting competing offers by arguing that the directors “understood that the entire financial community would know that Trans Union was for sale upon the announcement of the Pritzker offer, and anyone desiring to make a better offer was free to do so.” Yet, the press release issued on September 22, with the authorization of the Board, stated that Trans Union had entered into “definitive agreements” with the Pritzkers; and the press release did not even disclose Trans Union’s limited right to receive and accept higher offers. Accompanying this press release was a further public announcement that Pritzker had been granted an option to purchase at any time one million shares of *901ms Union’s capital stock at 75 cents >ve the then-current price per share.

Thus, notwithstanding what sever-of the outside directors later claimed to re “thought” occurred at the meeting, ! record compels the conclusion that ms Union’s Board had no rational basis conclude on September 20 or in the days nediately following, that the Board’s ac-'tance of Pritzker’s offer was condi-íed on (1) a “market test” of the offer; l (2) the Board’s right to withdraw from

Pritzker Agreement and accept any her offer received before the sharehold-neeting.

(3)

The directors’ unfounded reliance both the premium and the market test ;he basis for accepting the Pritzker proal undermines the defendants’ remain-contention that the Board’s collective erience and sophistication was a suffi-it basis for finding that it reached its tember 20 decision with informed, reaable deliberation.21 Compare Gimbel Signal Companies, Inc., Del. Ch., 316 d 599 (1974), aff'd per curiam, Del. r., 316 A.2d 619 (1974). There, the rt of Chancery preliminary enjoined a rd’s sale of stock of its wholly-owned sidiary for an alleged grossly ¡náde-te price. It did so based on a finding ; the business judgment rule had been ced for failure of management to give board “the opportunity to make a reaible and reasoned decision.” 316 A.2d 15. The Court there reached this result vithstanding the board’s sophistication experience; the company’s need of im-ítete cash; and the board’s need to act nptly due to the impact of an energy crisis on the value of the underlying assets being sold — all of its subsidiary’s oil and gas interests. The Court found those factors denoting competence to be outweighed by evidence of gross negligence; that management in effect sprang the deal on the board by negotiating the asset sale without informing the board; that the buyer intended to “force a quick decision” by the board; that the board meeting was called on only one-and-a-half days’ notice; that its outside directors were not notified of the meeting’s purpose; that during a meeting spanning “a couple of hours” a sale of assets worth $480 million was approved; and that the Board failed to obtain a current appraisal of its oil and gas interests. The analogy of Signal to the case at bar is significant.

(4)

Part of the defense is based on a claim that the directors relied on legal advice rendered at the September 20 meeting by James Brennan, Esquire, who was present at Van Gorkom’s request. Unfortunately, Brennan did not appear and testify at trial even though his firm participated in the defense of this action. There is no contemporaneous evidence of the advice given by Brennan on September 20, only the later deposition and trial testimony of certain directors as to their recollections or understanding of what was said at the meeting. Since counsel did not testify, and the advice attributed to Brennan is hearsay received by the Trial Court over the plaintiffs’ objections, we consider it only in the context of the directors’ present claims. In fairness to counsel, we make no findings that the advice attributed to him was in fact given. We focus solely on the efficacy of the *903defendants’ claims, made months and years later, in an effort to extricate themselves from liability.

Several defendants testified that Brennan advised them that Delaware law did not require a fairness opinion or an outside valuation of the Company before the Board could act on the Pritzker proposal. If given, the advice was correct. However, that did not end the matter. Unless the directors had before them adequate information regarding the intrinsic value of the Company, upon which a proper exercise of business judgment could be made, mere advice of this type is meaningless; and, given this record of the defendants’ failures, it constitutes no defense here.22

' We conclude that Trans Union’s Board \was grossly negligent in that it failed to act with informed reasonable deliberation ín agreeing to the Pritzker merger proposal pn September 20; and we further conclude that the Trial Court erred as a matter of law in failing to address that question before determining whether the directors’ latter conduct was sufficient to cure its initial jerror.

A second claim is that counsel advised the Board it would be subject to lawsuits if it rejected the $55 per share offer. It is, of course, a fact of corporate life that today when faced with difficult or sensitive issues, directors often are subject to suit, irrespective of the decisions they make. However, counsel’s mere acknowl-edgement of this circumstance cannot be rationally translated into a justification for a board permitting itself to be stampeded into a patently unadvised act. While suit might result from the rejection of a merger or tender offer, Delaware law makes clear that a board acting within the ambit of the business judgment rule faces no ultimate liability. Pogostin v. Rice, supra. Thus, we cannot conclude that the mere threat of litigation, acknowledged by counsel, constitutes either legal advice or any valid basis upon which to pursue an uninformed course.

Since we conclude that Brennan’s purported advice is of no consequence to the defense of this case, it is unnecessary for us to invoke the adverse inferences which may be attributable to one failing to appear at trial and testify.

-B-

We now examine the Board’s post-September 20 conduct for the purpose of determining first, whether it was informed and not grossly negligent; and second, if informed, whether it was sufficient to legally rectify and cure the Board’s derelictions of September 20.23

(1)

First, as to the Board meeting of October 8: Its purpose arose in the aftermath of the September 20 meeting: (1) the September 22 press release announcing that Trans Union “had entered into definitive agreements to merge with an affiliate of Mar-mon Group, Inc.;” and (2) Senior Management’s ensuing revolt.

Trans Union’s press release stated:

FOR IMMEDIATE RELEASE:

CHICAGO, IL — Trans Union Corporation announced today that it had entered into definitive agreements to merge with an affiliate of The Marmon Group, Inc. in a transaction whereby Trans Union stockholders would receive $55 per share in cash for each Trans Union share held. The Marmon Group, Inc. is controlled by the Pritzker family of Chicago.

The merger is subject to approval by the stockholders of Trans Union at a special meeting expected to be held *905sometime during December or early January.

Until October 10, 1980, the purchaser has the right to terminate the merger if financing that is satisfactory to the purchaser has not been obtained, but after that date there is no such right.

In a related transaction, Trans Union has agreed to sell to a designee of the purchaser one million newly-issued shares of Trans Union common stock at a cash price of $38 per share. Such shares will be issued only if the merger financing has been committed for no later than October 10, 1980, or if the purchaser elects to waive the merger financing condition. In addition, the New York Stock Exchange will be asked to approve the listing of the new shares pursuant to a listing application which Trans Union intends to file shortly.

Completing of the transaction is also subject to the preparation of a definitive proxy statement and making various filings and obtaining the approvals or consents of government agencies.

The press release made no reference to ovisions allegedly reserving to the Board e rights to perform a “market test” and withdraw from the Pritzker Agreement Trans Union received a better offer here the shareholder meeting. The defend-ts also concede that Trans Union never ide a subsequent public announcement iting that it had in fact reserved the ;Tat to accept alternate offers, the Agree-;nt notwithstanding.

The public announcement of the Pritzker irger resulted in an “en masse” revolt of ms Union’s Senior Management. The id of Trans Union’s tank car operations i most profitable division) informed Van Gorkom that unless the merger were called off, fifteen key personnel would resign.

A secondary purpose of the October 8 meeting 'as to obtain the Board’s approval for Trans nion to employ its investment advisor, Salo-lon Brothers, for the limited purpose of assist-ig Management in the solicitation of other of-:rs. Neither Management nor the Board then - thereafter requested Salomon Brothers to submit its opinion as to the fairness of Pritzker’s $55 cash-out merger proposal or to value Trans Union as an entity.

Instead of reconvening the Board, Van Gorkom again privately met with Pritzker, informed him of the developments, and sought his advice. Pritzker then made the following suggestions for overcoming Management’s dissatisfaction: (1) that the Agreement be amended to permit Trans Union to solicit, as well as receive, higher offers; and (2) that the shareholder meeting be postponed from early January to February 10, 1981. In return, Pritzker asked Van Gorkom to obtain a commitment from Senior Management to remain at Trans Union for at least six months after the merger was consummated.

Van Gorkom then advised Senior Management that the Agreement would be amended to give Trans Union the right to solicit competing offers through January, 1981, if they would agree to remain with Trans Union. Senior Management was temporarily mollified; and Van Gorkom then called a special meeting of Trans Union’s Board for October 8.

Thus, the primary purpose of the October 8 Board meeting was to amend the Merger Agreement, in a manner agreeable to Pritzker, to permit Trans Union to conduct a “market test.”24 Van Gorkom understood that the proposed amendments were intended'to give the Company an unfettered “right to openly solicit offers down through January 31.” Van Gorkom presumably so represented the amendments to Trans Union’s Board members on October 8. In a brief session, the directors approved Van Gorkom’s oral presentation of the substance of the proposed amend*907ments, the terms of which were not reduced to writing until October 10. But rather than waiting to review the amendments, the Board again approved them sight unseen and adjourned, giving Van Gorkom authority to execute the papers when he received them.25

*905There is no evidence of record that the October 8 meeting had any other purpose; and we also note that the Minutes of the October 8 Board meeting, including any notice of the meeting, are not part of the voluminous records of this case.

*907Thus, the Court of Chancery’s finding that the October 8 Board meeting was convened to reconsider the Pritzker “proposal” is clearly erroneous. Further, the consequence of the Board’s faulty conduct on October 8, in approving amendments to the Agreement which had not even been drafted, will become apparent when the actual amendments to the Agreement are hereafter examined.

The next day, October 9, and before the Agreement was amended, Pritzker moved swiftly to off-set the proposed market test amendment. First, Pritzker informed Trans Union that he had completed arrangements for financing its acquisition and that the parties were thereby mutually bound to a firm purchase and sale arrangement. Second, Pritzker announced the exercise of his option to purchase one million shares of Trans Union’s treasury stock at $38 per share — 75 cents above the current market price. Trans Union’s Management responded the same day by issuing a press release announcing: (1) that all financing arrangements for Pritzker’s acquisition of Trans Union had been completed; and (2) Pritzker’s purchase of one million shares of Trans Union’s treasury stock at $38 per share.

The next day, October 10, Pritzker delivered to Trans Union the proposed amendments to the September 20 Merger Agreement. Van Gorkom promptly proceeded to countersign all the instruments on behalf of Trans Union without reviewing the instruments to determine if they were consistent with the authority previously granted him by the Board. The amending documents were apparently not approved by Trans Union’s Board until a much later date, December 2. The record does not affirmatively establish that Trans Union’s directors ever read the October 10 amendments.26

The October 10 amendments to the Merger Agreement did authorize Trans Union to solicit competing offers, but the amendments had more far-reaching effects. The most significant change was in the definition of the third-party “offer” available to Trans Union as a possible basis for withdrawal from its Merger Agreement with Pritzker. Under the October 10 amendments, a better offer was no longer sufficient to permit Trans Union’s withdrawal. Trans Union was now permitted to terminate the Pritzker Agreement and abandon the merger only if, prior to February 10, 1981, Trans Union had either consummated a merger (or sale of assets) with a third party or had entered into a “definitive” merger agreement more favorable than Pritzker’s and for a greater consideration— subject only to stockholder approval. Further, the “extension” of the market test period to February 10, 1981 was circumscribed by other amendments which required Trans Union to file its preliminary proxy statement on the Pritzker merger proposal by December 5, 1980 and use its best efforts to mail the statement to its shareholders by January 5, 1981. Thus, the market test period was effectively reduced, not extended. (See infra note 29 at 886.)

In our view, the record compels the conclusion that the directors’ conduct on Octo-*9098 exhibited the same deficiencies as did r conduct on September 20. The Board nitted its Merger Agreement with zker to be amended in a manner it had !ier authorized nor intended. The rt of Chancery, in its decision, over-ed the significance of the October 8-10 its and their relevance to the sufficien-)f the directors’ conduct. The Trial rt’s letter opinion ignores: the October mendments; the manner of their adop-the effect of the October 9 press ise and the October 10 amendments on feasibility of a market test; and the tiate question as to the reasonableness íe directors’ reliance on a market test ¡commending that the shareholders ape the Pritzker merger.

We conclude that the Board i in a grossly negligent manner on iber 8; and that Van Gorkom’s repre-ations on which the Board based its >ns do not constitute “reports” under 1(e) on which the directors could rea-bly have relied. Further, the amended *er Agreement imposed on Trans Un-acceptance of a third party offer con-ns more onerous than those imposed 'rans Union’s acceptance of Pritzker’s r on September 20. After October 10, is Union could accept from a third par-better offer only if it were incorporat-i a definitive agreement between the ies, and not conditioned on financing or ny other contingency.

le October 9 press release, coupled the October 10 amendments, had the • effect of locking Trans Union’s Board the Pritzker Agreement. Pritzker had sby foreclosed Trans Union’s Board i negotiating any better “definitive” ement over the remaining eight weeks re Trans Union was required to clear-5roxy Statement submitting the Pritzk-roposal to its shareholders.

(2)

;xt, as to the “curative” effects of the •d’s post-September 20 conduct, we rein more detail the reaction of Van tom to the KKR proposal and the results of the Board-sponsored “market test.”

The KKR proposal was the first and only offer received subsequent to the Pritzker Merger Agreement. The offer resulted primarily from the efforts of Romans and other senior officers to propose an alternative to Pritzker’s acquisition of Trans Union. In late September, Romans’ group contacted KKR about the possibility of a leveraged buy-out by all members of Management, except Van Gorkom. By early October, Henry R. Kravis of KKR gave Romans written notice of KKR’s “interest in making an offer to purchase 100%” of Trans Union’s common stock.

Thereafter, and until early December, Romans’ group worked with KKR to develop a proposal. It did so with Van Gor-kom’s knowledge and apparently grudging consent. On December 2, Kravis and Romans hand-delivered to Van Gorkom a formal letter-offer to purchase all of Trans Union’s assets and to assume all of its liabilities for an aggregate cash consideration equivalent to $60 per share. The offer was contingent upon completing equity and bank financing of $650 million, which Kra-vis represented as 80% complete. The KKR letter made reference to discussions with major banks regarding the loan portion of the buy-out cost and stated that KKR was “confident that commitments for the bank financing * * * can be obtained within two or three weeks.” The purchasing group was to include certain named key members of Trans Union’s Senior Management, excluding Van Gorkom, and a major Canadian company. Kravis stated that they were willing to enter into a “definitive agreement” under terms and conditions “substantially the same” as those contained in Trans Union’s agreement with Pritzker. The offer was addressed to Trans Union’s Board of Directors and a meeting with the Board, scheduled for that afternoon, was requested.

Van Gorkom’s reaction to the KKR proposal was completely negative; he did not view the offer as being firm because of its *911financing condition. It was pointed out, to no avail, that Pritzker’s offer had not only been similarly conditioned, but accepted on an expedited basis. Van Gorkom refused Kravis’ request that Trans Union issue a press release announcing KKR’s offer, on the ground that it might “chill” any other offer.27 Romans and Kravis left with the understanding that their proposal would be presented to Trans Union’s Board that afternoon.

Within a matter of hours and shortly before the scheduled Board meeting, Kra-vis withdrew his letter-offer. He gave as his reason a sudden decision by the Chief Officer of Trans Union’s rail car leasing operation to withdraw from the KKR purchasing group. Van Gorkom had spoken to that officer about his participation in the KKR proposal immediately after his meeting with Romans and Kravis. However, Van Gorkom denied any responsibility for the officer’s change of mind.

At the Board meeting later that afternoon, Van Gorkom did not inform the directors of the KKR proposal because he considered it “dead.” Van Gorkom did not contact KKR again until January 20, when faced with the realities of this lawsuit, he then attempted to reopen negotiations. KKR declined due to the imminence of the February 10 stockholder meeting.

GE Credit Corporation’s interest in Trans Union did not develop until November; and it made no written proposal until mid-January. Even then, its proposal was not in the form of an offer. Had there been time to do so, GE Credit was prepared to offer between $2 and $5 per share above the $55 per share price which Pritzker offered. But GE Credit needed an additional 60 to 90 days; and it was unwilling to make a formal offer without a concession from Pritzker extending the February 10 “deadline” for Trans Union’s stockholder meeting. As previously stated, Pritzker refused to grant such extension; and on January 21, GE Credit terminated further negotiations with Trans Union. Its stated reasons, among others, were its “unwillingness to become involved in a bidding contest with Pritzker in the absence of the willingness of [the Pritzker interests] to terminate the proposed $55 cash merger.”

In the absence of any explicit finding by the Trial Court as to the reasonableness of Trans Union’s directors’ reliance on a market test and its feasibility, we may make our own findings based on the record. Our review of the record compels a finding that confirmation of the appropriateness of the Pritzker offer by an unfettered or free market test was virtually meaningless in the face of the terms and time limitations of Trans Union’s Merger Agreement with Pritzker as amended October 10, 1980.

(3)

Finally, we turn to the Board’s meeting of January 26, 1981. The defendant directors rely upon the action there taken to refute the contention that they did not reach an informed business judgment in approving the Pritzker merger. The defendants contend that the Trial Court correctly concluded that Trans Union’s directors were, in effect, as “free to turn down the Pritzker proposal” on January 26, as they were on September 20.

Applying the appropriate standard of review set forth in Levitt v. Bouvier, supra, we conclude that the Trial Court’s finding in this regard is neither supported by the record nor the product of an orderly and logical deductive process. Without disagreeing with the principle that a business decision by an originally uninformed board of directors may, under appropriate circumstances, be timely cured so as to become informed and deliberate, Muschel v. Western Union Corporation, Del. Ch., 310 *913904 (1973),28 we find that the record not permit the defendants to invoke principle in this case.

e Board’s January 26 meeting was the meeting following the filing of the tiffs’ suit in mid-December and the neeting before the previously-noticed ¡holder meeting of February 10.29 All lembers of the Board and three out-attorneys attended the meeting. At meeting the following facts, among aspects of the Merger Agreement, discussed:

The fact that prior to September 20, no Board member or member of Sen-unagement, except Chelberg and Pe-ü, knew that Van Gorkom had dis-d a possible merger with Pritzker;

The fact that the price of $55 per had been suggested initially to ter by Van Gorkom;

(c) The fact that the Board had not sought an independent fairness opinion;

(d) The fact that, at the September 20 Senior Management meeting, Romans and several members of Senior Management indicated both concern that the $55 per share price was inadequate and a belief that a higher price should and could be obtained;

(e) The fact that Romans had advised the Board at its meeting on September 20, that he and his department had prepared a study which indicated that the Company had a value in the range of $55 to $65 per share, and that he could not advise the Board that the $55 per share offer made by Pritzker was unfair.

The defendants characterize the Board’s Minutes of the January 26 meeting as a “review” of the “entire sequence of events” from Van Gorkom’s initiation of the negotiations on September 13 forward.30 The defendants also rely on the *915testimony of several of the Board members at trial as'confirming the Minutes.31 On the basis of this evidence, the defendants argue that whatever information the Board lacked to make a deliberate and informed judgment on September 20, or on October 8, was fully divulged to the entire Board on January 26. Hence, the argument goes, the Board's vote on January 26 to again “approve” the Pritzker merger must be found to have been an informed and deliberate judgment.

On the basis of this evidence, the defendants assert: (1) that the Trial Court was legally correct in widening the time frame for determining whether the defendants’ approval of the Pritzker merger represented an informed business judgment to include the entire four-month period during which the Board considered the matter from September 20 through January 26; and (2) that, given this extensive evidence of the Board’s further review and deliberations on January 26, this Court must affirm the Trial Court’s conclusion that the Board’s action was not reckless or improvident.

We cannot agree. We find the Trial Court to have erred, both as a matter of fact and as a matter of law, in relying on the action on January 26 to bring the defendants’ conduct within the protection of the business judgment rule.

Johnson’s testimony and the Board Minutes of January 26 are remarkably consistent. Both clearly indicate recognition that the question of the alternative courses of action, available to the Board on January 26 with respect to the Pritzker merger, was a legal question, presenting to the Board {after its review of the full record developed through pre-trial discovery) three options: (1) to “continue to recommend” the Pritzker merger; (2) to “recommend that *917e stockholders vote against” the Pritzker srger; or (3) to take a noncommittal posi->n on the merger and “simply leave the cisión to [the] shareholders.”

We must conclude from the forcing that the Board was mistaken as a itter of law regarding its available urses of action on January 26, 1981. Op-ns (2) and (3) were not viable or legally ailable to the Board under 8 Del.C. 251(b). The Board could not remain com-tted to the Pritzker merger and yet rec-unend that its stockholders vote it down; r could it take a neutral position and legate to the stockholders the unadvised cisión as to whether to accept or reject ; merger. Under § 251(b), the Board d but two options: (1) to proceed with ; merger and the stockholder meeting, th the Board’s recommendation of ap-jval; or (2) to rescind its agreement with itzker, withdraw its approval of the srger, and notify its stockholders that the jposed shareholder meeting was can-led. There is no evidence that the Board ve any consideration to these, its only ;ally viable alternative courses of action.

But the second course of action uld have clearly involved a substantial k — that the Board would be faced with t by Pritzker for breach of contract sed on its September 20 agreement as ended October 10. As previously noted, der the terms of the October 10 amend-nt, the Board’s only ground for release >m its agreement with Pritzker was its ;ry into a more favorable definitive reement to sell the Company to a third *ty. Thus, in reality, the Board was not ■ee to turn down the Pritzker proposal” the Trial Court found. Indeed, short of jotiating a better agreement with a third rty, the Board’s only basis for release m the Pritzker Agreement without liaity would have been to establish fundamental wrongdoing by Pritzker. Clearly, the Board was not “free” to withdraw from its agreement with Pritzker on January 26 by simply relying on its self-induced failure to have reached an informed business judgment at the time of its original agreement. See Wilmington Trust Company v. Coulter, Del.Supr., 200 A.2d 441, 453 (1964), aff'g Pennsylvania Company v. Wilmington Trust Company, Del.Ch., 186 A.2d 751 (1962).

Therefore, the Trial Court’s conclusion that the Board reached an informed business judgment on January 26 in determining whether to turn down the Pritzker “proposal” on that day cannot be sustained.32 The Court’s conclusion is not supported by the record; it is contrary to the provisions of § 251(b) and basic principles of contract law; and it is not the product of a logical and deductive reasoning process.

Upon the basis of the foregoing, we hold that the defendants’ post-September conduct did not cure the deficiencies of their September 20 conduct; and that, accordingly, the Trial Court erred in according to the defendants the benefits of the business judgment rule.

IV.

Whether the directors of Trans Union should be treated as one or individually in terms of invoking the protection of the business judgment rule and the applicability of 8 Del. C. § 141(c) are questions which were not originally addressed by the parties in their briefing of this case. This resulted in a supplemental briefing and a second rehearing en banc on two basic questions: (a) whether one or more of the directors were deprived of the protection of the business judgment rule by evidence of an absence of good faith; and (b) whether one or more of the outside directors were *919entitled to invoke the protection of 8 Del.C. § 141(e) by evidence of a reasonable, good faith reliance on “reports,” including legal advice, rendered the Board by certain inside directors and the Board’s special counsel, Brennan.

The parties’ response, including reargument, has led the majority of the Court to conclude: (1) that since all of the defendant directors, outside as well as inside, take a unified position, we are required to treat all of the directors as one as to whether they are entitled to the protection of the business judgment rule; and (2) that considerations of good faith, including the presumption that the directors acted in ¡good faith, are irrelevant in determining 'the threshold issue of whether the directors as a Board exercised an informed business judgment. For the same reason, We must reject defense counsel’s ad homi-fnem argument for affirmance: that reversal may result in a multi-million dollar class award against the defendants for having made an allegedly uninformed business judgment in a transaction not involving any personal gain, self-dealing or claim of bad faith.

In their brief, the defendants similarly mistake the business judgment rule’s application to this case by erroneously invoking presumptions of good faith and “wide discretion”:

This is a case in which plaintiff challenged the exercise of business judgment by an independent Board of Directors. There were no allegations and no proof of fraud, bad faith, or self-dealing by the directors....

The business judgment rule, which was properly applied by the Chancellor, allows directors wide discretion in the matter of valuation and affords room for honest differences of opinion. In order to prevail, plaintiffs had the heavy burden of proving that the merger price was so grossly inadequate as to display itself as a badge of fraud. That is a burden which plaintiffs have not met.

However, plaintiffs have not claimed, nor did the Trial Court decide, that $55 was a grossly inadequate pric® per share for sale of the Company. That being so, the presumption that a board’s judgment as to adequacy of price represents an honest exercise of business judgment (absent proof that the sale price was grossly inadequate) is irrelevant to the threshold question of whether an informed judgment was reached. Compare Sinclair Oil Corp. v. Levien, Del.Supr., 280 A.2d 717 (1971); Kelly v. Bell, Del.Supr., 266 A.2d 878, 879 (1970); Cole v. National Cash Credit Association, Del.Ch., 156 A. 183 (1931); Allaun v. Consolidated Oil Co., supra; Allen Chemical & Dye Corp. v. Steel & Tube Co. of America, Del.Ch., 120 A. 486 (1923).

V.

The defendants ultimately rely on the stockholder vote of February 10 for exoneration. The defendants contend that the stockholders’ “overwhelming” vote approving the Pritzker Merger Agreement had the legal effect of curing any failure of the Board to reach an informed business judgment in its approval of the merger.

The parties tacitly agree that a discovered failure of the Board to reach an informed business judgment in approving the merger constitutes a voidable, rather than a void, act. Hence, the merger can be sustained, notwithstanding the infirmity of the Board’s action, if its approval by majority vote of the shareholders is found to have been based on an informed electorate. Cf. Michelson v. Duncan, Del.Supr., 407 A.2d 211 (1979), aff'g in part and rev’g in part, Del.Ch., 386 A.2d 1144 (1978). The disagreement between the parties arises over: (1) the Board’s burden of disclosing to the shareholders all relevant and material information; and (2) the sufficiency of the evidence as to whether the Board satisfied that burden.

On this issue the Trial Court summarily concluded “that the stockholders of Trans Union were fairly informed as to the pending merger....” The Court provided no *921supportive reasoning nor did the Court make any reference to the evidence of record.

The plaintiffs contend that the Court committed error by applying an erroneous disclosure standard of “adequacy” rather than “completeness” in determining the sufficiency of the Company’s merger proxy materials. The plaintiffs also argue that the Board’s proxy statements, both its original statement dated January 19 and its supplemental statement dated January 26, were incomplete in various material respects. Finally, the plaintiffs assert that Management’s supplemental statement (mailed “on or about” January 27) was untimely either as a matter of law under 8 Del.C. § 251(c), or untimely as a matter of equity and the requirements of complete candor and fair disclosure.

The defendants deny that the Court committed legal or equitable error. On the question of the Board’s burden of disclosure, the defendants state that there was no dispute at trial over the standard of disclosure required of the Board; but the [defendants concede that the Board was required to disclose “all germane facts” which a reasonable shareholder would have considered important in deciding whether po approve the merger. Thus, the defendants argue that when the Trial Court ppeaks of finding the Company’s shareholders to have been “fairly informed” by Management’s proxy materials, the Court is fcpeaking in terms of “complete candor” as required under Lynch v. Vickers Energy Corp., Del.Supr., 383 A.2d 278 (1978).

The settled rule in Delaware is Ihat “where a majority of fully informed Itockholders ratify action of even interest-id directors, an attack on the ratified transition normally must fail.” Gerlach v. Gilam, Del.Ch., 139 A.2d 591, 593 (1958). the question of whether shareholders have leen fully informed such that their vote pn be said to ratify director action, “turns rt the fairness and completeness of the roxy materials submitted by the manage-lent to the ... shareholders.” Michelson v. Duncan, supra at 220. As this Court stated in Gottlieb v. Heyden Chemical Corp., Del.Supr., 91 A.2d 57, 59 (1952):

[T]he entire atmosphere is freshened and a new set of rules invoked where a formal approval has been given by a majority of independent, fully informed stockholders ....

In Lynch v. Vickers Energy Corp., supra, this Court held that corporate directors owe to their stockholders a fiduciary duty to disclose all facts germane to the transaction at issue in an atmosphere of complete candor. We defined “germane” in the tender offer context as all “information such as a reasonable stockholder would consider important in deciding whether to sell or retain stock.” Id. at 281. Accord Weinberger v. UOP, Inc., supra; Michelson v. Duncan, supra; Schreiber v. Pennzoil Corp., Del.Ch., 419 A.2d 952 (1980). In reality, “germane” means material facts.

Applying this standard to the record before us, we find that Trans Union’s stockholders were not fully informed of all facts material to their vote on the Pritzker Merger and that the Trial Court’s ruling to the contrary is clearly erroneous. We list the material deficiencies in the proxy materials:

(1) The fact that the Board had no reasonably adequate information indicative of the intrinsic value of the Company, other than a concededly depressed market price, was without question material to the shareholders voting on the merger. See Wein-berger, supra at 709 (insiders’ report that cash-out merger price up to $24 was good investment held material); Michelson, supra at 224 (alleged terms and intent of stock option plan held not germane); Schreiber, supra at 959 (management fee of $650,000 held germane).

Accordingly, the Board’s lack of valuation information should have been disclosed. Instead, the directors cloaked the absence of such information in both the Proxy Statement and the Supplemental *923Proxy Statement. Through artful drafting, noticeably absent at the September 20 meeting, both documents create the impression that the Board knew the intrinsic worth of the Company. In particular, the Original Proxy Statement contained the following:

[although the Board of Directors regards the intrinsic value of the Company's assets to be significantly greater than their book value ..., systematic liquidation of such a large and complex entity as Trans Union is simply not regarded as a feasible method of realizing its inherent value. Therefore, a business combination such as the merger would seem to be the only practicable way in which the stockholders could realize the value of the Company.

The Proxy stated further that “[i]n the dew of the Board of Directors ..., the prices at which the Company’s common stock has traded in recent years have not reflected the inherent value of the Company.” What the Board failed to disclose to its stockholders was that the Board had not made any study of the intrinsic or inherent worth of the Company; nor had the Board Bven discussed the inherent value of the Company prior to approving the merger on September 20, or at either of the subsequent meetings on October 8 or January 26. Neither in its Original Proxy Statement nor in its Supplemental Proxy did the Board disclose that it had no information before it, beyond the premium-over-market and the price/earnings ratio, on which to determine the fair value of the Company as a whole.

(2)We find false and misleading the Board’s characterization of the Romans report in the Supplemental Proxy Statement. The Supplemental Proxy stated:

At the September 20, 1980 meeting of the Board of Directors of Trans Union, Mr. Romans indicated that while he could not say that $55,00 per share was an unfair price, he had prepared a preliminary report which reflected that the value of the Company was in the range of $55.00 to $65.00 per share.

Nowhere does the Board disclose that Romans stated to the Board that his calculations were made in a "search for ways to justify a price in connection with” a leveraged buy-out transaction, “rather than to say what the shares are worth,” and that he stated to the Board that his conclusion thus arrived at “was not the same thing as saying that I have a valuation of the Company at X dollars.” Such information would have been material to a reasonable shareholder because it tended to invalidate the fairness of the merger price of $55. Furthermore, defendants again failed to disclose the absence of valuation information, but still made repeated reference to the “substantial premium.”

(3) We find misleading the Board’s references to the “substantial” premium offered. The Board gave as their primary reason in support of the merger the “substantial premium” shareholders would receive. But the Board did not disclose its failure to assess the premium offered in terms of other relevant valuation techniques, thereby rendering questionable its determination as to the substantiality of the premium over an admittedly depressed stock market price.

(4) We find the Board’s recital in the Supplemental Proxy of certain events preceding the September 20 meeting to be incomplete and misleading. It is beyond dispute that a reasonable stockholder would have considered material the fact that Van Gorkom not only suggested the $55 price to Pritzker, but also that he chose the figure because it made feasible a leveraged buy-out. The directors disclosed that Van Gorkom suggested the $55 price to Pritzker. But the Board misled the shareholders when they described the basis of Van Gorkom’s suggestion as follows:

Such suggestion was based, at least in part, on Mr. Van Gorkom’s belief that loans could be obtained from institutional lenders (together with about a $200 mil-*925ion equity contribution) which would istify the payment of such price, ... hough by January 26, the directors w the basis of the $55 figure, they did disclose that Van Gorkom chose the $55 :e because that figure would enable ;zker to both finance the purchase of ns Union through a leveraged buy-out , within five years, substantially repay loan out of the cash flow generated by Company’s operations,

i) The Board’s Supplemental Proxy iement, mailed on or after January 27, ed significant new matter, material to proposal to be voted on February 10, eh was not contained in the Original xy Statement. Some of this new mat-was information which had only been losed to the Board on January 26; :h was information known or reason-r available before January 21 but not ;aled in the Original Proxy Statement, the stockholders were not informed of e facts. Included in the “new” matter ; disclosed in the Supplemental Proxy ement were the following:

) The fact that prior to September 20, ), no Board member or member of Sen-Management, except Chelberg and Peon, knew that Van Gorkom had dis-ed a possible merger with Pritzker; ) The fact that the sale price of $55 per e had been suggested initially to sker by Van Gorkom;

1 The fact that the Board had not ;ht an independent fairness opinion;

) The fact that Romans and several ibers of Senior Management had indi-d concern at the September 20 Senior agement meeting that the $55 per e price was inadequate and had stated a higher price should and could be ined; and

(e) The fact that Romans had advised the Board at its meeting on September 20 that he and his department had prepared a study which indicated that the Company had a value in the range of $55 to $65 per share, and that he could not advise the Board that the $55 per share offer which Pritzker made was unfair.

The parties differ over whether the notice requirements of 8 Del. C. § 251(c) apply to the mailing date of supplemental proxy material or that of the original proxy material.33 The Trial Court summarily disposed of the notice issue, stating it was “satisfied that the proxy material furnished to Trans Union stockholders ... fairly presented the question to be voted on at the February 10, 1981 meeting.”

The defendants argue that the notice provisions of § 251(c) must be construed as requiring only that stockholders receive notice of the time, place, and purpose of a meeting to consider a merger at least 20 days prior to such meeting; and since the Original Proxy Statement was disseminated more than 20 days before the meeting, the defendants urge affirmance of the Trial Court’s ruling as correct as a matter of statutory construction. Apparently, the question has not been addressed by either the Court of Chancery or this Court; and authority in other jurisdictions is limited. See Electronic Specialty Co. v. Int’l Controls Corp., 2d Cir., 409 F.2d 937, 944 (1969) (holding that a tender offeror’s September 16, 1968 correction of a previous misstatement, combined with an offer of withdrawal running for eight days until September 24, 1968, was sufficient to cure past violations and eliminate any need for rescission); Nicholson File Co. v. H.K. Porter Co., D.R.I., 341 F.Supp. 508, 513-14 (1972), aff'd, 1st Cir., 482 F.2d 421 (1973) *927(permitting correction of a material misstatement by a mailing to stockholders within seven days of a tender offer withdrawal date). Both Electronic and Nicholson are federal security cases not arising under 8 Del. C. § 251(c) and they are otherwise distinguishable from this case on their facts.

Since we have concluded that Management’s Supplemental Proxy Statement does not meet the Delaware disclosure standard of “complete candor” under Lynch v. Vickers, supra, it is unnecessary for us to address the plaintiffs’ legal argument as to the proper construction of § 251(c). However, we do find it advisable to express the ; view that, in an appropriate case, an other- j wise candid proxy statement may be so i untimely as to defeat its purpose of meet- . ing the needs of a fully informed electorate.

In this case, the Board’s ultimate disclosure as contained in the Supplemental Proxy Statement related either to information readily accessible to all of the directors if they had asked the right questions, or was information already at their disposal. In short, the information disclosed by the Supplemental Proxy Statement was information which the defendant directors knew or should have known at the time the first Proxy Statement was issued. The defendants simply failed in their original duty of knowing, sharing, and disclosing information that was material and reasonably available for their discovery. They compounded that failure by their continued lack of candor in the Supplemental Proxy Statement. While we need not decide the issue here, we are satisfied that, in an appropriate case, a completely candid but belated disclosure of information long known or readily available to a board could raise serious issues of inequitable conduct. Schnell v. Chris-Craft Industries, Inc., Del.Supr., 285 A.2d 437, 439 (1971).

The burden must fall on defendants who claim ratification based on shareholder vote to establish that the shareholder approval resulted from a fully informed electorate. On the record before us, it is clear that the Board failed to meet that burden. Weinberger v. UOP, Inc., supra at 703; Michelson v. Duncan, supra.

For the foregoing reasons, we conclude that the director defendants breached their fiduciary duty of candor by their failure to make true and correct disclosures of all information they had, or should have had, material to the transaction submitted for stockholder approval.

VI.

To summarize: we hold that the directors of Trans Union breached their fiduciary duty to their stockholders (1) by their failure to inform themselves of all information reasonably available to them and relevant to their decision to recommend the Pritzker merger; and (2) by their failure to disclose all material information such as a reasonable stockholder would consider important in deciding whether to approve the Pritzker offer.

We hold, therefore, that the Trial Court committed reversible error in applying the business judgment rule in favor of the director defendants in this case.

On remand, the Court of Chancery shall conduct an evidentiary hearing to determine the fair value of the shares represented by the plaintiffs’ class, based on the intrinsic value of Trans Union on September 20, 1980. Such valuation shall be made in accordance with Weinberger v. UOP, Inc., supra at 712-715. Thereafter, an award of damages may be entered to the extent that the fair value of Trans Union exceeds $55 per share.

REVERSED and REMANDED for proceedings consistent herewith.

McNEILLY, Justice,

dissenting:

The majority opinion reads like an advocate’s closing address to a hostile jury. And I say that not lightly. Throughout the *929opinion great emphasis is directed only to the negative, with nothing more than lip service granted the positive aspects of this case. In my opinion Chancellor Marvel (retired) should have been affirmed. The Chancellor’s opinion was the product of well reasoned conclusions, based upon a sound deductive process, clearly supported by the evidence and entitled to deference in this appeal. Because of my diametrical opposition to all evidentiary conclusions of the majority, I respectfully dissent.

It would serve no useful purpose, particularly at this late date, for me to dissent at great length. I restrain myself from doing so, but feel compelled to at least point out what I consider to be the most glaring deficiencies in the majority opinion. The majority has spoken and has effectively said that Trans Union’s Directors have been the victims of a “fast shuffle” by Van Gorkom and Pritzker. That is the beginning of the majority’s comedy of errors. The first and most important error made is the majority’s assessment of the directors’ knowledge of the affairs of Trans Union and their combined ability to act in this situation under the protection of the business judgment rule.

Trans Union’s Board of Directors consisted of ten men, five of whom were “inside” directors and five of whom were “outside” directors. The “inside” directors were Van Gorkom, Chelberg, Bonser, William B. Browder, Senior Viee-President-Law, and Thomas P. O’Boyle, Senior Vice-President-Administration. At the time the merger vas proposed the inside five directors had collectively been employed by the Company for 116 years and had 68 years of combined experience as directors. The “outside” di•ectors were A.W. Wallis, William B. Johnson, Joseph B. Lanterman, Graham J. Morgan and Robert W. Reneker. With the exception of Wallis, these were all chief executive officers of Chicago based corporations that were at least as large as Trans Union. The five “outside” directors had 78 mars of combined experience as chief executive officers, and 53 years cumulative service as Trans Union directors.

The inside directors wear their badge of expertise in the corporate affairs of Trans Union on their sleeves. But what about the outsiders? Dr. Wallis is or was an economist and math statistician, a professor of economics at Yale University, dean of the graduate school of business at the University of Chicago, and Chancellor of the University of Rochester. Dr. Wallis had been on the Board of Trans Union since 1962. He also was on the Board of Bauseh & Lomb, Kodak, Metropolitan Life Insurance Company, Standard Oil and others.

William B. Johnson is a University of Pennsylvania law graduate, President of Railway Express until 1966, Chairman and Chief Executive of I.C. Industries Holding Company, and member of Trans Union’s Board since 1968.

Joseph Lanterman, a Certified Public Accountant, is or was President and Chief Executive of American Steel, on the Board of International Harvester, Peoples Energy, Illinois Bell Telephone, Harris Bank and Trust Company, Kemper Insurance Company and a director of Trans Union for four years.

Graham Morgan is achemist, was Chairman and Chief Executive Officer of U.S. Gypsum, and in the 17 and 18 years prior to the Trans Union transaction had been involved in 31 or 32 corporate takeovers.

Robert Reneker attended University of Chicago and Harvard Business Schools. He was President and Chief Executive of Swift and Company, director of Trans Union since 1971, and member of the Boards of seven other corporations including U.S. Gypsum and the Chicago Tribune.

Directors of this caliber are not ordinarily taken in by a “fast shuffle”. I submit they were not taken into this multi-million dollar corporate transaction without being fully informed and aware of the state of the art as it pertained to the entire corporate panoroma of Trans Union. True, even *931directors such as these, with their business acumen, interest and expertise, can go astray. I do not believe that to be the case here. Tnese men knew Trans Union like the back of their hands and were more than well qualified to make on the spot informed business judgments concerning the affairs of Trans Union including a 100% sale of the corporation. Lest we forget, the corporate world of then and now operates on what is so aptly referred to as “the fast track”. These men were at the time an integral part of that world, all professional business men, not intellectual figureheads.

The majority of this Court holds that the Board’s decision, reached on September 20, 1980, to approve the merger was not the product of an informed business judgment, that the Board’s subsequent efforts to amend the Merger Agreement and take other curative action were legally and factually ineffectual, and that the Board did not deal with complete candor with the stockholders by failing to disclose all material facts, which they knew or should have known, before securing the stockholders' approval of the merger. I disagree.

At the time of the September 20, 1980 meeting the Board was acutely aware of Trans Union and its prospects. The problems created by accumulated investment tax credits and accelerated depreciation were discussed repeatedly at Board meetings, and all of the directors understood the problem thoroughly. Moreover, at the July, 1980 Board meeting the directors had reviewed Trans Union’s newly prepared five-year forecast, and at the August, 1980 meeting Van Gorkom presented the results of a comprehensive study of Trans Union' made by The Boston Consulting Group. This study was prepared over an 18 month period and consisted of a detailed analysis of all Trans Union subsidiaries, including competitiveness, profitability, cash throw-off, cash consumption, technical competence and future prospects for contribution to Trans Union’s combined net income.

At the September 20 meeting Van Gor-kom reviewed all aspects of the proposed transaction and repeated the explanation of the Pritzker offer he had earlier given to senior management. Having heard Van Gorkom’s explanation of the Pritzker’s offer, and Brennan’s explanation of the merger documents the directors discussed the matter. Out of this discussion arose an insistence on the part of the directors that two modifications to the offer be made. First, they required that any potential competing bidder be given access to the same information concerning Trans Union that had been provided to the Pritzkers. Second, the merger documents were to be modified to reflect the fact that the directors could accept a better offer and would not be required to recommend the Pritzker offer if a better offer was made. The following language was inserted into the agreement:

“Within 30 days after the execution of this Agreement, TU shall call a meeting of its stockholders (the ‘Stockholder’s Meeting’) for the purpose of approving and adopting the Merger Agreement. The Board of Directors shall recommend to the stockholders of TU that they approve and adopt the Merger Agreement (the ‘Stockholders’ Approval’) and shall use its best efforts to obtain the requisite vote therefor; provided, however, that GL and NTC acknowledge that the Board of Directors of TU may have a competing fiduciary obligation to the Stockholders under certain circumstances.” (Emphasis added)

While the language is not artfully drawn, the evidence is clear that the intention underlying that language was to make specific the right that the directors assumed they had, that is, to accept any offer that they thought was better, and not to recommend the Pritzker offer in the face of a better one. At the conclusion of the meeting, the proposed merger was approved.

At a subsequent meeting on October 8, 1981 the directors, with the consent of the Pritzkers, amended the Merger Agreement so as to establish the right of Trans Union to solicit as well as to receive higher bids. *933although the Pritzkers insisted that their merger proposal be presented to the stockholders at the same time that the proposal of any third party was presented. A second amendment, which became effective on October 10, 1981, further provided that Trans Union might unilaterally terminate the proposed merger with the Pritzker company in the event that prior to February 10, 1981 there existed a definitive agreement with a third party for a merger, consolidation, sale of assets, or purchase or exchange of Trans Union stock which was more favorable for the stockholders of Trans Union than the Pritzker offer and which was conditioned upon receipt of stockholder approval and the absence of an injunction against its consummation.

Following the October 8 board meeting of Trans Union, the investment banking firm of Salomon Brothers was retained by the corporation to search for better offers than that of the Pritzkers, Salomon Brothers being charged with the responsibility of doing “whatever possible to see if there is a superior bid in the marketplace over a bid that is on the table for Trans Union”. In undertaking such project, it was agreed that Salomon Brothers would be paid the amount of $500,000 to cover its expenses as veil as a fee equal to %ths of 1% of the aggregate fair market value of the consideration to be received by the company in ;he case of a merger or the like, which neant that in the event Salomon Brothers ihould find a buyer willing to pay a price of 156.00 a share instead of $55.00, such firm would receive a fee of roughly $2,650,000 plus disbursements.

As the first step in proceeding to carry out its commitment, Salomon Brothers had a brochure prepared, which set forth Trans Union’s financial history, described the company's business in detail and set forth Trans Union’s operating and financial projections. Salomon Brothers also prepared a list of over 150 companies which it believed might be suitable merger partners, and while four of such companies, namely, General Electric, Borg-Wamer, Bendix, and Genstar, Ltd. showed some interest in such a merger, none made a firm proposal to Trans Union and only General Electric showed a sustained interest.1 As matters transpired, no firm offer which bettered the Pritzker offer of $55 per share was ever made.

On January 21, 1981 a proxy statement was sent to the shareholders of Trans Union advising them of a February 10, 1981 meeting in which the merger would be voted. On January 26, 1981 the directors held their regular meeting. At this meeting the Board discussed the instant merger as well as all events, including this litigation, surrounding it. At the conclusion of the meeting the Board unanimously voted to recommend to the stockholders that they approve the merger. Additionally, the directors reviewed and approved a Supplemental Proxy Statement which, among other things, advised the stockholders of what had occurred at the instant meeting and of the fact that General Electric had decided not to make an offer. On February 10, 1981 *935the stockholders of Trans Union met pursuant to notice and voted overwhelmingly in favor of the Pritzker merger, 89% of the votes cast being in favor of it.

I have no quarrel with the majority’s analysis of the business judgment rule. It is the application of that rule to these facts which is wrong. An overview of the entire record, rather than the limited view of bits and pieces which the majority has exploded like popcorn, convinces me that the directors made an informed business judgment which was buttressed by their test of the market.

At the time of the September 20 meeting the 10 members of Trans Union’s Board of Directors were highly qualified and well informed about the affairs and prospects of Trans Union. These directors were acutely aware of the historical problems facing Trans Union which were caused by the tax laws. They had discussed these problems ad nauseam. In fact, within two months of the September 20 meeting the board had reviewed and discussed an outside study of the company done by The Boston Consulting Group and an internal five year forecast prepared by management. At the September 20 meeting Van Gorkom presented the Pritzker offer, and the board then heard from James Brennan, the company’s counsel in this matter, who discussed the legal documents. Following this, the Board directed that certain changes be made in the merger documents. These changes made it clear that the Board was free to accept a better offer than Pritzker’s if one was made. The above facts reveal that the Board did not act in a grossly negligent manner in informing themselves of the relevant and available facts before passing on the merger. To the contrary, this record reveals that the directors acted with the utmost care in informing themselves of the relevant and available facts before passing on the merger.

The majority finds that Trans Union stockholders were not fully informed and that the directors breached their fiduciary duty of complete candor to the stoekhold-ers required by Lynch v. Vickers Energy Corp., Del.Supr. 383 A.2d 278 (1978) [Lynch I], in that the proxy materials were deficient in five areas.

Here again is exploitation of the negative by the majority without giving credit to the positive. To respond to the conclusions of the majority would merely be unnecessary prolonged argument. But briefly what did the proxy materials disclose? The proxy material informed the shareholders that projections were furnished to potential purchasers and such projections indicated that Trans Union’s net income might increase to approximately $153 million in 1985. That projection, what is almost three times the net income of $58,248,000 reported by Trans Union as its net income for December 31, 1979 confirmed the statement in the proxy materials that the “Board of Directors believes that, assuming reasonably favorable economic and financial conditions, the Company’s prospects for future earnings growth are excellent.” This material was certainly sufficient to place the Company’s stockholders on notice that there was a reasonable basis to believe that the prospects for future earnings growth were excellent, and that the value of their stock was more than the stock market value of their shares reflected.

Overall, my review of the record leads me to conclude that the proxy materials adequately complied with Delaware law in informing the shareholders about the proposed transaction and the events surrounding it.

The majority suggests that the Supplemental Proxy Statement did not comply with the notice requirement of 8 Del.C. § 251(c) that notice of the time, place and purpose of a meeting to consider a merger must be sent to each shareholder of record at least 20 days prior to the date of the meeting. In the instant case an original proxy statement was mailed on January 18, 1981 giving notice of the time, place and purpose of the meeting. A Supplemental Proxy Statement was mailed January 26, 1981 in an effort to advise Trans Union’s *937rareholders as to what had occurred at íe January 26, 1981 meeting, and that eneral Electric had decided not to make i offer. The shareholder meeting was ild February 10, 1981 fifteen days after le Supplemental Proxy Statement had sen sent.

All § 251(c) requires is that notice of the me, place and purpose of the meeting be ven at least 20 days prior to the meeting, ns was accomplished by the proxy state-ent mailed January 19, 1981. Nothing in 251(c) prevents the supplementation of ■oxy materials within 20 days of the meet-g. Indeed when additional information, hich a reasonable shareholder would con-ler important in deciding how to vote, mes to light that information must be sclosed to stockholders in sufficient time r the stockholders to consider it. But (thing in § 251(c) requires this additional formation to be disclosed at least 20 days ior to the meeting. To reach a contrary suit would ignore the current practice id would discourage the supplementation proxy materials in order to disclose the currence of intervening events. In my inion, fifteen days in the instant case is a sufficient amount of time for the Dckholders to receive and consider the formation in the supplemental proxy itement.

CHRISTIE, Justice,

dissenting:

I respectfully dissent.

Considering the standard and scope of r review under Levitt v. Bouvier, Del.Supr., 287 A.2d 671, 673 (1972), I believe at the record taken as a whole supports a nclusion that the actions of the defend-ts are protected by the business judg-mt rule. Aronson v. Lewis, Del.Supr., 8 A.2d 805, 812 (1984); Pogostin v. Rice, Del.Supr., 480 A.2d 619, 627 (1984). I also i satisfied that the record supports a nclusion that the defendants acted with e complete candor required by Lynch v. Vickers Energy Corp., Del.Supr., 383 A.2d 8 (1978). Under the circumstances I would affirm the judgment of the Court of Chancery.

ON MOTIONS FOR REARGUMENT

Following this Court’s decision, Thomas P. O’Boyle, one of the director defendants, sought, and was granted, leave for change of counsel. Thereafter, the individual director defendants, other than O’Boyle, filed a motion for reargument and director O’Boyle, through newly-appearing counsel, then filed a separate motion for reargument. Plaintiffs have responded to the several motions and this matter has now been duly considered.

The Court, through its majority, finds no merit to either motion and concludes that both motions should be denied. We are not persuaded that any errors of law or fact have been made that merit reargument.

However, defendant O’Boyle’s motion requires comment. Although O’Boyle continues to adopt his fellow directors’ arguments, O’Boyle now asserts in the alternative that he has standing to take a position different from that of his fellow directors and that legal grounds exist for finding him not liable for the acts or omissions of his fellow directors. Specifically, O’Boyle makes a two-part argument: (1) that his undisputed absence due to illness from both the September 20 and the October 8 meetings of the directors of Trans Union entitles him to be relieved from personal liability for the failure of the other directors to exercise due care at those meetings, see Propp v. Sadacca, Del.Ch., 175 A.2d 33, 39 (1961), modified on other grounds, Bennett v. Propp, Del.Supr., 187 A.2d 405 (1962); and (2) that his attendance and participation in the January 26, 1981 Board meeting does not alter this result given this Court’s precise findings of error committed at that meeting.

We reject defendant O’Boyle’s new argument as to standing because not timely asserted. Our reasons are several. One, in connection with the supplemental briefing of this case in March, 1984, a special opportunity was afforded the individual de*899fendants, including O’Boyle, to present any factual or legal reasons why each or any of them should be individually treated. Thereafter, at argument before the Court on June 11, 1984, the following colloquy took place between this Court and counsel for the individual defendants at the outset of counsel’s argument:

COUNSEL: I’ll make the argument on behalf of the nine individual defendants against whom the plaintiffs seek more than $100,000,000 in damages. That is the ultimate issue in this case, whether or not nine honest, experienced businessmen should be subject to damages in a case where—

JUSTICE MOORE: Is there a distinction between Chelberg and Van Gorkom vis-a-vis the other defendants?

COUNSEL: No, sir.

JUSTICE MOORE: None whatsoever?

COUNSEL: I think not.

Two, in this Court’s Opinion dated January 29, 1985, the Court relied on the individual defendants as having presented a unified defense. We stated:

The parties’ response, including reargument, has led the majority of the Court to conclude: (1) that since all of the defendant directors, outside as well as inside, take a unified position, we are required to treat all of the directors as one as to whether they are entitled to the protection of the business judgment rule

Three, previously O’Boyle took the position that the Board’s action taken January 26, 1981 — in which he fully participated— was determinative of virtually all issues. Now O’Boyle seeks to attribute no significance to his participation in the January 26 meeting. Nor does O’Boyle seek to explain lis having given before the directors’ meet-ng of October 8, 1980 his “consent to the ;ransaction of such business as may come >efore the meeting." * It is the view of he majority of the Court that O’Boyle’s change of position following this Court’s decision on the merits comes too late to be considered. He has clearly waived ‘ hat right.

The Motions for Reargument of all defendants are denied.

McNEILLY and CHRISTIE,

Justices, dissenting:

We do not disagree with the ruling as to the defendant O’Boyle, but we would have granted reargument on the other issues raised.

STRINE, Chief Justice:

Blue Bell Creameries USA, Inc., one of the country's largest ice cream manufacturers, suffered a listeria outbreak in early 2015, causing the company to recall all of its products, shut down production at all of its plants, and lay off over a third of its workforce. Blue Bell's failure to contain listeria 's spread in its manufacturing plants caused listeria to be present in its products and had sad consequences. Three people died as a result of the listeria outbreak. Less consequentially, but nonetheless important for this litigation, stockholders also suffered losses because, after the operational shutdown, Blue Bell suffered a liquidity crisis that forced it to accept a dilutive private equity investment.

Based on these unfortunate events, a stockholder brought a derivative suit against two key executives and against Blue Bell's directors claiming breaches of the defendants' fiduciary duties. The complaint alleges that the executives-Paul Kruse, the President and CEO, and Greg Bridges, the Vice President of Operations-breached their duties of care and loyalty by knowingly disregarding contamination risks and failing to oversee the safety of Blue Bell's food-making operations, and that the directors breached their duty of loyalty under Caremark.1

The defendants moved to dismiss the complaint for failure to plead demand futility. 2

*808The Court of Chancery granted the motion as to both claims. As to the claim against management, the Court of Chancery held that the plaintiff "failed to plead particularized facts that raise a reasonable doubt as to whether a majority of [Blue Bell's] Board could impartially consider a demand."3 Although the complaint alleged facts sufficient to raise a reasonable doubt as to the impartiality of a number of Blue Bell's directors, the plaintiff ultimately came up one short in the Court of Chancery's judgment: the plaintiff needed eight directors for a majority, but only had seven.

As to the Caremark claim, the Court of Chancery held that the plaintiff did not plead any facts to support "his contention that the [Blue Bell] Board 'utterly' failed to adopt or implement any reporting and compliance systems."4 Although the plaintiff argued that Blue Bell's board had no supervisory structure in place to oversee "health, safety and sanitation controls and compliance," the Court of Chancery reasoned that "[w]hat Plaintiff really attempts to challenge is not the existence of monitoring and reporting controls, but the effectiveness of monitoring and reporting controls in particular instances," and "[t]his is not a valid theory under ... Caremark ."5

In this opinion, we reverse as to both holdings.

We first hold that the complaint pleads particularized facts sufficient to create a reasonable doubt that an additional director, W.J. Rankin, could act impartially in deciding to sue Paul Kruse, Blue Bell's CEO, and his subordinate Greg Bridges, Blue Bell's Vice President of Operations, due to Rankin's longstanding business affiliation and personal relationship with the Kruse family.6 According to the complaint, Rankin worked at Blue Bell for decades and owes his entire career to Ed Kruse, the current CEO's father, who hired Rankin as his administrative assistant in 1981 and promoted him five years later to the position of CFO, a position Rankin maintained until his retirement in 2014. In 2004, while serving as CFO, Rankin was elected to Blue Bell's board, and has served since then. Moreover, the complaint alleges that the Kruse family showed its appreciation for Rankin not only by supporting his career, but also by leading a campaign that raised over $450,000 to name a building at the local university after Rankin. Despite the defendants' contentions that Rankin's relationship with the Kruse family was just an ordinary business relationship from which Rankin would derive no strong feelings of loyalty toward the Kruse family, these allegations are "suggestive of the type of very close personal [or professional] relationship that, like family ties, one would expect to heavily influence a human's ability to exercise impartial judgment."7 Rankin's apparently deep business and personal ties to the Kruse family raise a reasonable doubt as to whether Rankin could "impartially or *809objectively assess whether to bring a lawsuit against the sued party."8

As to the Caremark claim, we hold that the complaint alleges particularized facts that support a reasonable inference that the Blue Bell board failed to implement any system to monitor Blue Bell's food safety performance or compliance. Under Caremark and this Court's opinion in Stone v. Ritter ,9 directors have a duty "to exercise oversight" and to monitor the corporation's operational viability, legal compliance, and financial performance.10 A board's "utter failure to attempt to assure a reasonable information and reporting system exists" is an act of bad faith in breach of the duty of loyalty.11

As a monoline company that makes a single product-ice cream-Blue Bell can only thrive if its consumers enjoyed its products and were confident that its products were safe to eat. That is, one of Blue Bell's central compliance issues is food safety. Despite this fact, the complaint alleges that Blue Bell's board had no committee overseeing food safety, no full board-level process to address food safety issues, and no protocol by which the board was expected to be advised of food safety reports and developments. Consistent with this dearth of any board-level effort at monitoring, the complaint pleads particular facts supporting an inference that during a crucial period when yellow and red flags about food safety were presented to management, there was no equivalent reporting to the board and the board was not presented with any material information about food safety. Thus, the complaint alleges specific facts that create a reasonable inference that the directors consciously failed "to attempt to assure a reasonable information and reporting system exist[ed]."12

I. Background13

A. Blue Bell's History and Operating Environment

i. History

Founded in 1907 in Brenham, Texas, Blue Bell Creameries USA, Inc. ("Blue Bell"), a Delaware corporation, produces and distributes ice cream under the Blue Bell banner.14 By 1919, Blue Bell's predecessor was struggling financially. Blue *810Bell's board turned to E.F. Kruse, who took over the company that year and turned it around. Under his leadership, the company expanded and became profitable.15

E.F. Kruse led the company until his unexpected death in 1951.16 Upon his death, his sons, Ed F. Kruse and Howard Kruse, took over the company's management. Rapid expansion continued under Ed and Howard's leadership.17 In 2004, Ed Kruse's son, Paul Kruse, took over management, becoming Blue Bell's President and CEO.18 Ten years later, in 2014, Paul Kruse also assumed the position of Chairman of the Board, taking the position from his retiring father.19

ii. The Regulated Nature of Blue Bell's Industry

As a U.S. food manufacturer, Blue Bell operates in a heavily regulated industry. Under federal law, the Food and Drug Administration ("FDA") may set food quality standards, require food manufacturing facilities to register with the FDA, prohibit regulated manufacturers from placing adulterated food into interstate commerce, and hold companies liable if they place any adulterated foods into interstate commerce in violation of FDA rules.20 Blue Bell is "required to comply with regulations and establish controls to monitor for, avoid and remediate contamination and conditions that expose the Company and its products to the risk of contamination."21

Specifically, FDA regulations require food manufacturers to conduct operations "with adequate sanitation principles"22 and, in line with that obligation, "must prepare ... and implement a written food safety plan."23 As part of a manufacturer's food safety plan, the manufacturer must include processes for conducting a hazard analysis that identifies possible food safety hazards, identifies and implements preventative controls to limit potential food hazards, implements process controls, implements sanitation controls, and monitors these preventative controls. Appropriate corporate officials must monitor these preventative controls.24

Not only is Blue Bell subject to federal regulations, but it must also adhere to various state regulations. At the time of the listeria outbreak, Blue Bell operated in three states, and each had issued rules and regulations regarding the proper handling and production of food to ensure food safety.25

B. Plaintiff's Complaint

With that context out of the way, we briefly summarize the plaintiff's well-pled factual allegations and the reasonable inferences drawn from them.

The complaint starts by observing that, as a single-product food company, food safety is of obvious importance to Blue *811Bell.26 But despite the critical nature of food safety for Blue Bell's continued success, the complaint alleges that management turned a blind eye to red and yellow flags that were waved in front of it by regulators and its own tests, and the board-by failing to implement any system to monitor the company's food safety compliance programs-was unaware of any problems until it was too late.27

i. The Run-Up to the Listeria Outbreak

According to the complaint, Blue Bell's issues began to emerge in 2009. At that time, Paul Kruse, Blue Bell's President and CEO, and his cousin, Paul Bridges, were responsible for the three plants Blue Bell operated in Texas, Oklahoma, and Alabama.28 The complaint alleges that, despite being responsible for overseeing plant operations, Paul Kruse and Bridges failed to respond to signs of trouble in the run up to the listeria outbreak. From 2009 to 2013 several regulators found troubling compliance failures at Blue Bell's facilities:

• In July 2009, the FDA's inspection of the Texas facility revealed "two instances of condensation, one from a pipe carrying liquid caramel [that] was dripping into three gallon cartons waiting to be filled, and one dripping into ice cream sandwich wafers."29 The FDA reported these observations directly to Paul Kruse, who assured the FDA that "condensation is treated by Blue Bell as a serious concern."30

• In March 2010, the Alabama Department of Health inspected the Alabama plant and "found equipment left on the floor and a ceiling in disrepair in the container forming room."31

• Two months later, in May 2010, the FDA returned to the Texas plant "and observed ten violations that were cited to Paul Kruse including, again, a condensation drip."32 While the condensation drip persisted from the FDA's last inspection of the Texas plant, the FDA also observed "ripped and open containers of ingredients, inconsistent hand-washing and glove use and a spider and its web near the ingredients."33

• In July 2011, an inspection by "the Alabama Department of Public Health cited drips from a ceiling unit and pipelines, standing water, open tank lids and unprotected measuring cups."34

• Nine months later, in March 2012, an inspection of the Oklahoma facility revealed the plant's " '[f]ailure to manufacture foods under conditions and controls necessary to minimize contamination' and '[f]ailure to handle and maintain equipment, containers and utensils used to hold food in [sic] manner that protects against contamination.' "35

• That same month, in March 2012, "[t]he Alabama Department of Public Health required five changes" to the *812Alabama facility, "including instructions to clean various rooms and items, make repairs and [sic] after fruit processing to prevent contamination."36 A year later, "in March 2013, the Alabama Department of Public Health again ordered cleaning and repairs and observed an uncapped fruit tank."37 The Alabama Department of Public Health made similar observations in a July 2014 inspection.38

Regulatory inspections during this time were not the only signal that Blue Bell faced potential health safety risks. In 2013, "the Company had five positive tests" for listeria ,39 and in January 2014, "the Company received a presumptive positive [l]isteria result reports from the third party laboratory for the [Oklahoma] facility on January 20, 2014 and the samples reported positive for a second time on January 24, 2014."40

Although management had received reports about listeria 's growing presence in Blue Bell's plants, the complaint alleges that the board never received any information about listeria or more generally about food safety issues. Minutes from the board's January 29, 2014 meeting "reflect no report or discussion of the increasingly frequent positive tests that had been occurring since 2013 or the third party lab reports received in the preceding two weeks."41 Board meeting minutes from February and March likewise reflect no board-level discussion of listeria .42

During the rest of 2014, Blue Bell's problems accelerated, but the board remained uninformed about Blue Bell's problems. In April, "[t]he Company received further positive [l]isteria lab tests regarding [the Oklahoma facility]."43 That same month, the company had three "positive coliform tests far above the known legal regulator limits."44 Yet, minutes from the April board meeting reflected no discussion of listeria . Instead, the minutes note only that the Oklahoma and Alabama facilities' "plant operations were discussed briefly" and that Bridges also discussed "a good report from the TCEQ [Texas Commission on Environmental Quality]."45

Over the course of 2014, Blue Bell received ten positive tests for listeria . According to the complaint, these positive tests "included repeated positive results from the Company's third party laboratory in 2014, on consecutive samples, evidencing the inadequacy of the Company's remedial methods to eliminate the contamination."46

Despite management's knowledge of the growing problem, the complaint alleges that this information never made its way to the board, and the board continued to be uninformed about (and thus unaware of) the problem. Minutes from the board's 2014 meetings are bereft of reports on the listeria issues. Only during the September meeting is sanitation discussed, when *813Bridges informed the board that "[t]he recent Silliker audit [Blue Bell's third-party auditor for sanitation issues in 2014] went well."47 This lone reference to a third-party audit is the only instance, until the listeria outbreak forced the recall of Blue Bell's products, of any board-level discussion regarding food safety.

At this stage of the case, we are bound to draw all fair inferences in the plaintiff's favor from the well-pled facts. Based on this chronology of events, the plaintiffs have fairly pled that:

• Blue Bell had no board committee charged with monitoring food safety;

• Blue Bell's full board did not have a process where a portion of the board's meetings each year, for example either quarterly or biannually, were specifically devoted to food safety compliance; and

• The Blue Bell board did not have a protocol requiring or have any expectation that management would deliver key food safety compliance reports or summaries of these reports to the board on a consistent and mandatory basis. In fact, it is inferable that there was no expectation of reporting to the board of any kind.

In short, the complaint pleads that the Blue Bell board had made no effort at all to implement a board-level system of mandatory reporting of any kind.

ii. The Listeria Outbreak and the Board's Response

Blue Bell's listeria problem spread in 2015. Starting in January 2015, one of Blue Bell's product tests had positive coliform levels above legal limits.48 The same result appeared in February 2015.49 And by this point, the problem spread to Blue Bell's products and spiraled out of control.

On February 13, 2015, "Blue Bell received notification that the Texas Department of State Health Services also had positive tests for [l]isteria in Blue Bell samples."50 The Texas Department of State Health Services was alerted to these positive tests by the South Carolina Health Department.51 Company swabs at the Texas facility on February 19 and 21, 2015 tested positive for listeria .52 Yet despite these reports to management, Blue Bell's board was not informed by management about the severe problem. The board met on February 19, 2015, following Blue Bell's annual stockholders meeting, but there was no listeria discussion.53

Four days later, Blue Bell initiated a limited recall.54 Two days after that, Blue Bell's board met, and Bridges reported that "[t]he FDA is working with Texas health inspectors regarding the Company's recent recall of products. More information is developing and should be known within the next days or weeks."55 Despite two years of evidence that listeria was a growing *814problem for Blue Bell, this is the first time the board discussed the issue, according to the complaint and the incorporated board minutes. Instead of holding more frequent emergency board meetings to receive constant updates on the troubling fact that life-threatening bacteria was found in its products, Blue Bell's board left the company's response to management.

And the problem got worse, with awful effects. "In early March 2015, health authorities reported that they suspected a connection between human [l ]isteria infections in Kansas and products made by Blue Bell's [Texas] facility."56 The outbreak in Kansas matched a listeria strain found in Blue Bell's products in South Carolina. And by March 23, 2015, Blue Bell was forced to recall more products. Two days later, Blue Bell's board met and adopted a resolution "express[ing] support for Blue Bell's CEO, management, and employees and encourag[ing] them to ensure that everything Blue Bell manufacture[s] and distributes is a wholesome and good testing [sic] product that our consumers deserve and expect."57

Blue Bell expanded the recall two weeks later, and less than a month later, on April 20, 2015, Blue Bell "instituted a recall of all products."58 By this point, the Center for Disease Controls and Prevention ("CDC") had begun an investigation and discovered that the source of the listeria outbreak in Kansas was caused by Blue Bell's Texas and Oklahoma plants.59 Ultimately, five adults in Kansas and three adults in Texas were sickened by Blue Bell's products; three of the five Kansas adults died because of complications due to listeria infection.60 The CDC issued a recall to grocers and retailers, alerting them to the contamination and warning them against selling the products.61

After Blue Bell's full product recall, the FDA inspected each of the company's three plants. Each was found to have major deficiencies. In the Texas plant, the FDA found a "failure to manufacture foods under conditions and controls necessary to minimize the potential for growth of microorganisms," inadequate cleaning and sanitizing procedures, "failure to maintain buildings in repair sufficient to prevent food from coming [sic] adulterated," and improper construction of the building that failed to prevent condensation from occurring.62 Likewise, at the Oklahoma facility, "[t]he FDA found that the Company had been receiving increasingly frequent positive [l ]isteria tests at [the Oklahoma facility] for over three years," failed "to manufacture and package foods under conditions and controls necessary to minimize the potential growth of microorganisms and contamination," failed to perform testing to ferret out microbial growth, implemented inadequate cleaning and sterilization procedures, failed to provide running water at an appropriate temperature to sanitize equipment, and failed to store food in clean and sanitized portable equipment.63

*815Although the Alabama facility fared better, the FDA still found contamination and several issues, including the "failure to perform microbial testing where necessary to identify possible food contamination," "failure to maintain food contact surfaces to protect food from contamination by any source," and inadequate construction of the facility such that condensation was likely.64 Most of these findings, the complaint alleges, are unsurprising because similar deficiencies were found by the FDA and state regulators in the run up to the listeria outbreak, yet according to the FDA's inspection after the fact, it appeared that neither management nor the board made progress on remedying these deficiencies.

After the fact, various news outlets interviewed former Blue Bell employees who "claimed that Company management ignored complaints about factory conditions in [the Texas facility]."65 One former employee "reported [that] spilled ice cream was left to pool on the floor, 'creating an environment where bacteria could flourish.' "66 Another former employee described being "instructed to pour ice cream and fruit that dripped off his machine into mix to be used later."67

iii. The Aftermath of the Listeria Outbreak

With its operations shuttered, Blue Bell faced a liquidity crisis. Blue Bell initially sought a more traditional credit facility to bridge its liquidity, but after Blue Bell director W.J. Rankin informed his brother-in-law, Bill Reimann, about Blue Bell's liquidity crunch, Blue Bell ended up striking a deal with Moo Partners, a fund controlled by Sid Bass and affiliated with Reimann.68 Moo Partners provided Blue Bell with a $125 million credit facility and purchased a $100 million warrant to acquire 42% of Blue Bell at $50,000 per share.69 As part of Moo Partners's investment conditions, Blue Bell also amended its certificate of incorporation to grant Moo the right to appoint one member of Blue Bell's board who would be entitled to one-third of the board's voting power (or five votes based on a then-10-member board).

After investing in Blue Bell, Moo named Reimann to Blue Bell's board, expanding the board to 11 members with Reimann possessing five votes.70 In February 2016, Reimann suggested that the board separate the roles of CEO and Chairman (both held by Paul Kruse). The board voted to follow Reimann's recommendation at its February 18th meeting, but after Paul Kruse disagreed with the recommendation and threatened to resign as President and CEO if the split occurred, the board held another vote in which all members, except Reimann and Rankin, voted to restore the position of CEO and Chairman of the board.71

C. The Court of Chancery Dismisses the Case

After requesting Blue Bell's books and records through a § 220 request, the plaintiff, *816a Blue Bell stockholder, sued Blue Bell's management and board derivatively, asserting two claims based on management's alleged failure to respond appropriately to the red and yellow flags about growing food safety issues and the board's violation of its duty of loyalty, under Caremark , by failing to implement any reporting system and therefore failing to inform itself about Blue Bell's food safety compliance. The Court of Chancery dismissed both claims, holding that the plaintiff failed to plead demand futility.

As to the first claim, the plaintiff alleges that Paul Kruse, Blue Bell's President and CEO, and Bridges, Blue Bell's Vice President of Operations, had breached their duties of loyalty and care by knowingly disregarding contamination risks and failing to oversee Blue Bell's operations and food safety compliance process.72 "Because directors are empowered to manage, or direct the management of, the business and affairs of the corporation," the plaintiff's complaint must allege facts suggesting that "demand is excused because the directors are incapable of making an impartial decision regarding such litigation."73 The plaintiff's complaint claims that "[a] demand upon the Board of the Company to pursue claims against Paul Kruse and Bridges ... would be futile" because "the Kruse family-of which both Paul Kruse and Bridges are members-ha[s] long dominated Blue Bell" and the majority of directors are "long-time employees and/or otherwise beholden and loyal to the Kruse family."74

But the Court of Chancery held that the plaintiff "failed to plead particularized facts to raise a reasonable doubt that a majority of the [Blue Bell board] members could have impartially considered a pre-suit demand."75 Without belaboring the details of the Court of Chancery's thorough analysis, which is somewhat complicated due to the unusual structure of Blue Bell's board, we note that the court essentially ruled that the plaintiff came up one vote short. To survive the Rule 23.1 motion to dismiss, the complaint needed to allege particularized facts raising a reasonable doubt that directors holding eight of the 15 votes could have impartially considered a demand, but the court held that the plaintiff had done so for directors holding only seven votes.

One of the directors who the trial court held could consider demand impartially was Rankin, Blue Bell's recently retired former CFO. Although Rankin worked at Blue Bell for 28 years, the court emphasized that he was no longer employed by Blue Bell, having retired in 2014. As to the allegations that donations from the Kruse family resulted in a building at Blinn College being named for Rankin, the court noted that "the Complaint provide[d] no more specifics regarding the donation (i.e., who gave how much), and ma[de] no attempt to characterize the materiality of the gesture."76 That failure, the Court of Chancery concluded, fell short of Rule 23.1's particularity requirement. Further, the court noted that Rankin voted against rescinding a board initiative to split the CEO

*817and Chairman positions held by Paul Kruse.77 In the court's view, that act was evidence that Rankin was not beholden to the Kruse family. Ultimately, the Court of Chancery concluded that the plaintiff's "allegation that Rankin lacks independence falls flat."78

The Court of Chancery also rejected the plaintiff's second claim that Blue Bell's directors breached their duty of loyalty under Caremark by failing to "institute a system of controls and reporting" regarding food safety.79 In support of this claim, the plaintiff asserted, based on the facts alleged in the complaint and reasonable inferences from those facts, that: (1) the Blue Bell board had no committee overseeing food safety; (2) Blue Bell's board did not have any reporting system in place about food safety; (3) management knew about the growing listeria issues but did not report those issues to the board, further evidence that the board had no food safety reporting system in place; and (4) the board did not discuss food safety at its regular board meetings.

Rejecting the plaintiff's Caremark claim, the Vice Chancellor started by observing that "[d]espite the far-reaching regulatory schemes that governed Blue Bell's operations at the time of the [l ]isteria contamination, the Complaint contains no allegations that Blue Bell failed to implement the monitoring and reporting systems required by the FDCA [Federal Food, Drug, and Cosmetic Act], FDA regulations or state statutes (or that it was ever cited for such a failure)."80 In fact, the Court of Chancery concluded that "documents incorporated by reference in the Complaint reveal that Blue Bell distributed a sanitation manual with standard operating and reporting procedures, and promulgated written procedures for processing and reporting consumer complaints."81 And at the board level, the Vice Chancellor noted that "[b]oth Bridges and Paul Kruse ... provided regular reports regarding Blue Bell operations to the ... Board," including reports about audits of Blue Bell's facilities.82

Based on Blue Bell's compliance with FDA regulations, ongoing third-party monitoring for contamination, and consistent reporting by senior management to Blue Bell's board on operations, the Court of Chancery concluded that there was a monitoring system in place. At bottom, the Court of Chancery opined that "[w]hat Plaintiff really attempts to challenge is not the existence of monitoring and reporting controls, but the effectiveness of monitoring and reporting controls in particular instances."83 That, the Court of Chancery held, does not state a Caremark claim. As a result, the court held that demand was not excused as to the Caremark claims and dismissed the complaint.

The plaintiff timely appealed from that dismissal.

II. Analysis

We review a motion to dismiss for failure to plead demand futility de novo .84

*818A. Rankin's Independence

We first address the plaintiff's claim that the Court of Chancery erred by holding that the complaint did not allege particularized facts that raise a reasonable doubt as to whether directors holding a majority of the board's votes could impartially consider demand as to the management claims. The Court of Chancery concluded that four directors representing eight votes were independent and that seven directors representing seven votes were not independent. On appeal, the plaintiff challenges the Court of Chancery's conclusion as to only Rankin and one other director, Paul Ehlert. Holding that the Court of Chancery erred as to either director would be dispositive. Because we hold that Rankin was not independent for demand futility purposes, we reverse and need not and do not address whether Ehlert was independent.

On appeal, both parties agree that the Rales standard applies,85 and we therefore use it to determine whether the Court of Chancery erred in finding that a majority of the board was independent for pleading stage purposes. "[A] lack of independence turns on 'whether the plaintiffs have pled facts from which the director's ability to act impartially on a matter important to the interested party can be doubted because that director may feel either subject to the interested party's dominion or beholden to that interested party."86 When it comes to life's more intimate relationships concerning friendship and family, our law cannot "ignore the social nature of humans" or that they are motivated by things other than money, such as "love, friendship, and collegiality."87

The standard for conducting this inquiry at the demand futility stage is well balanced, requiring that the plaintiff plead facts with particularity, but also requiring that this Court draw all reasonable inferences in the plaintiff's favor.88 That is, the plaintiff cannot just assert that a close relationship exists, but when the plaintiff pleads specific facts about the relationship-such as the length of the relationship or details about the closeness of the relationship-then this Court is charged with making all reasonable inferences from those facts in the plaintiff's favor.89

From the pled facts, there is reason to doubt Rankin's capacity to impartially decide whether to sue members of the Kruse family. For starters, one can reasonably infer that Rankin's successful *819career as a businessperson was in large measure due to the opportunities and mentoring given to him by Ed Kruse, Paul Kruse's father, and other members of the Kruse family. The complaint alleges that Rankin started as Ed Kruse's administrative assistant and, over the course of a 28-year career with the company, rose to the high managerial position of CFO.90 Not only that, but Rankin was added to Blue Bell's board in 2004,91 which one can reasonably infer was due to the support of the Kruse family. Capping things off, the Kruse family spearheaded charitable efforts that led to a $450,000 donation to a key local college, resulting in Rankin being honored by having Blinn College's new agricultural facility named after him.92 On a cold complaint, these facts support a reasonable inference that there are very warm and thick personal ties of respect, loyalty, and affection between Rankin and the Kruse family, which creates a reasonable doubt that Rankin could have impartially decided whether to sue Paul Kruse and his subordinate Bridges.

Even though Rankin had ties to the Kruse family that were similar to other directors that the Court of Chancery found were sufficient at the pleading stage to support an inference that they could not act impartially in deciding whether to cause Blue Bell to sue Paul Kruse,93 the Court of Chancery concluded that because Rankin had voted differently from Paul Kruse on a proposal to separate the CEO and Chairman position, these ties did not matter.94 In doing so, the Court of Chancery ignored that the decision whether to sue someone is materially different and more important than the decision whether to part company with that person on a vote about corporate governance, and our law's precedent recognizes that the nature of the decision at issue must be considered in determining whether a director is independent.95 As important, at the pleading stage, *820the Court of Chancery was bound to accord the plaintiff the benefit of all reasonable inferences, and the pled facts fairly support the inference that Rankin owes an important debt of gratitude and friendship to the Kruse family for giving him his first job, nurturing his progress from an entry level position to a top manager and director, and honoring him by spearheading a campaign to name a building at an important community institution after him. Although the fact that fellow directors are social acquaintances who occasionally have dinner or go to common events does not, in itself, raise a fair inference of non-independence,96 our law has recognized that deep and longstanding friendships are meaningful to human beings and that any realistic consideration of the question of independence must give weight to these important relationships and their natural effect on the ability of the parties to act impartially toward each other. As in cases like Sandys v. Pincus97 and Delaware County Employees Retirement Fund v. Sanchez ,98 the important personal and business relationship that Rankin and the Kruse family have shared supports a pleading-stage inference that Rankin cannot act independently.

Because the complaint pleads particularized facts that raise a reasonable doubt as to Rankin's independence, we reverse the Court of Chancery's dismissal of the plaintiff's claims against management for failure to adequately plead demand futility.

B. The Caremark Claim

The plaintiff also challenges the Court of Chancery's dismissal of his Caremark claim. Although Caremark claims are difficult to plead and ultimately to prove out,99 we nonetheless disagree with the Court of Chancery's decision to dismiss the plaintiff's claim against the Blue Bell board.

Under Caremark and Stone v. Ritter , a director must make a good faith effort to oversee the company's operations.100 Failing to make that good faith effort breaches the duty of loyalty and can expose a director to liability. In other words, for a plaintiff to prevail on a Caremark claim, the plaintiff must show that a fiduciary acted in bad faith-"the state of mind traditionally used to define the mindset *821of a disloyal director."101

Bad faith is established, under Caremark , when "the directors [completely] fail[ ] to implement any reporting or information system or controls[,] or ... having implemented such a system or controls, consciously fail[ ] to monitor or oversee its operations thus disabling themselves from being informed of risks or problems requiring their attention."102 In short, to satisfy their duty of loyalty, directors must make a good faith effort to implement an oversight system and then monitor it.

As with any other disinterested business judgment, directors have great discretion to design context- and industry-specific approaches tailored to their companies' businesses and resources.103 But Caremark does have a bottom-line requirement that is important: the board must make a good faith effort-i.e. , try-to put in place a reasonable board-level system of monitoring and reporting.104 Thus, our case law gives deference to boards and has dismissed Caremark cases even when illegal or harmful company activities escaped detection, when the plaintiffs have been unable to plead that the board failed to make the required good faith effort to put a reasonable compliance and reporting system in place.105

For that reason, our focus here is on the key issue of whether the plaintiff has pled facts from which we can infer that Blue Bell's board made no effort to put in place a board-level compliance system. That is, we are not examining the effectiveness of a board-level compliance and reporting system after the fact. Rather, we are focusing on whether the complaint pleads facts supporting a reasonable inference that the board did not undertake good faith efforts to put a board-level system of monitoring and reporting in place.

*822Under Caremark , a director may be held liable if she acts in bad faith in the sense that she made no good faith effort to ensure that the company had in place any "system of controls."106 Here, the plaintiff did as our law encourages and sought out books and records about the extent of board-level compliance efforts at Blue Bell regarding what has to be one of the most central issues at the company: whether it is ensuring that the only product it makes-ice cream-is safe to eat.107 Using these books and records, the complaint fairly alleges that before the listeria outbreak engulfed the company:

• no board committee that addressed food safety existed;

• no regular process or protocols that required management to keep the board apprised of food safety compliance practices, risks, or reports existed;

• no schedule for the board to consider on a regular basis, such as quarterly or biannually, any key food safety risks existed;

• during a key period leading up to the deaths of three customers, management received reports that contained what could be considered red, or at least yellow, flags, and the board minutes of the relevant period revealed no evidence that these were disclosed to the board;

• the board was given certain favorable information about food safety by management, but was not given important reports that presented a much different picture; and

• the board meetings are devoid of any suggestion that there was any regular discussion of food safety issues.

And the complaint goes on to allege that after the listeria outbreak, the FDA discovered a number of systematic deficiencies in all of Blue Bell's plants-such as plants being constructed "in such a manner as to [not] prevent drip and condensate from contaminating food, food-contact surfaces, and food-packing material"-that might have been rectified had any reasonable reporting system that required management to relay food safety information to the board on an ongoing basis been in place.108

In sum, the complaint supports an inference that no system of board-level compliance monitoring and reporting existed at Blue Bell. Although Caremark is a tough standard for plaintiffs to meet, the plaintiff has met it here. When a plaintiff can plead an inference that a board has undertaken no efforts to make sure it is informed of a compliance issue intrinsically critical to the company's business operation, then that supports an inference that the board has not made the good faith effort that Caremark requires.

In defending this case, the directors largely point out that by law Blue Bell had to meet FDA and state regulatory requirements for food safety, and that the company *823had in place certain manuals for employees regarding safety practices and commissioned audits from time to time.109 In the same vein, the directors emphasize that the government regularly inspected Blue Bell's facilities, and Blue Bell management got the results.110

But the fact that Blue Bell nominally complied with FDA regulations does not imply that the board implemented a system to monitor food safety at the board level .111 Indeed, these types of routine regulatory requirements, although important, are not typically directed at the board. At best, Blue Bell's compliance with these requirements shows only that management was following, in a nominal way, certain standard requirements of state and federal law. It does not rationally suggest that the board implemented a reporting system to monitor food safety or Blue Bell's operational performance. The mundane reality that Blue Bell is in a highly regulated industry and complied with some of the applicable regulations does not foreclose any pleading-stage inference that the directors' lack of attentiveness rose to the level of bad faith indifference required to state a Caremark claim.

In answering the plaintiff's argument, the Blue Bell directors also stress that management regularly reported to them on "operational issues." This response is telling. In decisions dismissing Caremark claims, the plaintiffs usually lose because they must concede the existence of board-level systems of monitoring and oversight such as a relevant committee, a regular protocol requiring board-level reports about the relevant risks, or the board's use of third-party monitors, auditors, or consultants.112 For example, in Stone v. Ritter , *824although the company paid $50 million in fines related "to the failure by bank employees" to comply with "the federal Bank Secrecy Act,"113 the"[b]oard dedicated considerable resources to the [Bank Secrecy Act] compliance program and put into place numerous procedures and systems to attempt to ensure compliance."114 Accordingly, this Court affirmed the Court of Chancery's dismissal of a Caremark claim. Here, the Blue Bell directors just argue that because Blue Bell management, in its discretion, discussed general operations with the board, a Caremark claim is not stated.

But if that were the case, then Caremark would be a chimera. At every board meeting of any company, it is likely that management will touch on some operational issue. Although Caremark may not require as much as some commentators wish,115 it does require that a board make a good faith effort to put in place a reasonable system of monitoring and reporting about the corporation's central compliance risks. In Blue Bell's case, food safety was essential and mission critical. The complaint pled facts supporting a fair inference that no board-level system of monitoring or reporting on food safety existed.

If Caremark means anything, it is that a corporate board must make a good faith effort to exercise its duty of care. A failure to make that effort constitutes a breach of the duty of loyalty. Where, as here, a plaintiff has followed our admonishment to seek out relevant books and records116 and then uses those books and records to plead facts supporting a fair inference that no reasonable compliance system and protocols were established as to the obviously most central consumer safety and legal compliance issue facing the company, that the board's lack of efforts resulted in it not receiving official notices of food safety deficiencies for several years, and that, as a failure to take remedial action, the company exposed consumers to listeria -infected ice cream, resulting in the death and injury of company customers, the plaintiff has met his onerous pleading burden and is entitled to discovery to prove out his claim.

III. Conclusion

We therefore reverse the Court of Chancery's decision and remand for proceedings consistent with this opinion.

HORSEY, Justice

(for the majority):

This appeal from the Court of Chancery involves a class action brought by shareholders of the defendant Trans Union Corporation (“Trans Union” or “the Company”), originally seeking rescission of a cash-out merger of Trans Union into the defendant New T Company (“New T”), a wholly-owned subsidiary of the defendant, Marmon Group, Inc. (“Marmon”). Alternate relief in the form of damages is sought against the defendant members of the Board of Directors of Trans Union, *869New T, and Jay A. Pritzker and Robert A. Pritzker, owners of Mamón.1

Following trial, the former Chancellor granted judgr-ent for the defendant directors by unreported letter opinion dated fuly 6, 1982.2 Judgment was based on two ’hidings: (1) that the Board of Directors lad acted in an informed manner so as to >e entitled to protection of the business udgment rule in approving the cash-out nerger; and (2) that the shareholder vote pproving the merger should not be set side because the stockholders had been fairly informed” by the Board of Diectors before voting thereon. The plain-ffs appeal.

Speaking for the majority of the Court, e conclude that both rulings of the Court E Chancery are clearly erroneous. There->re, we reverse and direct that judgment 5 entered in favor of the plaintiffs and gainst the defendant directors for the fair due of the plaintiffs’ stockholdings in •ans Union, in accordance with Weinberger v. UOP, Inc., Del.Supr., 457 A.2d 1 (1983).3

We hold: (1) that the Board’s decision, ached September 20,1980, to approve the oposed cash-out merger was not the oduct of an informed business judgment; that the Board’s subsequent efforts to lend the Merger Agreement and take íer curative action were ineffectual, both ;ally and factually; and (3) that the ard did not deal with complete candor with the stockholders by failing to disclose all material facts, which they knew or should have known, before securing the stockholders’ approval of the merger.

I.

The nature of this case requires a detailed factual statement. The following facts are essentially uncontradicted:4

-A-

Trans Union was a publicly-traded, diversified holding company, the principal earnings of which were generated by its railcar leasing business. During the period here involved, the Company had a cash flow of hundreds of millions of dollars annually. However, the Company had difficulty in generating sufficient taxable income to offset increasingly large investment tax credits (ITCs). Accelerated depreciation deductions had decreased available taxable income against which to offset accumulating ITCs. The Company took these deductions, despite their effect on usable ITCs, because the rental price in the railcar leasing market had already impounded the purported tax savings.

In the late 1970’s, together with other capital-intensive firms, Trans Union lobbied in Congress to have ITCs refundable in cash to firms which could not fully utilize the credit. During the summer of 1980, defendant Jerome W. Van Gorkom, Trans Union’s Chairman and Chief Executive Of-*871fjcer, testified and lobbied in Congress for refundability of ITCs and against further accelerated depreciation. By the end of August, Van Gorkom was convinced that Congress would neither accept the refunda-bility concept nor curtail further aecelerat-ed depreciation.

Beginning in the late 1960’s, and continuing through the 197Q’s, Trans Union pursued a program of acquiring small companies in order to increase available taxable income. In July 1980, Trans Union Management prepared the annual revision of the Company’s Five Year Forecast. This report was presented to the Board of Directors at its July, 1980 meeting. The report projected an annual income growth of about 20%. The report also concluded that Trans Union would have about $195 million in spare cash between 1980 and 1985, “with the surplus growing rapidly from 1982 onward.” The report referred to the ITC situation as a “nagging problem” and, given that problem, the leasing company “would still appear to be constrained to a tax breakeven.” The report then listed four alternative uses of the projected 1982-1985 equity surplus: (1) stock repurchase; (2) dividend increases; (3) a major acquisition program; and (4) combinations of the above. The sale of Trans Union was not among the alternatives. The report emphasized that, despite the overall surplus, the operation of the Company would consume all available equity for the next several years, and concluded: “As a result, we have sufficient time to fully develop our course of action.”

-B-

On August 27, 1980, Van Gorkom met with Senior Management of Trans Union. Van Gorkom reported on his lobbying efforts in Washington and his desire to find a solution to the tax credit problem more permanent than a continued program of acquisitions. Various alternatives were suggested and discussed preliminarily, including the sale of Trans Union to a company with a large amount of taxable income. Donald Romans, Chief Financial Officer of Trans Union, stated that his department had done a “very brief bit of work on the possibility of a leveraged buy-out.” This work had been prompted by a media article which Romans had seen regarding a leveraged buy-out by management. The work consisted of a “preliminary study” of the cash which could be generated by the Company if it participated in a leveraged buyout. As Romans stated, this analysis “was very first and rough cut at seeing whether a cash flow would support what might be considered a high price for this type of transaction.”

On September 5, at another Senior Management meeting which Van Gorkom attended, Romans again brought up the idea of a leveraged buy-out as a “possible strategic alternative” to the Company’s acquisition program. Romans and Bruce S. Chel-berg, President and Chief Operating Officer of Trans Union, had been working on the matter in preparation for the meeting. According to Romans: They did not “come up” with a price for the Company. They merely “ran the numbers” at $50 a share and at $60 a share with the “rough form” of their cash figures at the time. Their “figures indicated that $50 would be very easy to do but $60 would be very difficult to do under those figures.” This work did not purport to establish a fair price for either the Company or 100% of the stock. It was intended to determine the cash flow needed to service the debt that would “probably” be incurred in a leveraged buyout, based on “rough calculations” without “any benefit of experts to identify what the limits were to that, and so forth.” These computations were not considered extensive and no conclusion was reached.

At this meeting, Van Gorkom stated that he would be willing to take $55 per share for his own 75,000 shares. He vetoed the suggestion of a leveraged buy-out by Management, however, as involving a potential conflict of interest for Management. Van Gorkom, a certified public accountant and lawyer, had been an officer of Trans Union *873t 24 years, its Chief Executive Officer t more than 17 years, and Chairman of > Board for 2 years. It is noteworthy in is connection that he was then approach-g 65 years of age and mandatory retire-ent.

For several days following the Septem-r 5 meeting, Van Gorkom pondered the ?a of a sale. He had participated in my acquisitions as a manager and di:tor of Trans Union and as a director of ter companies. He was familiar with imisition procedures, valuation methods, a negotiations; and he privately con-ered the pros and eons of whether Trans ion should seek a privately or publicly-¡d purchaser.

»Tan Gorkom decided to meet with Jay A. tzker, a well-known corporate takeover “cialist and a social acquaintance. How-;r, rather than approaching Pritzker sim-to determine his interest in acquiring ms Union, Van Gorkom assembled a proved per share price for sale of the Com-;y and a financing structure by which to omplish the sale. Van Gorkom did so bout consulting either his Board or any mbers of Senior Management except : Carl Peterson, Trans Union’s Control-Telling Peterson that he wanted no er person on his staff to know what he = doing, but without telling him why, i Gorkom directed Peterson to calculate feasibility of a leveraged buy-out at an anted price per share of $55. Apart n the Company’s historic stock market and Van 5 Gorkom’s long association : Trans Union, the record is devoid of competent evidence that $55 represent-he per share intrinsic value of the Com-y.

aving thus chosen the $55 figure, based ly on the availability of a leveraged -out, Van Gorkom multiplied the price share by the number of shares out-iding to reach a total value of the Company of $690 million. Van Gorkom told Peterson to use this $690 million figure and to assume a $200 million equity contribution by the buyer. Based on these assumptions, Van Gorkom directed Peterson to determine whether the debt portion of the purchase price could be paid off in five years or less if financed by Trans Union’s cash flow as projected in the Five Year Forecast, and by the sale of certain weaker divisions identified in a study done for Trans Union by the Boston Consulting Group (“BCG study”). Peterson reported that, of the purchase price, approximately $50-80 million would remain outstanding after five years. Van Gorkom was disappointed, but decided to meet with Pritzker nevertheless.

Van Gorkom arranged a meeting with Pritzker at the latter’s home on Saturday, September 13, 1980. Van Gorkom prefaced his presentation by stating to Pritzker: “Now as far as you are concerned, I can, I think, show how you can pay a substantial premium over the present stock price and pay off most of the loan in the first five years. * * * If you could pay $55 for this Company, here is a way in which I think it can be financed.”

Van Gorkom then reviewed with Pritzker his calculations based upon his proposed price of $55 per share. Although Pritzker mentioned $50 as a more attractive figure, no other price' was mentioned. However, Van Gorkom stated that to be sure that $55 was the best price obtainable, Trans Union should be free to accept any better offer. Pritzker demurred, stating that his organization would serve as a “stalking horse” for an “auction contest” only if Trans Union would permit Pritzker to buy 1,750,000 shares of Trans Union stock at market price which Pritzker could then sell to any higher bidder. After further discussion on this point, Pritzker told Van Gorkom that he would give him a more definite reaction soon.

*875On Monday, September 15, Pritzker ad-Van Gorkom that he was interested ¡f. the S55 cash-out merger proposal and re'jynKted more information on Trans Un-jor, Van Gorkom agreed to meet privately y/ilfr Pritzker, accompanied by Peterson, Chelberg, and Michael Carpenter, Trans Onion's consultant from the Boston Con-aüiúrig Group. The meetings took place on 16 and 17. Van Gorkom was "a.-,Hounded that events were moving with puch amazing rapidity.”

On Thursday, September 18, Van Gor-kom met again with Pritzker. At that time, Van Gorkom knew that Pritzker intended to make a cash-out merger offer at Van Gorkom’s proposed $55 per share. Pritzker instructed his attorney, a merger and acquisition specialist, to begin drafting merger documents. There was no further discussion of the $55 price. However, the number of shares of Trans Union’s treasury stock to be offered to Pritzker was negotiated down to one million shares; the price was set at $38 — 75 cents above the per share price at the close of the market on September 19. At this point, Pritzker insisted that the Trans Union Board act on his merger proposal within the next three days, stating to Van Gorkom: “We have to have a decision by no later than Sunday [evening, September 21] before the opening of the English stock exchange on Monday morning.” Pritzker’s lawyer was then instructed to draft the merger documents, to be reviewed by Van Gorkom’s lawyer, "sometimes with discussion and sometimes not. in the haste to get it finished.”

On Friday, September 19, Van Gorkom, Chelberg, and Pritzker consulted with Trans Union’s lead bank regarding the financing of Pritzker’s purchase of Trans Union. The bank indicated that it could form a syndicate of banks that would finance the transaction. On the same day, \an Gorkom retained James Brennan, Esquire. to advise Trans Union on the legal aspects of the merger. Van Gorkom did not consult with William Browder, a Vice-President and director of Trans Union and termer head of its legal department, or with William Moore, then the head of Trans Union’s legal staff.

On Friday, September 19, Van Gorkom called a special meeting of the Trans Union Board for noon the following day. He also called a meeting of the Company’s Senior Management to convene at 11:00 a.m., prior to the meeting of the Board. No one, except Chelberg and Peterson, was told the purpose of the meetings. Van Gorkom did not invite Trans Union’s investment banker, Salomon Brothers or its Chicago-based partner, to attend.

Of those present at the Senior Management meeting on September 20, only Chel-berg and Peterson had prior knowledge of Pritzker’s offer. Van Gorkom disclosed the offer and described its terms, but he furnished no copies of the proposed Merger Agreement. Romans announced that his department had done a second study which showed that, for a leveraged buy-out, the price range for Trans Union stock was between $55 and $65 per share. Van Gor-kom neither saw the study nor asked Romans to make it available for the Board meeting.

Senior Management’s reaction to the Pritzker proposal was completely negative. No member of Management, except Chel-berg and Peterson, supported the proposal. Romans objected to the price as being too low;6 he was critical of the timing and suggested that consideration should be given to the adverse tax consequences of an all-cash deal for low-basis shareholders; and he took the position that the agreement to sell Pritzker one million newly-issued shares at market price would inhibit other offers, as would the prohibitions against soliciting bids and furnishing inside infor-*877stion to other bidders. Romans argued at the Pritzker proposal was a “lock up” d amounted to “an agreed merger as posed to an offer.” Nevertheless, Van >rkom proceeded to the Board meeting as aeduled without further delay.

Ten directors served .on the Trans Union iard, five inside (defendants Bonser, Boyle, Browder, Chelberg, and Van Gor-in) and five outside (defendants Wallis, hnson, Lanterman, Morgan and Renek-i. All directors were present at the meet-r, except O’Boyle who was ill. Of the tside directors, four were corporate chief ecutive officers and one was the former ian of the University of Chicago Busi-ss School. None was an investment nker or trained financial analyst. All imbers of the Board were well informed out the Company and its operations as a ing concern. They were familiar with i current financial condition of the Com-ny, as well as operating and earnings Sections reported in the recent Five Year recast. The Board generally received jular and detailed reports and was kept reast of the accumulated investment tax ¡dit and accelerated depreciation prob-n.

Van Gorkom began the Special Meeting the Board with a twenty-minute oral jsentation. Copies of the proposed ;rger Agreement were delivered too late • study before or during the meeting.7 ! reviewed the Company’s ITC and depretion problems and the efforts thereto-•e made to solve them. He discussed his tial meeting with Pritzker and his motition in arranging that meeting. Van >rkom did not disclose to the Board, how-er, the methodology by which he alone d arrived at the $55 figure, or the fact it he first proposed the $55 price in his gotiations with Pritzker.

Van Gorkom outlined the terms of the Pritzker offer as follows: Pritzker would pay $55 in cash for all outstanding shares of Trans Union stock upon completion of which Trans Union would be merged into New T Company, a subsidiary wholly-owned by Pritzker and formed to implement the merger; for a period of 90 days, Trans Union could receive, but could not actively solicit, competing offers; the offer had to be acted on by the next evening, Sunday, September 21; Trans Union could only furnish to competing bidders published information, and not proprietary information; the offer was subject to Pritzker obtaining the necessary financing by October 10, 1980; if the financing contingency were met or waived by Pritzker, Trans Union was required to sell to Pritzker one million newly-issued shares of Trans Union at $38 per share.

Van Gorkom took the position that putting Trans Union “up for auction” through a 90-day market test would validate a decision by the Board that $55 was a fair price. He told the Board that the “free market will have an opportunity to judge whether $55 is a fair price.” Van Gorkom framed the decision before the Board not as whether $55 per share was the highest price that could be obtained, but as whether the $55 price was a fair price that the stockholders should be given the opportunity to accept or reject.8

Attorney Brennan advised the members of the Board that they might be sued if they failed to accept the offer and that a fairness opinion was not required as a matter of law.

Romans attended the meeting as chief financial officer of the Company. He told the Board that he had not been involved in the negotiations with Pritzker and knew nothing about the merger proposal until *879the morning of the meeting; that his studies did not indicate either a fair price for the stock or a valuation of the Company; that he did not see his role as directly addressing the fairness issue; and that he and his people “were trying to search for ways to justify a price in connection with such a [leveraged buy-out] transaction, rather than to say what the shares are worth.” Romans testified:

I told the Board that the study ran the numbers at 50 and 60, and then the subsequent study at 55 and 65, and that was not the same thing as saying that I have a valuation of the company at X dollars. But it was a way — a first step towards reaching that conclusion.

Romans told the Board that, in his opinion, $55 was “in the range of a fair price,” but “at the beginning of the range.”

Chelberg, Trans Union’s President, supported Van Gorkom’s presentation and representations. He testified that he “participated to make sure that the Board members collectively were clear on the details of the agreement or offer from Pritzker;” that he “participated in the discussion with Mr. Brennan, inquiring of him about the necessity for valuation opinions in spite of the way in which this particular offer was couched;” and that he was otherwise actively involved in supporting the positions being taken by Van Gorkom before the Board about “the necessity to act immediately on this offer,” and about “the adequacy of the $55 and the question of how that would be tested.”

The Board meeting of September 20 lasted about two hours. Based solely upon Van Gorkom’s oral presentation, Chel-berg’s supporting representations, Romans’ oral statement, Brennan’s legal advice, and their knowledge of the market history of the Company’s stock,9 the directors approved the proposed Merger Agreement. However, the Board later claimed to have attached two conditions to its acceptance: (1) that Trans Union reserved the right to accept any better offer that was made during the market test period; and (2) that Trans Union could share its proprietary information with any other potential bidders. While the Board now claims to have reserved the right to accept any better offer received after the announcement of the Pritzker agreement (even though the minutes of the meeting do not reflect this), it is undisputed that the Board did not reserve the right to actively solicit alternate offers.

The Merger Agreement was executed by Van Gorkom during the evening of September 20 at a formal social event that he hosted for the opening of the Chicago Lyric Opera. Neither he nor any other director read the agreement prior to its signing and delivery to Pritzker.

On Monday, September 22, the Company issued a press release announcing that Trans Union had entered into a “definitive” Merger Agreement with an affiliate of the Marmon Group, Inc., a Pritzker holding company. Within 10 days of the public announcement, dissent among Senior Management over the merger had become widespread. Faced with threatened resignations of kqy officers, Van Gorkom met with Pritzker who agreed to several modifications of the Agreement. Pritzker was willing to do so provided that Van Gorkom could persuade the dissidents to remain on the Company payroll for at least six months after consummation of the merger.

Van Gorkom reconvened the Board on October 8 and secured the directors’ approval of the proposed amendments — sight unseen. The Board also authorized the employment of Salomon Brothers, its in*881vestment banker, to solicit other offers for Trans Union during the proposed “market test” period.

The next day, October 9, Trans Union issued a press release announcing: (1) that Pritzker had obtained “the financing commitments necessary to consummate” the merger with Trans Union; (2) that Pritzker had acquired one million shares of Trans Union common stock at $38 per share; (3) that Trans Union was now permitted to actively seek other offers and had retained Salomon Brothers for that purpose; and (4) that if a more favorable offer were not received before February 1, 1981, Trans Union’s shareholders would thereafter meet to vote on the Pritzker proposal.

It was not until the following day, October 10, that the actual amendments to the Merger Agreement were prepared by Pritzker and delivered to Van Gorkom for execution. As will be seen, the amendments were considerably at variance with Van Gorkom’s representations of the amendments to the Board on October 8; and the amendments placed serious constraints on Trans Union’s ability to negotiate a better deal and withdraw from the Pritzker agreement. Nevertheless, Van Gorkom proceeded to execute what became the October 10 amendments to the Merger Agreement without conferring further with the Board members and apparently without comprehending the actual implications of the amendments.

Salomon Brothers’ efforts over a three-month period from October 21 to January 21 produced only one serious suitor for Trans Union — General Electric Credit Corporation (“GE Credit”), a subsidiary of the General Electric Company. However, GE Credit was unwilling to make an offer for Trans Union unless Trans Union first rescinded its Merger Agreement with Pritzker. When Pritzker refused, GE Credit terminated further discussions with Trans Union in early January. ,

In the meantime, in early December, the investment firm of Kohlberg, Kravis, Roberts & Co. (“KKR”), the only other concern to make a firm offer for Trans Union, withdrew its offer under circumstances hereinafter detailed.

On December 19, this litigation was commenced and, within four weeks, the plaintiffs had deposed eight of the ten directors of Trans Union, including Van Gorkom, Chelberg and Romans, its Chief Financial Officer. On January 21, Management’s Proxy Statement for the February 10 shareholder meeting was mailed to Trans Union’s stockholders. On January 26, Trans Union’s Board met and, after a lengthy meeting, voted to proceed with the Pritzker merger. The Board also approved for mailing, “on or about January 27,” a Supplement to its Proxy Statement. The Supplement purportedly set forth all information relevant to the Pritzker Merger Agreement, which had not been divulged in the first Proxy Statement.

On February 10, the stockholders of Trans Union approved the Pritzker merger proposal. Of the outstanding shares, 69.9% were voted in favor of the merger; 7.25% were voted against the merger; and 22.85% were not voted.

II.

We turn to the issue of the application of the business judgment rule to the September 20 meeting of the Board.

The Court of Chancery concluded from the evidence that the Board of Directors’ approval of the Pritzker merger proposal fell within the protection of the business judgment rule. The Court found that the Board had given sufficient time and attention to the transaction, since the directors had considered the Pritzker proposal on three different occasions, on September 20, and on October 8, 1980 and finally on January 26, 1981. On that basis, the Court reasoned that the Board had acquired, over the four-month period, sufficient information to reach an informed business judg-*883inent on the cash-out merger proposal. The Court ruled:

... that given the market value of Trans Union’s stock, the business acumen of the members of the board of Trans Union, the substantial premium over market offered by the Pritzkers and the ultimate effect on the merger price provided by the prospect of other bids for the stock in question, that the board of directors of Trans Union did not act recklessly or improvidently in determining on a course of action which they believed to be in the best interest of the stockholders of Trans Union.

The Court of Chancery made but one finding; i.e., that the Board’s conduct over the entire period from September 20 through January 26, 1981 was not reckless or improvident, but informed. This ultimate conclusion was premised upon three subordinate findings, one explicit and two implied. The Court’s explicit finding was that Trans Union’s Board was “free to turn down the Pritzker proposal” not only on September 20 but also on October 8, 1980 and on January 26, 1981. The Court’s implied, subordinate findings were: (1) that no legally binding agreement was reached by the parties until January 26; and (2) that if a higher offer were to be forthcoming, the market test would have produced it,10 and Trans Union would have been contractually free to accept such higher offer. However, the Court offered no factual basis or legal support for any of these findings; and the record compels contrary conclusions.

This Court’s standard of review of the findings of fact reached by the Trial Court following full evidentiary hearing is as stated in Levitt v. Bouvier, Del.Supr., 287 A.2d 671, 673 (1972):

[In an appeal of this nature] this court has the authority to review the entire record and to make its own findings of fact in a proper case. In exercising our power of review, we have the duty to review the sufficiency of the evidence and to test the propriety of the findings below. We do not, however, ignore the findings made by the trial judge. If they are sufficiently supported by the record and are the product of an orderly and logical deductive process, in the exercise of judicial restraint we accept them, even though independently we might have reached opposite conclusions. It is only when the findings below are clearly wrong and the doing of justice requires their overturn that we are free to make contradictory findings of fact.

Applying that standard and governing principles of law to the record and the decision of the Trial Court, we conclude that the Court’s ultimate finding that the Board’s conduct was not “reckless or imprudent” is contrary to the record and not the product of a logical and deductive reasoning process.

The plaintiffs contend that the Court of Chancery erred as a matter of law by exonerating the defendant directors under the business judgment rule without first determining whether the rule’s threshold condition of “due care and prudence” was satisfied. The plaintiffs assert that the Trial Court found the defendant directors to have reached an informed business judgment on the basis of “extraneous considerations and events that occurred after September 20, 1980.” The defendants deny that the Trial Court committed legal error in relying upon post-September 20, 1980 events and the directors’ later acquired knowledge. The defendants further submit that their decision to accept $55 per share was informed because: (1) they were “highly qualified;” (2) they were “well-informed;” and (3) they deliberated over the “proposal” not once but three times. On *885:ssentially this evidence and under our tandard of review, the defendants assert hat affirmance is required. We must disa-;ree.

Under Delaware law, the business adgment rule is the offspring of the fun-amental principle, codified in 8 Del.C. 141(a), that the business and affairs of a )elaware corporation are managed by or nder its board of directors.11 Pogostin v. Rice, Del.Supr., 480 A.2d 619, 624 (1984); Aronson v. Lewis, Del.Supr., 473 A.2d 805, 11 (1984); Zapata Corp. v. Maldonado, del.Supr., 430 A.2d 779, 782 (1981). In arrying out their managerial roles, diactors are charged with an unyielding fi-uciary duty to the corporation and its fiareholders. Loft, Inc. v. Guth, Del.Ch., A.2d 225 (1938), aff'd, Del.Supr., 5 A.2d 03 (1939). The business judgment rule ¡cists to protect and promote the full and ree exercise of the managerial power ranted to Delaware directors. Zapata Corp. v. Maldonado, supra at 782. The lie itself “is a presumption that in making business decision, the directors of a eor-oration acted on an informed basis, in ood faith and in the honest belief that the ation taken was in the best interests of íe company.” Aronson, supra at 812. hus, the party attacking a board decision 3 uninformed must rebut the presumption íat its business judgment was an in-)rmed one. Id.

The determination of whether a usiness judgment is an informed one irns on whether the directors have informed themselves “prior to making a business decision, of all1 material information reasonably available to them.” Id12

Under the business judgment rule there is no protection for directors who have made “an unintelligent or unadvised judgment.” Mitchell v. Highland-Western Glass, Del.Ch., 167 A. 831, 833 (1933). A director’s duty to inform himself in preparation for a decision derives from the fiduciary capacity in which he serves the corporation and its stockholders. Lutz v. Boas, Del.Ch., 171 A.2d 381 (1961). See Weinberger v. UOP, Inc., supra; Guth v. Loft, supra. Since a director is vested with the responsibility for the management of the affairs of the corporation, he must execute that duty with the recognition that he acts on behalf of others. Such obligation does not tolerate faithlessness or self-dealing. But fulfillment of the fiduciary function requires more than the mere absence of bad faith or fraud. Representation of the financial interests of others imposes on a director an affirmative duty to protect those interests and to proceed with a critical eye in assessing information of the type and under the circumstances present here. See Lutz v. Boas, supra; Guth v. Loft, supra.at 510. Compare Donovan v. Cunningham, 5th Cir., 716 F.2d 1455, 1467 (1983); Doyle v. Union Insurance Company, Neb.Supr., 277 N.W.2d 36 (1979); Continental Securities Co. v. Belmont, N.Y. App., 99 N.E. 138, 141 (1912).

Thus, a director’s duty to exercise an informed business judgment is in *887the nature of a duty of care, as distinguished from a duty of loyalty. Here, there were no allegations of fraud, bad faith, or self-dealing, or proof thereof. Hence, it is presumed that the directors reached their business judgment in good faith, Allaun v. Consolidated Oil Co., Del. Ch., 147 A. 257 (1929), and considerations of motive are irrelevant to the issue before us.

The standard of care applicable to a director’s duty of care has also been recently restated by this Court. In Aron-son, supra, we stated:

While the Delaware cases use a variety of terms to describe the applicable standard of care, our analysis satisfies us that under the business judgment rule director liability is predicated upon concepts of gross negligence, (footnote omitted)

473 A.2d at 812.

We again confirm that view. We think the concept of gross negligence is also the proper standard for determining whether a business judgment reached by a board of directors was an informed one.13

In the specific context of a proposed merger of domestic corporations, a director has a duty under 8 Del.C. 251(b),14 along with his fellow directors, to act in an informed and deliberate manner in determining whether to approve an agreement of merger before submitting the proposal to the stockholders. Certainly in the merger context, a director may not abdicate that duty by leaving to the shareholders alone the decision to approve or disapprove the agreement. See Beard v. Elster, Del.Supr., 160 A.2d 731, 737 (1960). Only an agreement of merger satisfying the requirements of 8 Del.C. § 251(b) may be submitted to the shareholders under § 251(c). See generally Aronson v. Lewis, supra at 811-13; see also Pogostin v. Rice, supra.

It is against those standards that the conduct of the directors of Trans Union must be tested, as a matter of law and as a matter of fact, regarding their exercise of an informed business judgment in voting to approve the Pritzker merger proposal.

III.

The defendants argue that the determination of whether their decision to accept $55 per share for Trans Union represented an informed business judgment requires consideration, not only of that which they knew and learned on September 20, but also of that which they subsequently learned and did over the following four-*889lonth period before the shareholders met > vote on the proposal in February, 1981. he defendants thereby seek to reduce the ignificance of their action on September D and to widen the time frame for deter-lining whether their decision to accept the ritzker proposal was an informed one. hus, the defendants contend that what the rectors did and learned subsequent to sptember 20 and through January 26, )81, was properly taken into account by te Trial Court in determining whether the oard’s judgment was an informed one. re disagree with this post hoc approach.

The issue of whether the directors ached an informed decision to “sell” the nnpany on September 20, 1980 must be itermined only upon the basis of the in-rmation then reasonably available to the rectors and relevant to their decision to cept the Pritzker merger proposal. This not to say that the directors were pre-nded from altering their original plan of tion, had they done so in an informed anner. What we do say is that the ques->n of whether the directors reached an formed business judgment in agreeing to 11 the Company, pursuant to the terms of e September 20 Agreement presents, in ality, two questions: (A) whether the dietors reached an informed business judg-mt' on September 20, 1980; and (B) if sy did not, whether the directors’ actions ten subsequent to September 20 were equate to cure any infirmity in their ac-n taken on September 20. We first con-ler the directors’ September 20 action in •ms of their reaching an informed busi-ss judgment.

-A-

On the record before us, we must iclude that the Board of Directors did t reach an informed business judgment September 20, 1980 in voting to “sell” 5 Company for $55 per share pursuant to the Pritzker cash-out merger proposal. Our reasons, in summary, are as follows:

The directors (1) did not adequately inform themselves as to Van Gorkom’s role in forcing the “sale” of the Company and in establishing the per share purchase price; (2) were uninformed as to the intrinsic value of the Company; and (3) given these circumstances, at a minimum, were grossly negligent in approving the “sale” of the Company upon two hours’ consideration, without prior notice, and without the exigency of a crisis or emergency.

As has been noted, the Board based its September 20 decision to approve the cash-out merger primarily on Van Gorkom’s representations. None of the directors, other than Van Gorkom and Chelberg, had any prior knowledge that the purpose of the meeting was to propose a cash-out merger of Trans Union. No members of Senior Management were present, other than Chelberg, Romans and Peterson; and the latter two had only learned of the proposed sale an hour earlier. Both general counsel Moore and former general counsel Browder attended the meeting, but were equally uninformed as to the purpose of the meeting and the documents to be acted upon.

Without any documents before them concerning the proposed transaction, the members of the Board were required to rely entirely upon Van Gorkom’s 20-minute oral presentation of the proposal. No written summary of the terms of the merger was presented; the directors were given no documentation to support the adequacy of $55 price per share for sale of the Company; and the Board had before it nothing more than Van Gorkom’s statement of his understanding of the substance of an agreement which he admittedly had never read, nor which any member of the Board had ever seen.

Under 8 Del.C. § 141(e),15 “directors are fully protected in relying in *891good faith on reports made by officers.” Michelson v. Duncan, Del.Ch., 386 A.2d 1144, 1156 (1978); aff'd in part and rev’d in part on other grounds, Del.Supr., 407 A.2d 211 (1979). See also Graham v. Allis-Chalmers Mfg. Co., Del.Supr., 188 A.2d 125, 130 (1963); Prince v. Bensinger, Del. Ch., 244 A.2d 89, 94 (1968). The term "report” has been liberally construed to include reports of informal personal investigations by corporate officers, Cheff v. Mathes, Del.Supr., 199 A.2d 548, 556 (1964). However, there is no evidence that any "report,” as defined under § 141(e), concerning the Pritzker proposal, was presented to the Board on September 20.16 Van Gorkom’s oral presentation of his understanding of the terms of the proposed Merger Agreement, which he had not seen, and Romans’ brief oral statement of his preliminary study regarding the feasibility of a leveraged buy-out of Trans Union do not qualify as § 141(e) “reports” for these reasons: The former lacked substance because Van Gorkom was basically uninformed as to the essential provisions of the very document about which he was talking. Romans’ statement was irrelevant to the issues before the Board since it did not purport to be a valuation study. At a minimum for a report to enjoy the status conferred by § 141(e), it must be pertinent to the subject matter upon which a board is called to act, and otherwise be entitled to good faith, not blind, reliance. Considering all of the surrounding circumstances — hastily calling the meeting without prior notice of its subject matter, the proposed sale of the Company without any prior consideration of the issue or necessity therefor, the urgent time constraints imposed by Pritzker, and the total absence of any documentation whatsoever — the directors were duty bound to make reasonable inquiry of Van Gorkom and Romans, and if they had done so, the inadequacy of that upon which they now claim to have relied would have been apparent.

The defendants rely on the following factors to sustain the Trial Court’s finding that the Board’s decision was an informed one: (1) the magnitude of the premium or spread between the $55 Pritzker offering price and Trans Union’s current market price of $38 per share; (2) the amendment of the Agreement as submitted on September 20 to permit the Board to accept any better offer during the “market test” period; (3) the collective experience and expertise of the Board’s “inside” and "outside” directors;17 and (4) their reliance on Brennan’s legal advice that the directors might be sued if they rejected the Pritzker proposal. We discuss each of these grounds seriatim:

(1)

A substantial premium may provide one reason to recommend a merger, but in the absence of other sound valuation information, the fact of a premium alone does not provide an adequate basis upon which to assess the fairness of an offering price. Here, the judgment reached as to the adequacy of the premium was based on a comparison between the historically depressed Trans Union market price and the amount of the Pritzker offer. Using market price as a basis for concluding that the premium adequately reflected the true val*893ue of the Company was a clearly faulty, indeed fallacious, premise, as the defendants’ own evidence demonstrates.

The record is clear that before September 20, Van Gorkom and other members of Trans Union’s Board knew that the market had consistently undervalued the worth of Trans Union’s stock, despite steady increases in the Company’s operating income in the seven years preceding the merger. The Board related this occurrence in large part to Trans Union’s inability to use its ITCs as previously noted. Van Gor-kom testified that he did not believe the market price accurately reflected Trans Union’s true worth; and several of the directors testified that, as a general rule, most chief executives think that the market undervalues their companies’ stock. Yet, on September 20, Trans Union’s Board apparently believed that the market stock price accurately reflected the value of the Company for the purpose of determining the adequacy of the premium for its sale.

In the Proxy Statement, however, the directors reversed their position. There, they stated that, although the earnings prospects for Trans Union were “excellent,” they found no basis for believing that this would be reflected in future stock prices. With regard to past trading, the Board stated that the prices at which the Company’s common stock had traded in recent years did not reflect the “inherent” value of the Company. But having referred to the “inherent” value of Trans Union, the directors ascribed no number to it. Moreover, nowhere did they disclose that they had no basis on which to fix “inherent” worth beyond an impressionistic reaction to the premium over market and an unsubstantiated belief that the value of the assets was “significantly greater” than book value. By their own admission they could not rely on the stock price as an accurate measure of value. Yet, also by their own admission, the Board members assumed that Trans Union’s market price was adequate to serve as a basis upon which to assess the adequacy of the premium for purposes of the September 20 meeting.

The parties do not dispute that a publicly-traded stock price is solely a measure of the value of a minority position and, thus, market price represents only the value of a single share. Nevertheless, on September 20, the Board assessed the adequacy of the premium over market, offered by Pritzker, solely by comparing it with Trans Union’s current and historical stock price. (See supra note 5 at 866.)

Indeed, as of September 20, the Board had no other information on which to base a determination of the intrinsic value of Trans Union as a going concern. As of September 20, the Board had made no evaluation of the Company designed to value the entire enterprise, nor had the Board ever previously considered selling the Company or consenting to a buy-out merger. Thus, the adequacy of a premium is indeterminate unless it is assessed in terms of other competent and sound valuation information that reflects the value of the particular business.

Despite the foregoing facts and circumstances, there was no call by the Board, either on September 20 or thereafter, for any valuation study or documentation of the |55 price per share as a measure of the fair value of the Company in a cash-out context. It is undisputed that the major asset of Trans Union was its cash flow. Yet, at no time did the Board call for a valuation study taking into account that highly significant element of the Company’s assets.

We do not imply that an outside valuation study is essential to support an informed business judgment; nor do we state that fairness opinions by independent investment bankers are required as a matter of law. Often insiders familiar with the business of a going concern are in a better position than are outsiders to gather relevant information; and under appropriate circumstances, such directors may be fully protected in relying in good faith upon the valuation reports of their management. *895See 8 Del. C. § 141(e). See also Cheff v. Mathes, supra.

Here, the record establishes that the Board did not request its Chief Financial Officer, Romans, to make any valuation study or review of the proposal to determine the adequacy of $55 per share for sale of the Company. On the record before us: The Board rested on Romans’ elicited response that the $55 figure was within a “fair price range” within the context of a leveraged buy-out. No director sought any further information from Romans. No director asked him why he put $55 at the bottom of his range. No director asked Romans for any details as to his study, the reason why it had been undertaken or its depth. No director asked to see the study; and no director asked Romans whether Trans Union’s finance department could do a fairness study within the remaining 36-hour 18 period available under the Pritzker offer.

Had the Board, or any member, made an inquiry of Romans, he presumably would have responded as he testified: that his calculations were rough and preliminary; and, that the study was not designed to determine the fair value of the Company, but rather to assess the feasibility of a leveraged buy-out financed by the Company’s projected cash flow, making certain assumptions as to the purchaser’s borrowing needs. Romans would have presumably also informed the Board of his view, and the widespread view of Senior Management, that the timing of the offer was wrong and the offer inadequate.

The record also establishes that the Board accepted without scrutiny Van Gor-kom’s representation as to the fairness of the $55 price per share for sale of the Company — a subject that the Board had never previously considered. The Board thereby failed to discover that Van Gorkom had suggested the $55 price to Pritzker and, most crucially, that Van Gorkom had arrived at the $55 figure based on calculations designed solely to determine the feasibility of a leveraged buy-out.19 No questions were raised either as to the tax implications of a cash-out merger or how the price for the one million share option granted Pritzker was calculated.

We do not say that the Board of Directors was not entitled to give some credence to Van Gorkom’s representation that $55 was an adequate or fair price. Under § 141(e), the directors were entitled to rely upon their chairman’s opinion of value and adequacy, provided that such opinion was reached on a sound basis. Here, the issue is whether the directors informed themselves as to all information that was reasonably available to them. Had they done so, they would have learned of the source and derivation of the $55 price and could not reasonably have relied thereupon in good faith.

None of the directors, Management or outside, were investment bankers or financial analysts. Yet the Board did not consider recessing the meeting until a later hour that day (or requesting an extension of Pritzker’s Sunday evening deadline) to give it time to elicit more information as to the sufficiency of the offer, either from *897e Management (in particular Romans) rom Trans Union’s own investment :er, Salomon Brothers, whose Chicago ialist in merger and acquisitions was vn to the Board and familiar with s Union’s affairs.

ms, the record compels the conclusion on September 20 the Board lacked ition information adequate to reach an •med business judgment as to the fair-of $55 per share for sale of the Com-20

(2)

is brings us to the post-September 20 'ket test” upon which the defendants lately rely to confirm the reasonable-of their September 20 decision to ac-the Pritzker proposal. In this connee-the directors present a two-part argu-(a) that by making a “market test” ritzker’s $55 per share offer a condi-of their September 20 decision to ac-his offer, they cannot be found to have 1 impulsively or in an uninformed man-on September 20; and (b) that the uacy of the $17 premium for sale of Company was conclusively established the following 90 to 120 days by the ; reliable evidence available — the mar-lace. Thus, the defendants impliedly md that the “market test” eliminated need for the Board to perform any r form of fairness test either on Sep>er 20, or thereafter.

fain, the facts of record do not support lefendants’ argument. There is no evi-e: (a) that the Merger Agreement was :tively amended to give the Board free-to put Trans Union up for auction sale íe highest bidder; or (b) that a public ion was in fact permitted to occur, minutes of the Board meeting make no rence to any of this. Indeed, the rd compels the conclusion that the dims had no rational basis for expecting a market test was attainable, given terms of the Agreement as executed ng the evening of September 20. We rely upon the following facts which are essentially uncontradicted:

The Merger Agreement, specifically identified as that originally presented to the Board on September 20, has never been produced by the defendants, notwithstanding the plaintiffs’ several demands for production before as well as during trial. No acceptable explanation of this failure to produce documents has been given to either the Trial Court or this Court. Significantly, neither the defendants nor their counsel have made the affirmative representation that this critical document has been produced. Thus, the Court is deprived of the best evidence on which to judge the merits of the defendants’ position as to the care and attention which they gave to the terms of the Agreement on September 20.

Van Gorkom states that the Agreement as submitted incorporated the ingredients for a market test by authorizing Trans Union to receive competing offers over the next 90-day period. However, he concedes that the Agreement barred Trans Union from actively soliciting such offers and from furnishing to interested parties any information about the Company other than that already in the public domain. Whether the original Agreement of September 20 went so far as to authorize Trans Union to receive competitive proposals is arguable. The defendants’ unexplained failure to produce and identify the original Merger Agreement permits the logical inference that the instrument would not support their assertions in this regard. Wilmington Trust Co. v. General Motors Corp., Del.Supr., 51 A.2d 584, 593 (1947); II Wigmore on Evidence § 291 (3d ed. 1940). It is a well established principle that the production of weak evidence when strong is, or should have been, available can lead only to the conclusion that the strong would have been adverse. Interstate Circuit v. United States, 306 U.S. *899208, 226, 59 S.Ct. 467, 474, 83 L.Ed. 610 (1939); Deberry v. State, Del.Supr., 457 A.2d 744, 754 (1983). Van Gorkom, conceding that he never read the Agreement, stated that he was relying upon his understanding that, under corporate law, directors always have an inherent right, as well as a fiduciary duty, to accept a better offer notwithstanding an existing contractual commitment by the Board. (See the discussion infra, part III B(3) at p. 55.)

The defendant directors assert that they “insisted” upon including two amendments to the Agreement, thereby permitting a market test: (1) to give Trans Union the right to accept a better offer; and (2) to reserve to Trans Union the right to distribute proprietary information on the Company to alternative bidders. Yet, the defendants concede that they did not seek to amend the Agreement to permit Trans Union to solicit competing offers.

Several of Trans Union’s outside directors resolutely maintained that the Agreement as submitted was approved on the understanding that, “if we got a better deal, we had a right to take it.” Director Johnson so testified; but he then added, “And if they didn’t put that in the agreement, then the management did not carry out the conclusion of the Board. And I just don’t know whether they did or not.” The only clause in the Agreement as finally executed to which the defendants can point as “keeping the door open” is the following underlined statement found in subpara-graph (a) of section 2.03 of the Merger Agreement as executed:

The Board of Directors shall recommend to the stockholders of Trans Union that they approve and adopt the Merger Agreement (‘the stockholders’ approval’) and to use its best efforts to obtain the requisite votes therefor. GL acknowledges that Trans Union directors may have a competing fiduciary obligation to the shareholders under certain circumstances.

Clearly, this language on its fa'ce cannot be construed as incorporating either of the two “conditions” described above: either the right to accept a better offer or the right to distribute proprietary information to third parties. The Lgical witness for the defendants to call to confirm their construction of this clause of the Agreement would have been Trans Union’s outside attorney, James Brennan. The defendants’ failure, without explanation, to call this witness again permits the logical inference that his testimony would not have been helpful to them. The further fact that the directors adjourned, rather than recessed, the meeting without incorporating in the Agreement these important “conditions” further weakens the defendants’ position. As has been noted, nothing in the Board’s Minutes supports these claims. No reference to either of the so-called “conditions” or of Trans Union’s reserved right to test the market appears in any notes of the Board meeting or in the Board Resolution accepting the Pritzker offer or in the Minutes of the meeting itself. That evening, in the midst of a formal party which he hosted for the opening of the Chicago Lyric Opera, Van Gorkom executed the Merger Agreement without he or any other member of the Board having read the instruments.

The defendants attempt to downplay the significance of the prohibition against Trans Union’s actively soliciting competing offers by arguing that the directors “understood that the entire financial community would know that Trans Union was for sale upon the announcement of the Pritzker offer, and anyone desiring to make a better offer was free to do so.” Yet, the press release issued on September 22, with the authorization of the Board, stated that Trans Union had entered into “definitive agreements” with the Pritzkers; and the press release did not even disclose Trans Union’s limited right to receive and accept higher offers. Accompanying this press release was a further public announcement that Pritzker had been granted an option to purchase at any time one million shares of *901ms Union’s capital stock at 75 cents >ve the then-current price per share.

Thus, notwithstanding what sever-of the outside directors later claimed to re “thought” occurred at the meeting, ! record compels the conclusion that ms Union’s Board had no rational basis conclude on September 20 or in the days nediately following, that the Board’s ac-'tance of Pritzker’s offer was condi-íed on (1) a “market test” of the offer; l (2) the Board’s right to withdraw from

Pritzker Agreement and accept any her offer received before the sharehold-neeting.

(3)

The directors’ unfounded reliance both the premium and the market test ;he basis for accepting the Pritzker proal undermines the defendants’ remain-contention that the Board’s collective erience and sophistication was a suffi-it basis for finding that it reached its tember 20 decision with informed, reaable deliberation.21 Compare Gimbel Signal Companies, Inc., Del. Ch., 316 d 599 (1974), aff'd per curiam, Del. r., 316 A.2d 619 (1974). There, the rt of Chancery preliminary enjoined a rd’s sale of stock of its wholly-owned sidiary for an alleged grossly ¡náde-te price. It did so based on a finding ; the business judgment rule had been ced for failure of management to give board “the opportunity to make a reaible and reasoned decision.” 316 A.2d 15. The Court there reached this result vithstanding the board’s sophistication experience; the company’s need of im-ítete cash; and the board’s need to act nptly due to the impact of an energy crisis on the value of the underlying assets being sold — all of its subsidiary’s oil and gas interests. The Court found those factors denoting competence to be outweighed by evidence of gross negligence; that management in effect sprang the deal on the board by negotiating the asset sale without informing the board; that the buyer intended to “force a quick decision” by the board; that the board meeting was called on only one-and-a-half days’ notice; that its outside directors were not notified of the meeting’s purpose; that during a meeting spanning “a couple of hours” a sale of assets worth $480 million was approved; and that the Board failed to obtain a current appraisal of its oil and gas interests. The analogy of Signal to the case at bar is significant.

(4)

Part of the defense is based on a claim that the directors relied on legal advice rendered at the September 20 meeting by James Brennan, Esquire, who was present at Van Gorkom’s request. Unfortunately, Brennan did not appear and testify at trial even though his firm participated in the defense of this action. There is no contemporaneous evidence of the advice given by Brennan on September 20, only the later deposition and trial testimony of certain directors as to their recollections or understanding of what was said at the meeting. Since counsel did not testify, and the advice attributed to Brennan is hearsay received by the Trial Court over the plaintiffs’ objections, we consider it only in the context of the directors’ present claims. In fairness to counsel, we make no findings that the advice attributed to him was in fact given. We focus solely on the efficacy of the *903defendants’ claims, made months and years later, in an effort to extricate themselves from liability.

Several defendants testified that Brennan advised them that Delaware law did not require a fairness opinion or an outside valuation of the Company before the Board could act on the Pritzker proposal. If given, the advice was correct. However, that did not end the matter. Unless the directors had before them adequate information regarding the intrinsic value of the Company, upon which a proper exercise of business judgment could be made, mere advice of this type is meaningless; and, given this record of the defendants’ failures, it constitutes no defense here.22

' We conclude that Trans Union’s Board \was grossly negligent in that it failed to act with informed reasonable deliberation ín agreeing to the Pritzker merger proposal pn September 20; and we further conclude that the Trial Court erred as a matter of law in failing to address that question before determining whether the directors’ latter conduct was sufficient to cure its initial jerror.

A second claim is that counsel advised the Board it would be subject to lawsuits if it rejected the $55 per share offer. It is, of course, a fact of corporate life that today when faced with difficult or sensitive issues, directors often are subject to suit, irrespective of the decisions they make. However, counsel’s mere acknowl-edgement of this circumstance cannot be rationally translated into a justification for a board permitting itself to be stampeded into a patently unadvised act. While suit might result from the rejection of a merger or tender offer, Delaware law makes clear that a board acting within the ambit of the business judgment rule faces no ultimate liability. Pogostin v. Rice, supra. Thus, we cannot conclude that the mere threat of litigation, acknowledged by counsel, constitutes either legal advice or any valid basis upon which to pursue an uninformed course.

Since we conclude that Brennan’s purported advice is of no consequence to the defense of this case, it is unnecessary for us to invoke the adverse inferences which may be attributable to one failing to appear at trial and testify.

-B-

We now examine the Board’s post-September 20 conduct for the purpose of determining first, whether it was informed and not grossly negligent; and second, if informed, whether it was sufficient to legally rectify and cure the Board’s derelictions of September 20.23

(1)

First, as to the Board meeting of October 8: Its purpose arose in the aftermath of the September 20 meeting: (1) the September 22 press release announcing that Trans Union “had entered into definitive agreements to merge with an affiliate of Mar-mon Group, Inc.;” and (2) Senior Management’s ensuing revolt.

Trans Union’s press release stated:

FOR IMMEDIATE RELEASE:

CHICAGO, IL — Trans Union Corporation announced today that it had entered into definitive agreements to merge with an affiliate of The Marmon Group, Inc. in a transaction whereby Trans Union stockholders would receive $55 per share in cash for each Trans Union share held. The Marmon Group, Inc. is controlled by the Pritzker family of Chicago.

The merger is subject to approval by the stockholders of Trans Union at a special meeting expected to be held *905sometime during December or early January.

Until October 10, 1980, the purchaser has the right to terminate the merger if financing that is satisfactory to the purchaser has not been obtained, but after that date there is no such right.

In a related transaction, Trans Union has agreed to sell to a designee of the purchaser one million newly-issued shares of Trans Union common stock at a cash price of $38 per share. Such shares will be issued only if the merger financing has been committed for no later than October 10, 1980, or if the purchaser elects to waive the merger financing condition. In addition, the New York Stock Exchange will be asked to approve the listing of the new shares pursuant to a listing application which Trans Union intends to file shortly.

Completing of the transaction is also subject to the preparation of a definitive proxy statement and making various filings and obtaining the approvals or consents of government agencies.

The press release made no reference to ovisions allegedly reserving to the Board e rights to perform a “market test” and withdraw from the Pritzker Agreement Trans Union received a better offer here the shareholder meeting. The defend-ts also concede that Trans Union never ide a subsequent public announcement iting that it had in fact reserved the ;Tat to accept alternate offers, the Agree-;nt notwithstanding.

The public announcement of the Pritzker irger resulted in an “en masse” revolt of ms Union’s Senior Management. The id of Trans Union’s tank car operations i most profitable division) informed Van Gorkom that unless the merger were called off, fifteen key personnel would resign.

A secondary purpose of the October 8 meeting 'as to obtain the Board’s approval for Trans nion to employ its investment advisor, Salo-lon Brothers, for the limited purpose of assist-ig Management in the solicitation of other of-:rs. Neither Management nor the Board then - thereafter requested Salomon Brothers to submit its opinion as to the fairness of Pritzker’s $55 cash-out merger proposal or to value Trans Union as an entity.

Instead of reconvening the Board, Van Gorkom again privately met with Pritzker, informed him of the developments, and sought his advice. Pritzker then made the following suggestions for overcoming Management’s dissatisfaction: (1) that the Agreement be amended to permit Trans Union to solicit, as well as receive, higher offers; and (2) that the shareholder meeting be postponed from early January to February 10, 1981. In return, Pritzker asked Van Gorkom to obtain a commitment from Senior Management to remain at Trans Union for at least six months after the merger was consummated.

Van Gorkom then advised Senior Management that the Agreement would be amended to give Trans Union the right to solicit competing offers through January, 1981, if they would agree to remain with Trans Union. Senior Management was temporarily mollified; and Van Gorkom then called a special meeting of Trans Union’s Board for October 8.

Thus, the primary purpose of the October 8 Board meeting was to amend the Merger Agreement, in a manner agreeable to Pritzker, to permit Trans Union to conduct a “market test.”24 Van Gorkom understood that the proposed amendments were intended'to give the Company an unfettered “right to openly solicit offers down through January 31.” Van Gorkom presumably so represented the amendments to Trans Union’s Board members on October 8. In a brief session, the directors approved Van Gorkom’s oral presentation of the substance of the proposed amend*907ments, the terms of which were not reduced to writing until October 10. But rather than waiting to review the amendments, the Board again approved them sight unseen and adjourned, giving Van Gorkom authority to execute the papers when he received them.25

*905There is no evidence of record that the October 8 meeting had any other purpose; and we also note that the Minutes of the October 8 Board meeting, including any notice of the meeting, are not part of the voluminous records of this case.

*907Thus, the Court of Chancery’s finding that the October 8 Board meeting was convened to reconsider the Pritzker “proposal” is clearly erroneous. Further, the consequence of the Board’s faulty conduct on October 8, in approving amendments to the Agreement which had not even been drafted, will become apparent when the actual amendments to the Agreement are hereafter examined.

The next day, October 9, and before the Agreement was amended, Pritzker moved swiftly to off-set the proposed market test amendment. First, Pritzker informed Trans Union that he had completed arrangements for financing its acquisition and that the parties were thereby mutually bound to a firm purchase and sale arrangement. Second, Pritzker announced the exercise of his option to purchase one million shares of Trans Union’s treasury stock at $38 per share — 75 cents above the current market price. Trans Union’s Management responded the same day by issuing a press release announcing: (1) that all financing arrangements for Pritzker’s acquisition of Trans Union had been completed; and (2) Pritzker’s purchase of one million shares of Trans Union’s treasury stock at $38 per share.

The next day, October 10, Pritzker delivered to Trans Union the proposed amendments to the September 20 Merger Agreement. Van Gorkom promptly proceeded to countersign all the instruments on behalf of Trans Union without reviewing the instruments to determine if they were consistent with the authority previously granted him by the Board. The amending documents were apparently not approved by Trans Union’s Board until a much later date, December 2. The record does not affirmatively establish that Trans Union’s directors ever read the October 10 amendments.26

The October 10 amendments to the Merger Agreement did authorize Trans Union to solicit competing offers, but the amendments had more far-reaching effects. The most significant change was in the definition of the third-party “offer” available to Trans Union as a possible basis for withdrawal from its Merger Agreement with Pritzker. Under the October 10 amendments, a better offer was no longer sufficient to permit Trans Union’s withdrawal. Trans Union was now permitted to terminate the Pritzker Agreement and abandon the merger only if, prior to February 10, 1981, Trans Union had either consummated a merger (or sale of assets) with a third party or had entered into a “definitive” merger agreement more favorable than Pritzker’s and for a greater consideration— subject only to stockholder approval. Further, the “extension” of the market test period to February 10, 1981 was circumscribed by other amendments which required Trans Union to file its preliminary proxy statement on the Pritzker merger proposal by December 5, 1980 and use its best efforts to mail the statement to its shareholders by January 5, 1981. Thus, the market test period was effectively reduced, not extended. (See infra note 29 at 886.)

In our view, the record compels the conclusion that the directors’ conduct on Octo-*9098 exhibited the same deficiencies as did r conduct on September 20. The Board nitted its Merger Agreement with zker to be amended in a manner it had !ier authorized nor intended. The rt of Chancery, in its decision, over-ed the significance of the October 8-10 its and their relevance to the sufficien-)f the directors’ conduct. The Trial rt’s letter opinion ignores: the October mendments; the manner of their adop-the effect of the October 9 press ise and the October 10 amendments on feasibility of a market test; and the tiate question as to the reasonableness íe directors’ reliance on a market test ¡commending that the shareholders ape the Pritzker merger.

We conclude that the Board i in a grossly negligent manner on iber 8; and that Van Gorkom’s repre-ations on which the Board based its >ns do not constitute “reports” under 1(e) on which the directors could rea-bly have relied. Further, the amended *er Agreement imposed on Trans Un-acceptance of a third party offer con-ns more onerous than those imposed 'rans Union’s acceptance of Pritzker’s r on September 20. After October 10, is Union could accept from a third par-better offer only if it were incorporat-i a definitive agreement between the ies, and not conditioned on financing or ny other contingency.

le October 9 press release, coupled the October 10 amendments, had the • effect of locking Trans Union’s Board the Pritzker Agreement. Pritzker had sby foreclosed Trans Union’s Board i negotiating any better “definitive” ement over the remaining eight weeks re Trans Union was required to clear-5roxy Statement submitting the Pritzk-roposal to its shareholders.

(2)

;xt, as to the “curative” effects of the •d’s post-September 20 conduct, we rein more detail the reaction of Van tom to the KKR proposal and the results of the Board-sponsored “market test.”

The KKR proposal was the first and only offer received subsequent to the Pritzker Merger Agreement. The offer resulted primarily from the efforts of Romans and other senior officers to propose an alternative to Pritzker’s acquisition of Trans Union. In late September, Romans’ group contacted KKR about the possibility of a leveraged buy-out by all members of Management, except Van Gorkom. By early October, Henry R. Kravis of KKR gave Romans written notice of KKR’s “interest in making an offer to purchase 100%” of Trans Union’s common stock.

Thereafter, and until early December, Romans’ group worked with KKR to develop a proposal. It did so with Van Gor-kom’s knowledge and apparently grudging consent. On December 2, Kravis and Romans hand-delivered to Van Gorkom a formal letter-offer to purchase all of Trans Union’s assets and to assume all of its liabilities for an aggregate cash consideration equivalent to $60 per share. The offer was contingent upon completing equity and bank financing of $650 million, which Kra-vis represented as 80% complete. The KKR letter made reference to discussions with major banks regarding the loan portion of the buy-out cost and stated that KKR was “confident that commitments for the bank financing * * * can be obtained within two or three weeks.” The purchasing group was to include certain named key members of Trans Union’s Senior Management, excluding Van Gorkom, and a major Canadian company. Kravis stated that they were willing to enter into a “definitive agreement” under terms and conditions “substantially the same” as those contained in Trans Union’s agreement with Pritzker. The offer was addressed to Trans Union’s Board of Directors and a meeting with the Board, scheduled for that afternoon, was requested.

Van Gorkom’s reaction to the KKR proposal was completely negative; he did not view the offer as being firm because of its *911financing condition. It was pointed out, to no avail, that Pritzker’s offer had not only been similarly conditioned, but accepted on an expedited basis. Van Gorkom refused Kravis’ request that Trans Union issue a press release announcing KKR’s offer, on the ground that it might “chill” any other offer.27 Romans and Kravis left with the understanding that their proposal would be presented to Trans Union’s Board that afternoon.

Within a matter of hours and shortly before the scheduled Board meeting, Kra-vis withdrew his letter-offer. He gave as his reason a sudden decision by the Chief Officer of Trans Union’s rail car leasing operation to withdraw from the KKR purchasing group. Van Gorkom had spoken to that officer about his participation in the KKR proposal immediately after his meeting with Romans and Kravis. However, Van Gorkom denied any responsibility for the officer’s change of mind.

At the Board meeting later that afternoon, Van Gorkom did not inform the directors of the KKR proposal because he considered it “dead.” Van Gorkom did not contact KKR again until January 20, when faced with the realities of this lawsuit, he then attempted to reopen negotiations. KKR declined due to the imminence of the February 10 stockholder meeting.

GE Credit Corporation’s interest in Trans Union did not develop until November; and it made no written proposal until mid-January. Even then, its proposal was not in the form of an offer. Had there been time to do so, GE Credit was prepared to offer between $2 and $5 per share above the $55 per share price which Pritzker offered. But GE Credit needed an additional 60 to 90 days; and it was unwilling to make a formal offer without a concession from Pritzker extending the February 10 “deadline” for Trans Union’s stockholder meeting. As previously stated, Pritzker refused to grant such extension; and on January 21, GE Credit terminated further negotiations with Trans Union. Its stated reasons, among others, were its “unwillingness to become involved in a bidding contest with Pritzker in the absence of the willingness of [the Pritzker interests] to terminate the proposed $55 cash merger.”

In the absence of any explicit finding by the Trial Court as to the reasonableness of Trans Union’s directors’ reliance on a market test and its feasibility, we may make our own findings based on the record. Our review of the record compels a finding that confirmation of the appropriateness of the Pritzker offer by an unfettered or free market test was virtually meaningless in the face of the terms and time limitations of Trans Union’s Merger Agreement with Pritzker as amended October 10, 1980.

(3)

Finally, we turn to the Board’s meeting of January 26, 1981. The defendant directors rely upon the action there taken to refute the contention that they did not reach an informed business judgment in approving the Pritzker merger. The defendants contend that the Trial Court correctly concluded that Trans Union’s directors were, in effect, as “free to turn down the Pritzker proposal” on January 26, as they were on September 20.

Applying the appropriate standard of review set forth in Levitt v. Bouvier, supra, we conclude that the Trial Court’s finding in this regard is neither supported by the record nor the product of an orderly and logical deductive process. Without disagreeing with the principle that a business decision by an originally uninformed board of directors may, under appropriate circumstances, be timely cured so as to become informed and deliberate, Muschel v. Western Union Corporation, Del. Ch., 310 *913904 (1973),28 we find that the record not permit the defendants to invoke principle in this case.

e Board’s January 26 meeting was the meeting following the filing of the tiffs’ suit in mid-December and the neeting before the previously-noticed ¡holder meeting of February 10.29 All lembers of the Board and three out-attorneys attended the meeting. At meeting the following facts, among aspects of the Merger Agreement, discussed:

The fact that prior to September 20, no Board member or member of Sen-unagement, except Chelberg and Pe-ü, knew that Van Gorkom had dis-d a possible merger with Pritzker;

The fact that the price of $55 per had been suggested initially to ter by Van Gorkom;

(c) The fact that the Board had not sought an independent fairness opinion;

(d) The fact that, at the September 20 Senior Management meeting, Romans and several members of Senior Management indicated both concern that the $55 per share price was inadequate and a belief that a higher price should and could be obtained;

(e) The fact that Romans had advised the Board at its meeting on September 20, that he and his department had prepared a study which indicated that the Company had a value in the range of $55 to $65 per share, and that he could not advise the Board that the $55 per share offer made by Pritzker was unfair.

The defendants characterize the Board’s Minutes of the January 26 meeting as a “review” of the “entire sequence of events” from Van Gorkom’s initiation of the negotiations on September 13 forward.30 The defendants also rely on the *915testimony of several of the Board members at trial as'confirming the Minutes.31 On the basis of this evidence, the defendants argue that whatever information the Board lacked to make a deliberate and informed judgment on September 20, or on October 8, was fully divulged to the entire Board on January 26. Hence, the argument goes, the Board's vote on January 26 to again “approve” the Pritzker merger must be found to have been an informed and deliberate judgment.

On the basis of this evidence, the defendants assert: (1) that the Trial Court was legally correct in widening the time frame for determining whether the defendants’ approval of the Pritzker merger represented an informed business judgment to include the entire four-month period during which the Board considered the matter from September 20 through January 26; and (2) that, given this extensive evidence of the Board’s further review and deliberations on January 26, this Court must affirm the Trial Court’s conclusion that the Board’s action was not reckless or improvident.

We cannot agree. We find the Trial Court to have erred, both as a matter of fact and as a matter of law, in relying on the action on January 26 to bring the defendants’ conduct within the protection of the business judgment rule.

Johnson’s testimony and the Board Minutes of January 26 are remarkably consistent. Both clearly indicate recognition that the question of the alternative courses of action, available to the Board on January 26 with respect to the Pritzker merger, was a legal question, presenting to the Board {after its review of the full record developed through pre-trial discovery) three options: (1) to “continue to recommend” the Pritzker merger; (2) to “recommend that *917e stockholders vote against” the Pritzker srger; or (3) to take a noncommittal posi->n on the merger and “simply leave the cisión to [the] shareholders.”

We must conclude from the forcing that the Board was mistaken as a itter of law regarding its available urses of action on January 26, 1981. Op-ns (2) and (3) were not viable or legally ailable to the Board under 8 Del.C. 251(b). The Board could not remain com-tted to the Pritzker merger and yet rec-unend that its stockholders vote it down; r could it take a neutral position and legate to the stockholders the unadvised cisión as to whether to accept or reject ; merger. Under § 251(b), the Board d but two options: (1) to proceed with ; merger and the stockholder meeting, th the Board’s recommendation of ap-jval; or (2) to rescind its agreement with itzker, withdraw its approval of the srger, and notify its stockholders that the jposed shareholder meeting was can-led. There is no evidence that the Board ve any consideration to these, its only ;ally viable alternative courses of action.

But the second course of action uld have clearly involved a substantial k — that the Board would be faced with t by Pritzker for breach of contract sed on its September 20 agreement as ended October 10. As previously noted, der the terms of the October 10 amend-nt, the Board’s only ground for release >m its agreement with Pritzker was its ;ry into a more favorable definitive reement to sell the Company to a third *ty. Thus, in reality, the Board was not ■ee to turn down the Pritzker proposal” the Trial Court found. Indeed, short of jotiating a better agreement with a third rty, the Board’s only basis for release m the Pritzker Agreement without liaity would have been to establish fundamental wrongdoing by Pritzker. Clearly, the Board was not “free” to withdraw from its agreement with Pritzker on January 26 by simply relying on its self-induced failure to have reached an informed business judgment at the time of its original agreement. See Wilmington Trust Company v. Coulter, Del.Supr., 200 A.2d 441, 453 (1964), aff'g Pennsylvania Company v. Wilmington Trust Company, Del.Ch., 186 A.2d 751 (1962).

Therefore, the Trial Court’s conclusion that the Board reached an informed business judgment on January 26 in determining whether to turn down the Pritzker “proposal” on that day cannot be sustained.32 The Court’s conclusion is not supported by the record; it is contrary to the provisions of § 251(b) and basic principles of contract law; and it is not the product of a logical and deductive reasoning process.

Upon the basis of the foregoing, we hold that the defendants’ post-September conduct did not cure the deficiencies of their September 20 conduct; and that, accordingly, the Trial Court erred in according to the defendants the benefits of the business judgment rule.

IV.

Whether the directors of Trans Union should be treated as one or individually in terms of invoking the protection of the business judgment rule and the applicability of 8 Del. C. § 141(c) are questions which were not originally addressed by the parties in their briefing of this case. This resulted in a supplemental briefing and a second rehearing en banc on two basic questions: (a) whether one or more of the directors were deprived of the protection of the business judgment rule by evidence of an absence of good faith; and (b) whether one or more of the outside directors were *919entitled to invoke the protection of 8 Del.C. § 141(e) by evidence of a reasonable, good faith reliance on “reports,” including legal advice, rendered the Board by certain inside directors and the Board’s special counsel, Brennan.

The parties’ response, including reargument, has led the majority of the Court to conclude: (1) that since all of the defendant directors, outside as well as inside, take a unified position, we are required to treat all of the directors as one as to whether they are entitled to the protection of the business judgment rule; and (2) that considerations of good faith, including the presumption that the directors acted in ¡good faith, are irrelevant in determining 'the threshold issue of whether the directors as a Board exercised an informed business judgment. For the same reason, We must reject defense counsel’s ad homi-fnem argument for affirmance: that reversal may result in a multi-million dollar class award against the defendants for having made an allegedly uninformed business judgment in a transaction not involving any personal gain, self-dealing or claim of bad faith.

In their brief, the defendants similarly mistake the business judgment rule’s application to this case by erroneously invoking presumptions of good faith and “wide discretion”:

This is a case in which plaintiff challenged the exercise of business judgment by an independent Board of Directors. There were no allegations and no proof of fraud, bad faith, or self-dealing by the directors....

The business judgment rule, which was properly applied by the Chancellor, allows directors wide discretion in the matter of valuation and affords room for honest differences of opinion. In order to prevail, plaintiffs had the heavy burden of proving that the merger price was so grossly inadequate as to display itself as a badge of fraud. That is a burden which plaintiffs have not met.

However, plaintiffs have not claimed, nor did the Trial Court decide, that $55 was a grossly inadequate pric® per share for sale of the Company. That being so, the presumption that a board’s judgment as to adequacy of price represents an honest exercise of business judgment (absent proof that the sale price was grossly inadequate) is irrelevant to the threshold question of whether an informed judgment was reached. Compare Sinclair Oil Corp. v. Levien, Del.Supr., 280 A.2d 717 (1971); Kelly v. Bell, Del.Supr., 266 A.2d 878, 879 (1970); Cole v. National Cash Credit Association, Del.Ch., 156 A. 183 (1931); Allaun v. Consolidated Oil Co., supra; Allen Chemical & Dye Corp. v. Steel & Tube Co. of America, Del.Ch., 120 A. 486 (1923).

V.

The defendants ultimately rely on the stockholder vote of February 10 for exoneration. The defendants contend that the stockholders’ “overwhelming” vote approving the Pritzker Merger Agreement had the legal effect of curing any failure of the Board to reach an informed business judgment in its approval of the merger.

The parties tacitly agree that a discovered failure of the Board to reach an informed business judgment in approving the merger constitutes a voidable, rather than a void, act. Hence, the merger can be sustained, notwithstanding the infirmity of the Board’s action, if its approval by majority vote of the shareholders is found to have been based on an informed electorate. Cf. Michelson v. Duncan, Del.Supr., 407 A.2d 211 (1979), aff'g in part and rev’g in part, Del.Ch., 386 A.2d 1144 (1978). The disagreement between the parties arises over: (1) the Board’s burden of disclosing to the shareholders all relevant and material information; and (2) the sufficiency of the evidence as to whether the Board satisfied that burden.

On this issue the Trial Court summarily concluded “that the stockholders of Trans Union were fairly informed as to the pending merger....” The Court provided no *921supportive reasoning nor did the Court make any reference to the evidence of record.

The plaintiffs contend that the Court committed error by applying an erroneous disclosure standard of “adequacy” rather than “completeness” in determining the sufficiency of the Company’s merger proxy materials. The plaintiffs also argue that the Board’s proxy statements, both its original statement dated January 19 and its supplemental statement dated January 26, were incomplete in various material respects. Finally, the plaintiffs assert that Management’s supplemental statement (mailed “on or about” January 27) was untimely either as a matter of law under 8 Del.C. § 251(c), or untimely as a matter of equity and the requirements of complete candor and fair disclosure.

The defendants deny that the Court committed legal or equitable error. On the question of the Board’s burden of disclosure, the defendants state that there was no dispute at trial over the standard of disclosure required of the Board; but the [defendants concede that the Board was required to disclose “all germane facts” which a reasonable shareholder would have considered important in deciding whether po approve the merger. Thus, the defendants argue that when the Trial Court ppeaks of finding the Company’s shareholders to have been “fairly informed” by Management’s proxy materials, the Court is fcpeaking in terms of “complete candor” as required under Lynch v. Vickers Energy Corp., Del.Supr., 383 A.2d 278 (1978).

The settled rule in Delaware is Ihat “where a majority of fully informed Itockholders ratify action of even interest-id directors, an attack on the ratified transition normally must fail.” Gerlach v. Gilam, Del.Ch., 139 A.2d 591, 593 (1958). the question of whether shareholders have leen fully informed such that their vote pn be said to ratify director action, “turns rt the fairness and completeness of the roxy materials submitted by the manage-lent to the ... shareholders.” Michelson v. Duncan, supra at 220. As this Court stated in Gottlieb v. Heyden Chemical Corp., Del.Supr., 91 A.2d 57, 59 (1952):

[T]he entire atmosphere is freshened and a new set of rules invoked where a formal approval has been given by a majority of independent, fully informed stockholders ....

In Lynch v. Vickers Energy Corp., supra, this Court held that corporate directors owe to their stockholders a fiduciary duty to disclose all facts germane to the transaction at issue in an atmosphere of complete candor. We defined “germane” in the tender offer context as all “information such as a reasonable stockholder would consider important in deciding whether to sell or retain stock.” Id. at 281. Accord Weinberger v. UOP, Inc., supra; Michelson v. Duncan, supra; Schreiber v. Pennzoil Corp., Del.Ch., 419 A.2d 952 (1980). In reality, “germane” means material facts.

Applying this standard to the record before us, we find that Trans Union’s stockholders were not fully informed of all facts material to their vote on the Pritzker Merger and that the Trial Court’s ruling to the contrary is clearly erroneous. We list the material deficiencies in the proxy materials:

(1) The fact that the Board had no reasonably adequate information indicative of the intrinsic value of the Company, other than a concededly depressed market price, was without question material to the shareholders voting on the merger. See Wein-berger, supra at 709 (insiders’ report that cash-out merger price up to $24 was good investment held material); Michelson, supra at 224 (alleged terms and intent of stock option plan held not germane); Schreiber, supra at 959 (management fee of $650,000 held germane).

Accordingly, the Board’s lack of valuation information should have been disclosed. Instead, the directors cloaked the absence of such information in both the Proxy Statement and the Supplemental *923Proxy Statement. Through artful drafting, noticeably absent at the September 20 meeting, both documents create the impression that the Board knew the intrinsic worth of the Company. In particular, the Original Proxy Statement contained the following:

[although the Board of Directors regards the intrinsic value of the Company's assets to be significantly greater than their book value ..., systematic liquidation of such a large and complex entity as Trans Union is simply not regarded as a feasible method of realizing its inherent value. Therefore, a business combination such as the merger would seem to be the only practicable way in which the stockholders could realize the value of the Company.

The Proxy stated further that “[i]n the dew of the Board of Directors ..., the prices at which the Company’s common stock has traded in recent years have not reflected the inherent value of the Company.” What the Board failed to disclose to its stockholders was that the Board had not made any study of the intrinsic or inherent worth of the Company; nor had the Board Bven discussed the inherent value of the Company prior to approving the merger on September 20, or at either of the subsequent meetings on October 8 or January 26. Neither in its Original Proxy Statement nor in its Supplemental Proxy did the Board disclose that it had no information before it, beyond the premium-over-market and the price/earnings ratio, on which to determine the fair value of the Company as a whole.

(2)We find false and misleading the Board’s characterization of the Romans report in the Supplemental Proxy Statement. The Supplemental Proxy stated:

At the September 20, 1980 meeting of the Board of Directors of Trans Union, Mr. Romans indicated that while he could not say that $55,00 per share was an unfair price, he had prepared a preliminary report which reflected that the value of the Company was in the range of $55.00 to $65.00 per share.

Nowhere does the Board disclose that Romans stated to the Board that his calculations were made in a "search for ways to justify a price in connection with” a leveraged buy-out transaction, “rather than to say what the shares are worth,” and that he stated to the Board that his conclusion thus arrived at “was not the same thing as saying that I have a valuation of the Company at X dollars.” Such information would have been material to a reasonable shareholder because it tended to invalidate the fairness of the merger price of $55. Furthermore, defendants again failed to disclose the absence of valuation information, but still made repeated reference to the “substantial premium.”

(3) We find misleading the Board’s references to the “substantial” premium offered. The Board gave as their primary reason in support of the merger the “substantial premium” shareholders would receive. But the Board did not disclose its failure to assess the premium offered in terms of other relevant valuation techniques, thereby rendering questionable its determination as to the substantiality of the premium over an admittedly depressed stock market price.

(4) We find the Board’s recital in the Supplemental Proxy of certain events preceding the September 20 meeting to be incomplete and misleading. It is beyond dispute that a reasonable stockholder would have considered material the fact that Van Gorkom not only suggested the $55 price to Pritzker, but also that he chose the figure because it made feasible a leveraged buy-out. The directors disclosed that Van Gorkom suggested the $55 price to Pritzker. But the Board misled the shareholders when they described the basis of Van Gorkom’s suggestion as follows:

Such suggestion was based, at least in part, on Mr. Van Gorkom’s belief that loans could be obtained from institutional lenders (together with about a $200 mil-*925ion equity contribution) which would istify the payment of such price, ... hough by January 26, the directors w the basis of the $55 figure, they did disclose that Van Gorkom chose the $55 :e because that figure would enable ;zker to both finance the purchase of ns Union through a leveraged buy-out , within five years, substantially repay loan out of the cash flow generated by Company’s operations,

i) The Board’s Supplemental Proxy iement, mailed on or after January 27, ed significant new matter, material to proposal to be voted on February 10, eh was not contained in the Original xy Statement. Some of this new mat-was information which had only been losed to the Board on January 26; :h was information known or reason-r available before January 21 but not ;aled in the Original Proxy Statement, the stockholders were not informed of e facts. Included in the “new” matter ; disclosed in the Supplemental Proxy ement were the following:

) The fact that prior to September 20, ), no Board member or member of Sen-Management, except Chelberg and Peon, knew that Van Gorkom had dis-ed a possible merger with Pritzker; ) The fact that the sale price of $55 per e had been suggested initially to sker by Van Gorkom;

1 The fact that the Board had not ;ht an independent fairness opinion;

) The fact that Romans and several ibers of Senior Management had indi-d concern at the September 20 Senior agement meeting that the $55 per e price was inadequate and had stated a higher price should and could be ined; and

(e) The fact that Romans had advised the Board at its meeting on September 20 that he and his department had prepared a study which indicated that the Company had a value in the range of $55 to $65 per share, and that he could not advise the Board that the $55 per share offer which Pritzker made was unfair.

The parties differ over whether the notice requirements of 8 Del. C. § 251(c) apply to the mailing date of supplemental proxy material or that of the original proxy material.33 The Trial Court summarily disposed of the notice issue, stating it was “satisfied that the proxy material furnished to Trans Union stockholders ... fairly presented the question to be voted on at the February 10, 1981 meeting.”

The defendants argue that the notice provisions of § 251(c) must be construed as requiring only that stockholders receive notice of the time, place, and purpose of a meeting to consider a merger at least 20 days prior to such meeting; and since the Original Proxy Statement was disseminated more than 20 days before the meeting, the defendants urge affirmance of the Trial Court’s ruling as correct as a matter of statutory construction. Apparently, the question has not been addressed by either the Court of Chancery or this Court; and authority in other jurisdictions is limited. See Electronic Specialty Co. v. Int’l Controls Corp., 2d Cir., 409 F.2d 937, 944 (1969) (holding that a tender offeror’s September 16, 1968 correction of a previous misstatement, combined with an offer of withdrawal running for eight days until September 24, 1968, was sufficient to cure past violations and eliminate any need for rescission); Nicholson File Co. v. H.K. Porter Co., D.R.I., 341 F.Supp. 508, 513-14 (1972), aff'd, 1st Cir., 482 F.2d 421 (1973) *927(permitting correction of a material misstatement by a mailing to stockholders within seven days of a tender offer withdrawal date). Both Electronic and Nicholson are federal security cases not arising under 8 Del. C. § 251(c) and they are otherwise distinguishable from this case on their facts.

Since we have concluded that Management’s Supplemental Proxy Statement does not meet the Delaware disclosure standard of “complete candor” under Lynch v. Vickers, supra, it is unnecessary for us to address the plaintiffs’ legal argument as to the proper construction of § 251(c). However, we do find it advisable to express the ; view that, in an appropriate case, an other- j wise candid proxy statement may be so i untimely as to defeat its purpose of meet- . ing the needs of a fully informed electorate.

In this case, the Board’s ultimate disclosure as contained in the Supplemental Proxy Statement related either to information readily accessible to all of the directors if they had asked the right questions, or was information already at their disposal. In short, the information disclosed by the Supplemental Proxy Statement was information which the defendant directors knew or should have known at the time the first Proxy Statement was issued. The defendants simply failed in their original duty of knowing, sharing, and disclosing information that was material and reasonably available for their discovery. They compounded that failure by their continued lack of candor in the Supplemental Proxy Statement. While we need not decide the issue here, we are satisfied that, in an appropriate case, a completely candid but belated disclosure of information long known or readily available to a board could raise serious issues of inequitable conduct. Schnell v. Chris-Craft Industries, Inc., Del.Supr., 285 A.2d 437, 439 (1971).

The burden must fall on defendants who claim ratification based on shareholder vote to establish that the shareholder approval resulted from a fully informed electorate. On the record before us, it is clear that the Board failed to meet that burden. Weinberger v. UOP, Inc., supra at 703; Michelson v. Duncan, supra.

For the foregoing reasons, we conclude that the director defendants breached their fiduciary duty of candor by their failure to make true and correct disclosures of all information they had, or should have had, material to the transaction submitted for stockholder approval.

VI.

To summarize: we hold that the directors of Trans Union breached their fiduciary duty to their stockholders (1) by their failure to inform themselves of all information reasonably available to them and relevant to their decision to recommend the Pritzker merger; and (2) by their failure to disclose all material information such as a reasonable stockholder would consider important in deciding whether to approve the Pritzker offer.

We hold, therefore, that the Trial Court committed reversible error in applying the business judgment rule in favor of the director defendants in this case.

On remand, the Court of Chancery shall conduct an evidentiary hearing to determine the fair value of the shares represented by the plaintiffs’ class, based on the intrinsic value of Trans Union on September 20, 1980. Such valuation shall be made in accordance with Weinberger v. UOP, Inc., supra at 712-715. Thereafter, an award of damages may be entered to the extent that the fair value of Trans Union exceeds $55 per share.

REVERSED and REMANDED for proceedings consistent herewith.

McNEILLY, Justice,

dissenting:

The majority opinion reads like an advocate’s closing address to a hostile jury. And I say that not lightly. Throughout the *929opinion great emphasis is directed only to the negative, with nothing more than lip service granted the positive aspects of this case. In my opinion Chancellor Marvel (retired) should have been affirmed. The Chancellor’s opinion was the product of well reasoned conclusions, based upon a sound deductive process, clearly supported by the evidence and entitled to deference in this appeal. Because of my diametrical opposition to all evidentiary conclusions of the majority, I respectfully dissent.

It would serve no useful purpose, particularly at this late date, for me to dissent at great length. I restrain myself from doing so, but feel compelled to at least point out what I consider to be the most glaring deficiencies in the majority opinion. The majority has spoken and has effectively said that Trans Union’s Directors have been the victims of a “fast shuffle” by Van Gorkom and Pritzker. That is the beginning of the majority’s comedy of errors. The first and most important error made is the majority’s assessment of the directors’ knowledge of the affairs of Trans Union and their combined ability to act in this situation under the protection of the business judgment rule.

Trans Union’s Board of Directors consisted of ten men, five of whom were “inside” directors and five of whom were “outside” directors. The “inside” directors were Van Gorkom, Chelberg, Bonser, William B. Browder, Senior Viee-President-Law, and Thomas P. O’Boyle, Senior Vice-President-Administration. At the time the merger vas proposed the inside five directors had collectively been employed by the Company for 116 years and had 68 years of combined experience as directors. The “outside” di•ectors were A.W. Wallis, William B. Johnson, Joseph B. Lanterman, Graham J. Morgan and Robert W. Reneker. With the exception of Wallis, these were all chief executive officers of Chicago based corporations that were at least as large as Trans Union. The five “outside” directors had 78 mars of combined experience as chief executive officers, and 53 years cumulative service as Trans Union directors.

The inside directors wear their badge of expertise in the corporate affairs of Trans Union on their sleeves. But what about the outsiders? Dr. Wallis is or was an economist and math statistician, a professor of economics at Yale University, dean of the graduate school of business at the University of Chicago, and Chancellor of the University of Rochester. Dr. Wallis had been on the Board of Trans Union since 1962. He also was on the Board of Bauseh & Lomb, Kodak, Metropolitan Life Insurance Company, Standard Oil and others.

William B. Johnson is a University of Pennsylvania law graduate, President of Railway Express until 1966, Chairman and Chief Executive of I.C. Industries Holding Company, and member of Trans Union’s Board since 1968.

Joseph Lanterman, a Certified Public Accountant, is or was President and Chief Executive of American Steel, on the Board of International Harvester, Peoples Energy, Illinois Bell Telephone, Harris Bank and Trust Company, Kemper Insurance Company and a director of Trans Union for four years.

Graham Morgan is achemist, was Chairman and Chief Executive Officer of U.S. Gypsum, and in the 17 and 18 years prior to the Trans Union transaction had been involved in 31 or 32 corporate takeovers.

Robert Reneker attended University of Chicago and Harvard Business Schools. He was President and Chief Executive of Swift and Company, director of Trans Union since 1971, and member of the Boards of seven other corporations including U.S. Gypsum and the Chicago Tribune.

Directors of this caliber are not ordinarily taken in by a “fast shuffle”. I submit they were not taken into this multi-million dollar corporate transaction without being fully informed and aware of the state of the art as it pertained to the entire corporate panoroma of Trans Union. True, even *931directors such as these, with their business acumen, interest and expertise, can go astray. I do not believe that to be the case here. Tnese men knew Trans Union like the back of their hands and were more than well qualified to make on the spot informed business judgments concerning the affairs of Trans Union including a 100% sale of the corporation. Lest we forget, the corporate world of then and now operates on what is so aptly referred to as “the fast track”. These men were at the time an integral part of that world, all professional business men, not intellectual figureheads.

The majority of this Court holds that the Board’s decision, reached on September 20, 1980, to approve the merger was not the product of an informed business judgment, that the Board’s subsequent efforts to amend the Merger Agreement and take other curative action were legally and factually ineffectual, and that the Board did not deal with complete candor with the stockholders by failing to disclose all material facts, which they knew or should have known, before securing the stockholders' approval of the merger. I disagree.

At the time of the September 20, 1980 meeting the Board was acutely aware of Trans Union and its prospects. The problems created by accumulated investment tax credits and accelerated depreciation were discussed repeatedly at Board meetings, and all of the directors understood the problem thoroughly. Moreover, at the July, 1980 Board meeting the directors had reviewed Trans Union’s newly prepared five-year forecast, and at the August, 1980 meeting Van Gorkom presented the results of a comprehensive study of Trans Union' made by The Boston Consulting Group. This study was prepared over an 18 month period and consisted of a detailed analysis of all Trans Union subsidiaries, including competitiveness, profitability, cash throw-off, cash consumption, technical competence and future prospects for contribution to Trans Union’s combined net income.

At the September 20 meeting Van Gor-kom reviewed all aspects of the proposed transaction and repeated the explanation of the Pritzker offer he had earlier given to senior management. Having heard Van Gorkom’s explanation of the Pritzker’s offer, and Brennan’s explanation of the merger documents the directors discussed the matter. Out of this discussion arose an insistence on the part of the directors that two modifications to the offer be made. First, they required that any potential competing bidder be given access to the same information concerning Trans Union that had been provided to the Pritzkers. Second, the merger documents were to be modified to reflect the fact that the directors could accept a better offer and would not be required to recommend the Pritzker offer if a better offer was made. The following language was inserted into the agreement:

“Within 30 days after the execution of this Agreement, TU shall call a meeting of its stockholders (the ‘Stockholder’s Meeting’) for the purpose of approving and adopting the Merger Agreement. The Board of Directors shall recommend to the stockholders of TU that they approve and adopt the Merger Agreement (the ‘Stockholders’ Approval’) and shall use its best efforts to obtain the requisite vote therefor; provided, however, that GL and NTC acknowledge that the Board of Directors of TU may have a competing fiduciary obligation to the Stockholders under certain circumstances.” (Emphasis added)

While the language is not artfully drawn, the evidence is clear that the intention underlying that language was to make specific the right that the directors assumed they had, that is, to accept any offer that they thought was better, and not to recommend the Pritzker offer in the face of a better one. At the conclusion of the meeting, the proposed merger was approved.

At a subsequent meeting on October 8, 1981 the directors, with the consent of the Pritzkers, amended the Merger Agreement so as to establish the right of Trans Union to solicit as well as to receive higher bids. *933although the Pritzkers insisted that their merger proposal be presented to the stockholders at the same time that the proposal of any third party was presented. A second amendment, which became effective on October 10, 1981, further provided that Trans Union might unilaterally terminate the proposed merger with the Pritzker company in the event that prior to February 10, 1981 there existed a definitive agreement with a third party for a merger, consolidation, sale of assets, or purchase or exchange of Trans Union stock which was more favorable for the stockholders of Trans Union than the Pritzker offer and which was conditioned upon receipt of stockholder approval and the absence of an injunction against its consummation.

Following the October 8 board meeting of Trans Union, the investment banking firm of Salomon Brothers was retained by the corporation to search for better offers than that of the Pritzkers, Salomon Brothers being charged with the responsibility of doing “whatever possible to see if there is a superior bid in the marketplace over a bid that is on the table for Trans Union”. In undertaking such project, it was agreed that Salomon Brothers would be paid the amount of $500,000 to cover its expenses as veil as a fee equal to %ths of 1% of the aggregate fair market value of the consideration to be received by the company in ;he case of a merger or the like, which neant that in the event Salomon Brothers ihould find a buyer willing to pay a price of 156.00 a share instead of $55.00, such firm would receive a fee of roughly $2,650,000 plus disbursements.

As the first step in proceeding to carry out its commitment, Salomon Brothers had a brochure prepared, which set forth Trans Union’s financial history, described the company's business in detail and set forth Trans Union’s operating and financial projections. Salomon Brothers also prepared a list of over 150 companies which it believed might be suitable merger partners, and while four of such companies, namely, General Electric, Borg-Wamer, Bendix, and Genstar, Ltd. showed some interest in such a merger, none made a firm proposal to Trans Union and only General Electric showed a sustained interest.1 As matters transpired, no firm offer which bettered the Pritzker offer of $55 per share was ever made.

On January 21, 1981 a proxy statement was sent to the shareholders of Trans Union advising them of a February 10, 1981 meeting in which the merger would be voted. On January 26, 1981 the directors held their regular meeting. At this meeting the Board discussed the instant merger as well as all events, including this litigation, surrounding it. At the conclusion of the meeting the Board unanimously voted to recommend to the stockholders that they approve the merger. Additionally, the directors reviewed and approved a Supplemental Proxy Statement which, among other things, advised the stockholders of what had occurred at the instant meeting and of the fact that General Electric had decided not to make an offer. On February 10, 1981 *935the stockholders of Trans Union met pursuant to notice and voted overwhelmingly in favor of the Pritzker merger, 89% of the votes cast being in favor of it.

I have no quarrel with the majority’s analysis of the business judgment rule. It is the application of that rule to these facts which is wrong. An overview of the entire record, rather than the limited view of bits and pieces which the majority has exploded like popcorn, convinces me that the directors made an informed business judgment which was buttressed by their test of the market.

At the time of the September 20 meeting the 10 members of Trans Union’s Board of Directors were highly qualified and well informed about the affairs and prospects of Trans Union. These directors were acutely aware of the historical problems facing Trans Union which were caused by the tax laws. They had discussed these problems ad nauseam. In fact, within two months of the September 20 meeting the board had reviewed and discussed an outside study of the company done by The Boston Consulting Group and an internal five year forecast prepared by management. At the September 20 meeting Van Gorkom presented the Pritzker offer, and the board then heard from James Brennan, the company’s counsel in this matter, who discussed the legal documents. Following this, the Board directed that certain changes be made in the merger documents. These changes made it clear that the Board was free to accept a better offer than Pritzker’s if one was made. The above facts reveal that the Board did not act in a grossly negligent manner in informing themselves of the relevant and available facts before passing on the merger. To the contrary, this record reveals that the directors acted with the utmost care in informing themselves of the relevant and available facts before passing on the merger.

The majority finds that Trans Union stockholders were not fully informed and that the directors breached their fiduciary duty of complete candor to the stoekhold-ers required by Lynch v. Vickers Energy Corp., Del.Supr. 383 A.2d 278 (1978) [Lynch I], in that the proxy materials were deficient in five areas.

Here again is exploitation of the negative by the majority without giving credit to the positive. To respond to the conclusions of the majority would merely be unnecessary prolonged argument. But briefly what did the proxy materials disclose? The proxy material informed the shareholders that projections were furnished to potential purchasers and such projections indicated that Trans Union’s net income might increase to approximately $153 million in 1985. That projection, what is almost three times the net income of $58,248,000 reported by Trans Union as its net income for December 31, 1979 confirmed the statement in the proxy materials that the “Board of Directors believes that, assuming reasonably favorable economic and financial conditions, the Company’s prospects for future earnings growth are excellent.” This material was certainly sufficient to place the Company’s stockholders on notice that there was a reasonable basis to believe that the prospects for future earnings growth were excellent, and that the value of their stock was more than the stock market value of their shares reflected.

Overall, my review of the record leads me to conclude that the proxy materials adequately complied with Delaware law in informing the shareholders about the proposed transaction and the events surrounding it.

The majority suggests that the Supplemental Proxy Statement did not comply with the notice requirement of 8 Del.C. § 251(c) that notice of the time, place and purpose of a meeting to consider a merger must be sent to each shareholder of record at least 20 days prior to the date of the meeting. In the instant case an original proxy statement was mailed on January 18, 1981 giving notice of the time, place and purpose of the meeting. A Supplemental Proxy Statement was mailed January 26, 1981 in an effort to advise Trans Union’s *937rareholders as to what had occurred at íe January 26, 1981 meeting, and that eneral Electric had decided not to make i offer. The shareholder meeting was ild February 10, 1981 fifteen days after le Supplemental Proxy Statement had sen sent.

All § 251(c) requires is that notice of the me, place and purpose of the meeting be ven at least 20 days prior to the meeting, ns was accomplished by the proxy state-ent mailed January 19, 1981. Nothing in 251(c) prevents the supplementation of ■oxy materials within 20 days of the meet-g. Indeed when additional information, hich a reasonable shareholder would con-ler important in deciding how to vote, mes to light that information must be sclosed to stockholders in sufficient time r the stockholders to consider it. But (thing in § 251(c) requires this additional formation to be disclosed at least 20 days ior to the meeting. To reach a contrary suit would ignore the current practice id would discourage the supplementation proxy materials in order to disclose the currence of intervening events. In my inion, fifteen days in the instant case is a sufficient amount of time for the Dckholders to receive and consider the formation in the supplemental proxy itement.

CHRISTIE, Justice,

dissenting:

I respectfully dissent.

Considering the standard and scope of r review under Levitt v. Bouvier, Del.Supr., 287 A.2d 671, 673 (1972), I believe at the record taken as a whole supports a nclusion that the actions of the defend-ts are protected by the business judg-mt rule. Aronson v. Lewis, Del.Supr., 8 A.2d 805, 812 (1984); Pogostin v. Rice, Del.Supr., 480 A.2d 619, 627 (1984). I also i satisfied that the record supports a nclusion that the defendants acted with e complete candor required by Lynch v. Vickers Energy Corp., Del.Supr., 383 A.2d 8 (1978). Under the circumstances I would affirm the judgment of the Court of Chancery.

ON MOTIONS FOR REARGUMENT

Following this Court’s decision, Thomas P. O’Boyle, one of the director defendants, sought, and was granted, leave for change of counsel. Thereafter, the individual director defendants, other than O’Boyle, filed a motion for reargument and director O’Boyle, through newly-appearing counsel, then filed a separate motion for reargument. Plaintiffs have responded to the several motions and this matter has now been duly considered.

The Court, through its majority, finds no merit to either motion and concludes that both motions should be denied. We are not persuaded that any errors of law or fact have been made that merit reargument.

However, defendant O’Boyle’s motion requires comment. Although O’Boyle continues to adopt his fellow directors’ arguments, O’Boyle now asserts in the alternative that he has standing to take a position different from that of his fellow directors and that legal grounds exist for finding him not liable for the acts or omissions of his fellow directors. Specifically, O’Boyle makes a two-part argument: (1) that his undisputed absence due to illness from both the September 20 and the October 8 meetings of the directors of Trans Union entitles him to be relieved from personal liability for the failure of the other directors to exercise due care at those meetings, see Propp v. Sadacca, Del.Ch., 175 A.2d 33, 39 (1961), modified on other grounds, Bennett v. Propp, Del.Supr., 187 A.2d 405 (1962); and (2) that his attendance and participation in the January 26, 1981 Board meeting does not alter this result given this Court’s precise findings of error committed at that meeting.

We reject defendant O’Boyle’s new argument as to standing because not timely asserted. Our reasons are several. One, in connection with the supplemental briefing of this case in March, 1984, a special opportunity was afforded the individual de*899fendants, including O’Boyle, to present any factual or legal reasons why each or any of them should be individually treated. Thereafter, at argument before the Court on June 11, 1984, the following colloquy took place between this Court and counsel for the individual defendants at the outset of counsel’s argument:

COUNSEL: I’ll make the argument on behalf of the nine individual defendants against whom the plaintiffs seek more than $100,000,000 in damages. That is the ultimate issue in this case, whether or not nine honest, experienced businessmen should be subject to damages in a case where—

JUSTICE MOORE: Is there a distinction between Chelberg and Van Gorkom vis-a-vis the other defendants?

COUNSEL: No, sir.

JUSTICE MOORE: None whatsoever?

COUNSEL: I think not.

Two, in this Court’s Opinion dated January 29, 1985, the Court relied on the individual defendants as having presented a unified defense. We stated:

The parties’ response, including reargument, has led the majority of the Court to conclude: (1) that since all of the defendant directors, outside as well as inside, take a unified position, we are required to treat all of the directors as one as to whether they are entitled to the protection of the business judgment rule

Three, previously O’Boyle took the position that the Board’s action taken January 26, 1981 — in which he fully participated— was determinative of virtually all issues. Now O’Boyle seeks to attribute no significance to his participation in the January 26 meeting. Nor does O’Boyle seek to explain lis having given before the directors’ meet-ng of October 8, 1980 his “consent to the ;ransaction of such business as may come >efore the meeting." * It is the view of he majority of the Court that O’Boyle’s change of position following this Court’s decision on the merits comes too late to be considered. He has clearly waived ‘ hat right.

The Motions for Reargument of all defendants are denied.

McNEILLY and CHRISTIE,

Justices, dissenting:

We do not disagree with the ruling as to the defendant O’Boyle, but we would have granted reargument on the other issues raised.

HOLLAND, Justice:

Doran Malone, Joseph P. Danielle, and Adrienne M. Danielle, the plaintiffs-appellants, filed this individual and class action in the Court of Chancery. The complaint alleged that the directors of Mercury Finance Company (“Mercury”), a Delaware corporation, breached their fiduciary duty of disclosure. The individual defendant-appellee directors are John N. Brincat, Dennis H. Chookaszian, William C. Croft, Clifford R. Johnson, Andrew McNally, IV, Bruce I. McPhee, Fred G. Steingraber, and Phillip J. Wicklander. The complaint also alleged that the defendant-appellee, KPMG Peat Marwick LLP (“KPMG”) aided and abetted the Mercury directors’ breaches of fiduciary duty. The Court of Chancery dismissed the complaint with prejudice pursuant to Chancery Rule 12(b)(6) for failure to state a claim upon which relief may be granted.

The complaint alleged that the director defendants intentionally overstated the financial condition of Mercury on repeated occasions throughout a four-year period in disclosures to Mercury’s shareholders. Plaintiffs contend that the complaint states a claim upon which relief can be granted for a breach of the fiduciary duty of disclosure. Plaintiffs also contend that, because the director defendants breached their fiduciary duty of disclo *8 sure to the Mercury shareholders, the Court of Chancery erroneously dismissed the aiding and abetting claim against KPMG.

This Court has concluded that the Court of Chancery properly granted the defendants’ motions to dismiss the complaint. That dismissal, however, should have been without prejudice. Plaintiffs are entitled to file an amended complaint. Therefore, the judgment of the Court of Chancery is affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion.

Facts

Mercury is a publicly-traded company engaged primarily in purchasing installment sales contracts from automobile dealers and providing short-term installment loans directly to consumers. This action was filed on behalf of the named plaintiffs and all persons (excluding defendants) who owned common stock of Mercury from 1993 through the present and their successors in interest, heirs and assigns (the “putative class”). The complaint alleged that the directors “knowingly and intentionally breached their fiduciary duty of disclosure because the SEC filings made by the directors and every communication from the company to the shareholders since 1994 was materially false” and that “as a direct result of the false disclosures ... the Company has lost all or virtually all of its value (about $2 billion).” The complaint also alleged that KPMG knowingly participated in the directors’ breaches of their fiduciary duty of disclosure.

According to plaintiffs, since 1994, the director defendants caused Mercury to disseminate information containing overstatements of Mercury’s earnings, financial performance and shareholders’ equity. Mercury’s earnings for 1996 were actually only $56.7 million, or $.33 a share, rather than the $120.7 million, or $.70 a share, as reported by the director defendants. Mercury’s earnings in 1995 were actually $76.9 million, or $.44 a share, rather than $98.9 million, or $.57 a share, as reported by the director defendants. Mercury’s earnings for 1994 were $83 million, or $.47 a share, rather than $86.5 million, or $.49 a share, as reported by the director defendants. Mercury’s earnings for 1993 were $64.2 million, rather than $64.9 million, as reported by the director defendants. Shareholders’ equity on December 31, 1996 was disclosed by the director defendants as $353 million, but was only $263 million or less. The complaint alleged that all of the foregoing inaccurate information was included or referenced in virtually every filing Mercury made with the SEC and every communication Mercury’s directors made to the shareholders during this period of time.

Having alleged these violations of fiduciary duty, which (if true) are egregious, plaintiffs alleged that as “a direct result of [these] false disclosures ... the company has lost all or virtually all its value (about $2 billion),” and seeks class action status to pursue damages against the directors and KPMG for the individual plaintiffs and common stockholders. The individual director defendants filed a motion to dismiss, contending that they owed no fiduciary duty of disclosure under the circumstances alleged in the complaint. KPMG also filed a motion to dismiss the aiding and abetting claim asserted against it.

After briefing and oral argument, the Court of Chancery granted both of the motions to dismiss with prejudice. The Court of Chancery held that directors have no fiduciary duty of disclosure under Delaware law in the absence of a request for shareholder action. In so holding, the Court stated:

The federal securities laws ensure the timely release of accurate information into the marketplace. The federal power to regulate should not be duplicated or impliedly usurped by Delaware. When a shareholder is damaged merely as a result of the release of inaccurate information into the marketplace, unconnected with any Delaware corporate governance issue, that shareholder must seek a remedy under federal law. 1

*9 We disagree, and although we hold that the Complaint as drafted should have been dismissed, our rationale is different.

Standard of Review

A motion to dismiss a complaint presents the trial court with a question of law and is subject to de novo review by this Court on appeal. 2 This Court and the trial court must accept all well-pleaded allegations of fact as true. 3 A complaint should be dismissed for failure to state a claim only when it appears “with a reasonable certainty that a plaintiff would not be entitled to the relief sought under any set of facts which could be proven to support the action.” 4

Issue On Appeal

This Court has held that a board of directors is under a fiduciary duty to disclose material information when seeking shareholder action 5 :

It is well-established that the duty of disclosure “represents nothing more than the well-recognized proposition that directors of Delaware corporations are under a fiduciary duty to disclose fully and fairly all material information within the board’s control when it seeks shareholder action. 6

The majority of opinions from the Court of Chancery have held that there may be a cause of action for disclosure violations only where directors seek shareholder action. 7 The present appeal requires this Court to decide whether a director’s fiduciary duty arising out of misdisclosure is implicated in the absence of a request for shareholder action. We hold that directors who knowingly disseminate false information that results in corporate injury or damage to an individual stockholder violate their fiduciary duty, and may be held accountable in a manner appropriate to the circumstances.

Fiduciary Duty Delaware Corporate Directors

An underlying premise for the imposition of fiduciary duties is a separation of legal control from beneficial ownership. 8 Equitable principles act in those circumstances to protect the beneficiaries who are not in a position to protect themselves. 9 One of the fundamental tenets of Delaware corporate law provides for a separation of control and ownership. The board of directors has the legal responsibility to manage the business of a corporation for the benefit of its shareholder owners. 10 Accordingly, fiduciary duties are imposed on the directors of Delaware corporations to regulate their conduct when they discharge that function. 11

*10 The directors of Delaware corporations stand in a fiduciary relationship not only to the stockholders but also to the corporations upon whose boards they serve. 12 The director’s fiduciary duty to both the corporation and its shareholders has been characterized by this Court as a triad: due care, good faith, and loyalty. 13 That triparte fiduciary duty does not operate intermittently but is the constant compass by which all director actions for the corporation and interactions with its shareholders must be guided.

Although the fiduciary duty of a Delaware director is unremitting, the exact course of conduct that must be charted to properly discharge that responsibility will change in the specific context of the action the director is taking with regard to either the corporation or its shareholders. 14 This Court has endeavored to provide the directors with clear signal beacons and brightly lined-channel markers as they navigate with due care, good faith, and loyalty on behalf of a Delaware corporation and its shareholders. 15 This Court has also endeavored to mark the safe harbors clearly. 16

Director Communications Shareholder Reliance Justified

The shareholder constituents of a Delaware corporation are entitled to rely upon their elected directors to discharge their fiduciary duties at all times. Whenever directors communicate publicly or directly with shareholders about the corporation’s affairs, with or without a request for shareholder action, directors have a fiduciary duty to shareholders to exercise due care, good faith and loyalty. It follows a fortiori that when directors communicate publicly or directly with shareholders about corporate matters the sine qua non of directors’ fiduciary duty to shareholders is honesty. 17

According to the appellants, the focus of the fiduciary duty of disclosure is to protect shareholders as the “beneficiaries” of all material information disseminated by the directors. The duty of disclosure is, and always has been, a specific application of the general fiduciary duty owed by directors. The duty of disclosure obligates directors to provide the stockholders with accurate and complete information material to a transaction or other corporate event that is being presented to them for action.

The issue in this case is not whether Mercury’s directors breached their duty of disclosure. It is whether they breached their more general fiduciary duty of loyalty and good faith by knowingly disseminating to the stockholders false information about the financial condition of the company. The directors’ fiduciary duties include the duty to deal with their stockholders honestly.

Shareholders are entitled to rely upon the truthfulness of all information dissemi *11 nated to them by the directors they elect to manage the corporate enterprise. 18 Delaware directors disseminate information in at least three contexts: public statements made to the market, including shareholders; statements informing shareholders about the affairs of the corporation without a request for shareholder action; and, statements to shareholders in conjunction with a request for shareholder action. Inaccurate information in these contexts may be the result of a violation of the fiduciary duties of care, loyalty or good faith. We will examine the remedies that are available to shareholders for misrepresentations in each of these three contexts by the directors of a Delaware corporation.

State Fiduciary Disclosure Duty Shareholder Remedy In Action Requested Context

In the absence of a request for stockholder action, the Delaware General Corporation Law doés not require directors to provide shareholders with information concerning the finances or affairs of the corporation. 19 Even when shareholder action is sought, the provisions in the General Corporation Law requiring notice to the shareholders of the proposed action do not require the directors to convey substantive information beyond a statutory minimum. 20 Consequently, in the context of a request for shareholder action, the protection afforded by Delaware law is a judicially recognized equitable cause of action by shareholders against directors.

The fiduciary duty of directors in connection with disclosure violations in Delaware jurisprudence was restated in Lynch v. Vickers Energy Corp., Del.Supr., 383 A.2d 278 (1978). In Lynch, this Court held that, in making a tender offer to acquire the stock of the minority stockholders, a majority stockholder “owed a fiduciary duty ... which required ‘complete candor’ in disclosing fully ‘all the facts and circumstances surrounding the’ tender offer.” 21 In Stroud v. Grace, we noted that the language of our jurisprudence should be clarified to the extent that “candor” requires no more than the duty to disclose all material facts when seeking stockholder action. 22 An article by Professor Lawrence Hamermesh 23 includes an excellent historical summary of the content, context, and parameters of the law of disclosure, as it has been developed in a series of decisions during the last two decades. 24

The duty of directors to observe proper disclosure requirements derives from the combination of the fiduciary duties of care, loyalty and good faith. 25 The plaintiffs *12 contend that, because directors fiduciary responsibilities are not “intermittent duties,” there is no reason why the duty of disclosure should not be implicated in every public communication by a corporate board of directors. The directors of a Delaware corporation are required to disclose fully and fairly all material information within the board’s control when it seeks shareholder action. 26 When the directors disseminate information to stockholders when no stockholder action is sought, the fiduciary duties of care, loyalty and good faith apply. Dissemination of false information could violate one or more of those duties.

An action for a breach of fiduciary duty arising out of disclosure violations in connection with a request for stockholder action does not include the elements of reliance, causation and actual quantifiable monetary damages. 27 Instead, such actions require the challenged disclosure to have a connection to the request for shareholder action. The essential inquiry in such an action is whether the alleged omission or misrepresentation is material 28 Materiality is determined with respect to the shareholder action being sought. 29

The directors’ duty to disclose all available material information in connection with a request for shareholder action must be balanced against its concomitant duty to protect the corporate enterprise, in particular, by keeping certain financial information confidential. 30 Directors are required to provide shareholders with all information that is material to the action being requested and to provide a balanced, truthful account of all matters disclosed in the communications with shareholders. 31 Accordingly, directors have definitive guidance in discharging their fiduciary duty by an analysis of the factual circumstances relating to the specific shareholder action being requested and an inquiry into the potential for deception or misinformation. 32

Fraud On Market Regulated by Federal Law

When corporate directors impart information they must comport with the obligations imposed by both the Delaware law and the federal statutes and regulations of the United States Securities and Exchange Commission (“SEC”). 33 Historically, federal law has regulated disclosures by corporate directors into the general interstate market. 34 This Court has noted that “in observing its congressional mandate the SEC has *13 adopted a ‘basic philosophy of disclosure.’ ” 35 Accordingly, this Court has held that there is “no legitimate basis to create a new cause of action which would replicate, by state deci-sional law, the provisions of ... the 1934 Act.” 36 In deference to the panoply of federal protections that are available to investors in connection with the purchase or sale of securities of Delaware corporations, this Court has decided not to recognize a state common law cause of action against the directors of Delaware corporations for “fraud on the market.” 37 Here, it is to be noted, the claim appears to be made by those who did not sell and, therefore, would not implicate federal securities laws which relate to the purchase or sale of securities.

The historic roles played by state and federal law in regulating corporate disclosures have been not only compatible but complementary. 38 That symbiotic relationship has been perpetuated by the recently enacted federal Securities Litigation Uniform Standards Act of 1998. 39 Although that statute by its terms does not apply to this case, the new statute will require securities class actions involving the purchase or sale of nationally traded securities, based upon false or misleading statements, to be brought exclusively in federal court under federal law. The 1998 Act, however, contains two important exceptions: 40 the first provides that an “exclusively derivative action brought by one or more shareholders on behalf of a corporation” is not preempted; the second preserves the availability of state court class actions, where state law already provides that corporate directors have fiduciary disclosure obligations to shareholders. 41 These exceptions have become known as the “Delaware carve-outs.” 42

*14 State Common Law Shareholder Remedy In Nonaction Context

Delaware law also protects shareholders who receive false communications from directors even in the absence of a request for shareholder action. When the directors are not seeking shareholder action, but are deliberately misinforming shareholders about the business of the corporation, either directly or by a public statement, there is a violation of fiduciary duty. That violation may result in a derivative claim on behalf of the corporation or a cause of action for damages. 43 There may also be a basis for equitable relief to remedy the violation.

Complaint Properly Dismissed No Shareholder Action Requested

Here the complaint alleges (if true) an egregious violation of fiduciary duty by the directors in knowingly disseminating materially false information. Then it alleges that the corporation lost about $2 billion in value as a result. Then it merely claims that the action is brought on behalf of the named plaintiffs and the putative class. It is a non sequitur rather than a syllogism.

The allegation in paragraph 3 that the false disclosures resulted in the corporation losing virtually all its equity seems obliquely to claim an injury to the corporation. The plaintiffs, however, never expressly assert a derivative claim on behalf of the corporation or allege compliance with Court of Chancery Rule 23.1, which requires pre-suit demand or cognizable and particularized allegations that demand is excused. 44 If the plaintiffs intend to assert a derivative claim, 45 they should be permitted to replead to assert such a claim and any damage or equitable remedy sought on behalf of the corporation. 46 Likewise, the plaintiffs should have the opportunity to re-plead to assert any individual cause of action and articulate a remedy that is appropriate on behalf of the named plaintiffs individually, or a properly recognizable class consistent with Court of Chancery Rule 23, and our decision in Gaffin 47

The Court of Chancery properly dismissed the complaint before it against the individual director defendants, in the absence of well-pleaded allegations stating a derivative, class or individual cause of action and properly assertable remedy. Without a well-pleaded allegation in the complaint for a breach of *15 fiduciary duty, there can be no claim for aiding and abetting such a breach. 48 Accordingly, the plaintiffs’ aiding and abetting claim against KPMG was also properly dismissed.

Nevertheless, we disagree with the Court of Chancery’s holding that such a claim cannot be articulated on these facts. The plaintiffs should have been permitted to amend their complaint, if possible, to state a properly cognizable cause of action against the individual defendants and KPMG. Consequently, the Court of Chancery should have dismissed the complaint without prejudice.

Conclusion

The judgment of the Court of Chancery to dismiss the complaint is affirmed. The judgment to dismiss the complaint with prejudice is reversed. This matter is remanded for further proceedings in accordance with this opinion.

VALIHURA, Justice:

*272This case calls into question the integrity of a stockholder vote purported to qualify for Corwin "cleansing." It offers a cautionary reminder to directors and the attorneys who help them craft their disclosures: "partial and elliptical disclosures"1 cannot facilitate the protection of the business judgment rule under the Corwin doctrine.2

* * *

In March 2016, soon after The Fresh Market (the "Company") announced plans to go private, the Company publicly filed certain required disclosures under the federal securities laws.3 Given that the transaction involved a tender offer, the required disclosures included a Solicitation/Recommendation Statement on Schedule 14D-9 (together with amendments, the "14D-9"), which articulated the Board's reasons for recommending that stockholders accept the tender offer-from an entity controlled by private equity firm Apollo Global Management LLC ("Apollo") for $28.5 in cash *273per share.4 The 14D-9 also included a narrative of the events leading up to the transaction,5 which, in addition to the tender offer, included an equity rollover whereby The Fresh Market's founder, Ray Berry, and his son, Brett-who collectively owned 9.8% of the Company's shares-were to roll over their equity and end up with an approximately 20% stake in the Company upon the closing.6 As also required under the federal securities laws,7 Apollo publicly filed a Schedule TO, which included its own narrative of the background to the transaction. The 14D-9 incorporated Apollo's Schedule TO by reference.8

After reading these disclosures, as the tender offer was still pending, stockholder Elizabeth Morrison ("Plaintiff") suspected that the Company's directors had breached their fiduciary duties in the course of the sale process, and she sought Company books and records pursuant to Section 220 of the Delaware General Corporation Law. The Company denied her request, and the tender offer closed as scheduled on April 21 with 68.2% of outstanding shares validly tendered.9

Litigation over the Section 220 demand ensued, and Plaintiff obtained several key documents, such as board minutes and a crucial e-mail from Ray Berry's counsel to the Company's lawyers. Plaintiff then filed this action in the Court of Chancery. It includes a breach of fiduciary duty claim against all ten of the Company's directors, including Ray Berry, and a claim for aiding and abetting the breach against Ray Berry's son, Brett Berry, who did not serve on the Board.10

The thrust of Plaintiff's breach of fiduciary duty claim is that Ray and Brett Berry teamed up with Apollo to buy The Fresh Market at a discount by deceiving the Board and inducing the directors to put the Company up for sale through a *274process that "allowed the Berrys and Apollo to maintain an improper bidding advantage" and "predictably emerge[ ] as the sole bidder for Fresh Market" at a price below fair value.11 Plaintiff also alleges that Ray Berry's commitment to Apollo was not fully disclosed to the Board or to other stockholders, and that the auction that ensued led to a pre-ordained result: Apollo was the winner, with the Berrys participating in an equity rollover. In other words, Plaintiff alleges that the Board and the stockholders were misled into believing that Ray Berry would open-mindedly consider partnering with any private equity firm willing to outbid Apollo, but, instead, "[t]he reality of the situation was that Ray Berry (a) had already formed the belief that Apollo was uniquely well situated to buy Fresh Market; (b) had already entered into an undisclosed agreement with Apollo; and (c) was incentivized not to create price competition for Apollo."12

In moving to dismiss, Defendants argued that Corwin applied. Under that doctrine, the "business judgment rule is invoked as the appropriate standard of review for a post-closing damages action when a merger that is not subject to the entire fairness standard of review has been approved by a fully informed, uncoerced majority of the disinterested stockholders."13 The Corwin doctrine is premised on the view that, "[w]hen the real parties in interest-the disinterested equity owners-can easily protect themselves at the ballot box by simply voting no, the utility of a litigation-intrusive standard of review promises more costs to stockholders in the form of litigation rents and inhibitions on risk-taking than it promises in terms of benefits to them."14 The same is true of stockholders deciding whether to tender their shares, and the Corwin doctrine has been extended to these circumstances.15 However, those same stockholders cannot possibly protect themselves when left to vote on an existential question in the life of a corporation based on materially incomplete or misleading information. Careful application of Corwin is important due to its potentially case-dispositive impact.16

*275In granting Defendants' motion to dismiss this case, the Court of Chancery stated that this matter "presents an exemplary case of the utility of th[e] ratification doctrine, as set forth in Corwin and Volcano ."17 Respectfully, we disagree.

Here, Defendants have not shown, as required under Corwin , that the vote was fully informed-especially given that Plaintiff's complaint alleges facts showing that the Company failed to disclose "troubling facts regarding director behavior ... that would have been material to a voting stockholder."18 A reasonable stockholder would have found these facts material because they would have shed light on the depth of the Berrys' commitment to Apollo, the extent of Ray Berry's and Apollo's pressure on the Board, and the degree that this influence may have impacted the structure of sale process. Thus, "the business judgment rule is not invoked."19

We REVERSE the Court of Chancery's decision for these reasons and those that follow, and we REMAND this case for further proceedings consistent with this opinion.

I.

Plaintiff's argument on appeal is straightforward: she contends that the Court of Chancery erred in applying Corwin because an array of alleged deficiencies rendered the 14D-9's disclosures materially incomplete and misleading.20 A *276brief overview of the key dates recounted in the 14D-9 is helpful to establish the context of the alleged flaws in the disclosures.

On October 1, 2015, The Fresh Market received an "unsolicited preliminary non-binding indication of interest" from Apollo to purchase the Company for $30 per share in cash.21 The letter stated that Apollo had discussed an equity rollover with the Berrys and had an "exclusive partnership" with them.22 On October 15, the Company's Board convened a meeting to review the proposal and plan its course of action. The directors authorized the formation of a Strategic Transaction Committee (the "Committee"), and they specifically asked Ray Berry if he had an agreement with Apollo. Ray Berry denied that he did, and he recused himself from the meeting "so that the members of the Board could engage in a discussion without him present."23 Following that meeting, Ray Berry recused himself from Board meetings through the date the Company entered into the merger agreement.24

In a letter dated as of that date, October 15, 2015, Apollo stated that its proposal would expire on October 20, and, on October 21, the firm formally withdrew it. But, on November 25, Apollo reaffirmed the same proposal and again stated that it "was making the proposal together with Ray Berry and Brett Berry."25 The Company's lawyers wrote Ray Berry's counsel seeking clarity on Ray Berry's status with Apollo. Ray Berry's counsel responded by e-mail on November 28 (the "November 28 E-mail").26 That e-mail referred to an agreement that Ray Berry had with Apollo in October-an agreement that can rationally be seen as contrary to Ray Berry's representation to the Board on October 15 that he had no such agreement. The sale process officially began on December 3, the day after the conclusion of a two-day Board meeting.27

Plaintiff identifies a number of problems that allegedly render the 14D-9 materially misleading, including the following four:

First, the November 28 E-mail from Ray Berry's counsel reveals that Berry had an agreement with Apollo as of October, and that revelation must have suggested to the Board that Berry had not been forthcoming as he previously had denied the existence of an agreement. But, because the 14D-9 never disclosed this *277information, the 14D-9 omitted material information or was misleading.

Second, Ray Berry's statements expressing a clear preference for a rollover transaction involving Apollo-and reluctance to engage in such a transaction if another buyer were to prevail-were material, and these statements were never disclosed to stockholders. In fact, the 14D-9 disclosures implied otherwise-i.e. , that Ray Berry was willing to partner with a party other than Apollo.

Third, the 14D-9 never disclosed a "threat" contained in the November 28 E-mail-that Ray Berry would sell his shares if the Board did not undertake a sale process.

Fourth, Plaintiff also alleges that the Board misrepresented the reasons that the Board formed the Committee tasked with overseeing a sale process because the 14D-9 failed to state that the directors were motivated by existing activist pressure.

Though Plaintiff challenges the adequacy of other disclosures, such as those concerning the management projections reviewed by the Board, we need not consider them here given that the aforementioned deficiencies in the disclosures prove sufficient to deny Corwin "cleansing."

A. Plaintiff alleges serious misrepresentations-both to the Board, and to stockholders-about Ray Berry's "agreement" with Apollo.

The November 28 E-mail indicates that Ray Berry had agreed as early as October that, if Apollo reached a deal with the Board to purchase the Company, he would roll over his equity interest. But the 14D-9 never mentioned the October agreement and even suggested that, to the contrary, none ever existed.28 And the Company's Board minutes show that Ray Berry also never disclosed this "agreement" to his fellow directors, even when he was asked directly about his arrangement with Apollo at the October 15, 2015 Board meeting. Plaintiff alleges that the omission of the November 28 E-mail's revelation of an October agreement (the "Agreement Omission") is material "not only in substance but also because it shows that Ray Berry was lying to the Board, the Board was on notice that Ray Berry was lying to them and the Board did nothing to address it."29

The following chart compares the 14D-9's summary of the November 28 E-mail with the actual e-mail. Italicized words indicate portions omitted from the 14D-9.

*27814D-930 November 28 E-Mail31 Berry's counsel ... stated that since Since Apollo withdrew its earlier offer in [Apollo's] earlier offer had expired on October, Mr. Berry has had one October 20, 2015, Mr. Berry had engaged conversation with Apollo. During that in one conversation with [Apollo], and conversation, he agreed, as he did in during that conversation he had agreed that October, that, in the event Apollo agreed he would roll his equity interest over into on a transaction with TFM, he would roll the surviving entity if [Apollo] were to be his equity interest over into the surviving successful in agreeing to a transaction with entity. Apollo determined the price that TFM.32 was offered.

[Editor's Note: The preceding image contains the references for footnotes30 ^,31 ^,32 ].

Plaintiff alleges that the exclusion of "as he did in October" from the 14D-9 is a material omission not just on its own, but because it undermines the veracity of other statements that Berry had made to both the Company's general counsel and its Board. For example, the 14D-9 states that, on October 5, 2015, Ray Berry told the Company's general counsel that he had told Apollo that he "would consider an equity rollover depending upon the terms ...."33 But the 14D-9 omits reference to any agreement to engage in an equity rollover as of that time. In fact, the 14D-9 also states that Berry even told the general counsel that "he had not been involved in [Apollo's] formulation of its proposal, he had not committed to any participation in a transaction with [Apollo] (or any other potential buyer) and he was not working with [Apollo] on an exclusive basis."34 And, when the Board convened its telephonic meeting on October 15, Berry "reiterated that he had not committed to any transaction with [Apollo] (or any other potential bidder)," as recounted in the 14D-9.35

Moreover, even if the Schedule TO is also considered to be part of the "total mix" of information disclosed to stockholders, as the Director Defendants urge, any impression of an agreement is undermined by the 14D-9's suggestions to the contrary. The Schedule TO discloses that Apollo called the Berrys just before the submission of its October 1 proposal "to confirm whether they would participate in such a transaction,"36 and states that the *279Berrys "indicated they were interested"-albeit with a caveat that they needed flexibility and Board approval.37 In contrast, though the 14D-9 references several conversations that Ray Berry had with Apollo before its submission of the October 1 proposal, it undermines any impression one might get of an agreement by describing Apollo's last pre-October 1 call as a "courtesy call" in which Apollo stated that it would be submitting an offer.38

Moreover, the 14D-9 omits any mention of Brett Berry in its description of Apollo's pre-October 1 contacts with Ray Berry-allegedly because a reference to these discussions would bolster the impression of an agreement among Apollo, Ray Berry, and Brett Berry.39 Nor does it disclose that, at the October 15, 2015 Board meeting, Ray Berry told the directors that he "was not aware of any conversation that may or may not have occurred with Apollo and Brett Berry."40 Plaintiff alleges that, given that the Schedule TO suggests that Ray Berry was in fact aware of such conversations,41 this omission is material because, if revealed, it would have informed stockholders that the Company's directors "blinded themselves to the reality of the joint plan among Apollo, Ray Berry and Brett Berry."42 Moreover, even if Ray Berry and the 14D-9's statement that he "had not been involved in [Apollo's] formulation of its proposal"43 were literally true, Plaintiff alleges that it is misleading because it omits that he was involved by providing indications of his interest and directing the Apollo senior partner, Andrew Jhawar, to contact Brett Berry to explore "various structural alternatives for an equity rollover transaction," and Jhawar and Brett Berry then "had several communications regarding potential transaction *280structures."44

B. Plaintiff alleges that the 14D-9 misled stockholders about Ray Berry's clear preference for Apollo.

Plaintiff alleges that the 14D-9 misleadingly conveys an impression that Berry would open-mindedly consider offers from a potential purchaser other than Apollo. The narrative in the 14D-9 fails to mention that Ray Berry divulged to the Board his clear preference for Apollo and reluctance to consider bids from other prospective purchasers.

For example, the 14D-9 states that, at the October 15 Board meeting, Berry told the directors that "he had communicated to [Apollo] that he would only participate in a transaction that was supported by the Board and that he would also be willing to sell his shares to any potential purchaser for cash in a Board-supported transaction."45 But the 14D-9 never mentions that, in response to a question from the Company's outside counsel, Cravath, Swaine & Moore LLP, as to whether "he would be willing to participate in an equity rollover with another party were the Corporation to engage in [a] sale transaction with a party other than Apollo," Ray Berry also told the Board that "he was not aware of any other potential private equity buyer that had experience in the food retail industry with whom he would be comfortable engaging in an equity rollover."46 A fair implication of this statement in the minutes is that, while Ray Berry would be willing to consider selling his shares to another private equity buyer for cash, he would not engage in an equity rollover with a party other than Apollo. But the 14D-9 never discloses that fact.

The November 28 E-mail further suggests Ray Berry's resistance to participate in an equity rollover with a non-Apollo party, but the 14D-9's account never mentions that resistance in its summary. Again, a comparison between the disclosure of the November 28 E-mail and the November 28 E-mail itself is illustrative. (Italicized words indicate substantive information omitted.)

14D-947 November 28 E-Mail48 Mr. Berry's counsel also said that in the Should Apollo not be successful in its bid, event that another buyer, and not equity Mr. Berry would consider rolling his equity funds managed by [Apollo], were to interest over in connection with an acquire TFM, Mr. Berry would also acquisition of TFM by another buy-out consider rolling his equity interest over in firm that successfully bids for the such a transaction. company, provided he has confidence in its ability to properly oversee the company. As he mentioned to the board of directors in October, however, he believes that Apollo is uniquely qualified to generate value because of its recent success in TFM's space with the acquisition of Sprouts.

[Editor's Note: The preceding image contains the references for footnotes47 ^,48 ].

*281Whereas the 14D-9 states that Ray Berry was willing to consider an equity rollover with a party other than Apollo, Plaintiff alleges that the omitted portion suggests that the opposite is the case: that he would be willing to consider such an equity rollover only if he "has confidence in [the firm's] ability to properly oversee the company," and he only had confidence in one party, namely, Apollo.49 If, as Plaintiff fairly alleges, Ray Berry were only willing to consider an equity rollover with a qualified party, and Apollo was "uniquely qualified," then Ray Berry was not, in fact, willing to consider an equity rollover with another party.

C. Plaintiff alleges that the 14D-9 failed to disclose Ray Berry's "threat" to sell the Company.

Plaintiff alleges that the November 28 E-mail reveals that the 14D-9 is marred by another material omission: the 14D-9 never mentions that Ray Berry's counsel emphasized his client's belief that the Company needed to go private and that, if it stayed public, Ray Berry would sell his shares. Specifically, Berry's attorney stated in the November 28 E-mail that Ray Berry believed it was "in the best interests of the shareholders for the board to pursue a sale of the company at this time due to the low valuation of the company in spite of a built-in buy-out premium as well as the complexity of implementing the changes [new CEO] Rick Anicetti covered in the earnings release while under the scrutiny of the public market."50 But the 14D-9 does not include anything resembling a summary of that assertion. Berry's counsel stated further that, "If The Fresh Market remains public, Mr. Berry will give serious consideration to selling his stock when permitted as he does not believe TFM is well positioned to prosper as a public company and he can do better with his investment dollars elsewhere."51 Again, this assertion is missing from the 14D-9.

D. Plaintiff alleges that the 14D-9 misled stockholders about the Company's reasons for forming the Strategic Transaction Committee.

Plaintiff alleges that the 14D-9 misled stockholders concerning existing activist stockholder pressure facing the Company at the time of the October 15, 2015 Board meeting, when the directors decided to form the Strategic Transaction Committee. The 14D-9 states that the Board decided to form the Committee in order "to enhance efficiency in light of the fact that TFM could become the subject of shareholder pressure and communications and potentially additional unsolicited acquisition proposals in light of TFM's recent stock performance."52 It fails to mention that the Company had already become subject to stockholder pressure and that the Board considered that fact when deciding to form the Committee. According to the minutes of the October 15 meeting, the Board discussed "that there had been a significant amount of shareholder outreach recently regarding the strategic direction of the Corporation in light of the Corporation's performance and the trends facing the industry."53 In particular, the directors addressed a letter dated October 8, 2015, from activist investor Neuberger *282Berman LLC, which owned 3.4% of the Company's shares.54 The letter listed grievances with The Fresh Market's performance and proclaimed that "urgent action is necessary to restore credibility and prevent further damage to this asset base."55 Neuberger stated that "it is now time" for the Board "to initiate a comprehensive strategic review" and "consider in that review hiring outside financial advisers to assess: (i) a sale of the Company, (ii) possible strategic partnerships, joint ventures, or alliances, or (iii) other possible internal investments or external transactions."56

II.

Reviewing the Court of Chancery's decision to dismiss the complaint de novo ,57 we reverse because Defendants did not meet their burden for triggering application of the business judgment rule under Corwin.58

We focus on whether the stockholder vote was fully informed-that is, whether the Company's disclosures apprised stockholders of all material information and did not materially mislead them.59 At the pleading stage, that requires us to consider whether Plaintiff's complaint, when fairly read, supports a rational inference that material facts were not disclosed or that the disclosed information was otherwise materially misleading.60

"An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote."61

*283Framed differently, an omitted fact is material if there is "a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available."62 But, to be sure, this materiality test "does not require proof of a substantial likelihood that disclosure of the omitted fact would have caused the reasonable investor to change his vote."63

Just as disclosures cannot omit material information, disclosures cannot be materially misleading. As we said in Arnold v. Society for Savings Bancorp, Inc. ,64 "once defendants traveled down the road of partial disclosure of the history leading up to the Merger ... they had an obligation to provide the stockholders with an accurate, full, and fair characterization of those historic events."65 And, in Zirn v. VLI Corp. ,66 we explained that, "even a non-material fact can, in some instances, trigger an obligation to disclose additional, otherwise non-material facts in order to prevent the initial disclosure from materially misleading the stockholders."67

Here, the Court of Chancery stated that, if the Plaintiff could adequately allege in her pleadings that "the apparent robustness of the auction was a sham" and "[Ray] Berry had already made up his mind that he wished Apollo to be the acquirer and only Apollo had a shot at winning the auction," then "surely the disclosures were flawed and inadequate to allow the vote to serve as a ratification of the Defendants' actions."68 But the trial court rejected Plaintiff's argument because it found "the facts regarding Berry's involvement with Apollo were disclosed" and, thus, "[t]he conclusion that the Plaintiff reaches-that the auction was a sham-is not supported by the record."69 Respectfully, we disagree.

Plaintiff has unearthed and pled in her complaint specific, material, undisclosed facts that a reasonable stockholder is substantially likely to have considered important in deciding how to vote.70 We believe a *284reasonable stockholder likely would find such information important because it would have helped the stockholder to reach a materially more accurate assessment of the probative value of the sale process. These facts include "troubling facts regarding director behavior,"71 and thus we conclude that there is a substantial likelihood that they would have altered the total mix of information available to stockholders.

A. Plaintiff adequately alleges material omissions in the 14D-9 concerning Ray Berry's "agreement" with Apollo and relationship with the firm.

Plaintiff alleges that the phrase "as he did in October" in the November 28 E-mail should have informed directors that Ray Berry had "lied" at their October 15 meeting, but that agreement and its eventual disclosure to the directors was never disclosed to the Company's stockholders.72 This omission seems to undermine the veracity of Ray Berry's statement to the Board that, as of the October 15 meeting, "he had not committed to any transaction with [Apollo]," as suggested in the Schedule 14D-973 and the minutes.74

We agree with the Plaintiff that this Agreement Omission was material.75 A reasonable stockholder would want to know the facts showing that Ray Berry had not been forthcoming with the Board about his agreement with Apollo (among other information discussed below),76 as directors have an " 'unremitting obligation' to deal candidly with their fellow directors."77 Moreover, a reasonable stockholder would want to know about this level of commitment to a potential purchaser, in the context of this deal.78

*285Though the 14D-9 does mention certain of Ray Berry's prior conversations with Apollo, the 14D-9 avoids implying any agreement with Apollo and limits facts that might suggest such an impression. For example, whereas the Schedule TO describes the last pre-October 1 call from Apollo to the Berrys as a call "to confirm they would participate in such [an equity rollover] transaction,"79 the 14D-9 merely describes it as a "courtesy call."80

The 14D-9's failure to mention Brett Berry also supports a pleading-stage inference that the 14D-9 is so committed to "the false proposition that Ray Berry, Brett Berry and Apollo were not acting pursuant to a plan" that it presents a distorted narrative.81 As Plaintiff alleges, if included, this information would help show that "Ray Berry, Brett Berry and Apollo had formulated and acted pursuant to a plan to buy Fresh Market at a vulnerable time at the lowest possible price."82 We agree that Plaintiff's allegations are sufficient to prevent invocation of the business judgment rule under Corwin .

B. Plaintiff adequately alleges that the 14D-9 is materially misleading about Ray Berry's clear preference for Apollo and willingness to consider an equity rollover.

Plaintiff adequately alleges that the 14D-9 is materially misleading because it repeatedly includes statements that imply an openness to consider other bidders, while omitting Ray Berry's statements from those same conversations that suggest that he would actually only consider an equity rollover with Apollo. The 14D-9 posits that, at the October 15 Board meeting, Berry stated that he would be willing to sell his shares for cash to other potential bidders and that he had not yet committed to Apollo, evoking an impression of openness.83 Yet the 14D-9 omits that, when asked by the Board's counsel about an equity rollover with a party other than Apollo, Ray Berry's comments indicated that only Apollo would suffice: he stated that he was unaware of "any other potential private equity buyer that had experience *286in the food retail industry with whom he would be comfortable engaging in an equity rollover."84 Such omission is material because, if disclosed, a reasonable stockholder might infer that Berry's expression of a clear preference for Apollo and reluctance to engage with other bidders hindered the openness of the sale process, notwithstanding that Ray Berry also submitted that "he had not committed to any transaction with Apollo."85

Even more, the description of the November 28 E-mail includes the statement that Ray Berry would consider an equity rollover involving another buyer, but it omits the crucial precondition-that he must have "confidence in [the firm's] ability to properly oversee the company"86 -and that Berry believed that Apollo was "uniquely qualified to generate value because of its recent success in TFM's space with the acquisition of Sprouts,"87 effectively ruling out other parties despite the 14D-9's suggestion to the contrary. Directors cannot fulfill their disclosure obligations through such partial disclosure-that is, where material facts are either not disclosed or "presented in an ambiguous, incomplete, or misleading manner."88 Stockholders are "entitled to a balanced and truthful recitation of events, not a sanitized version that is materially misleading."89

C. Plaintiff adequately alleges that the 14D-9's omission of Ray Berry's "threat" to sell his shares is material.

Plaintiff adequately alleges that the 14D-9 omits the material statement from the November 28 E-mail that Ray Berry believed that the Board should pursue a sale of the Company "at this time" and that, if it failed to act, he would sell his shares90 -a warning that Plaintiff characterizes as a threat. We do not embrace Plaintiffs' characterization of this as a threat, but we do view it as an economically relevant statement of intent.

The Court of Chancery considered the omission of this so-called "threat" to be the "only factual lacuna in the disclosures that comes close to materiality."91 But the court dismissed it because it reasoned that "it would not have made investors less likely to tender if they knew that a large blockholder-the founder-was considering a sale if the deal was not consummated."92 That is not the test. Omitted information is material if there is a substantial likelihood that a reasonable stockholder would have considered the omitted information important when deciding whether to tender her shares or seek appraisal.93 This is any information that an investor would consider important. Such information could make a stockholder less likely to tender. But it also may be material *287if it is the sort of information that would make a stockholder more likely to tender, or just information that a reasonable stockholder would generally want to know in making the decision, regardless of whether it actually sways a stockholder one way or the other, as a single piece of information rarely drives a stockholder's vote.94

Further, the November 28 E-mail included Berry's counsel's communication of the reason why Ray Berry believed that it was time to sell the Company.95 A reasonable stockholder would want to know the rationale that Ray Berry gave the Board in encouraging it to pursue the sale, as well as his communication of his intent to sell his shares if a transaction were not consummated.96

D. Plaintiff adequately alleges that the 14D-9's presentation of the Board's reasons for forming the Strategic Transaction Committee are materially misleading.

Plaintiff alleges that the 14D-9 "conceals the pressure on the Board from activist stockholders to sell the Company."97 But the trial court dismissed that argument, finding the existing disclosures sufficient.98 That was error. The 14D-9 did disclose that, at the October 15, 2015 Board meeting, the Board decided to create the Committee "to enhance efficiency in light of the fact that TFM could become the subject of shareholder pressure and communications and potentially additional unsolicited acquisition proposals in light of TFM's recent stock performance."99 However, the minutes of that meeting reveal that the 14D-9 omits an important point: the Company had actually already become subject to stockholder pressure. In fact, before forming the Committee, the Board discussed "that there had been a significant amount of shareholder outreach recently regarding the strategic direction of the Corporation."100 We believe there is more than a semantic difference between the possibility that there "could " be stockholder pressure, as suggested in the 14D-9, and "there had been a significant amount of shareholder outreach recently ," as revealed in the minutes. Given the Company *288chose to speak on the topic, stockholders were entitled to know the depth and breadth of the pressure confronting the Company, especially given that it already existed.101

III.

As in Berkman , "given the nature of the omission[s]," we decline "defendants' invitation for us to find another ground for affirmance, such as reliance on the exculpatory charter provision, which was not addressed by the Court of Chancery."102

For the reasons set forth above, we REVERSE the Court of Chancery's opinion and REMAND for proceedings consistent with this opinion.

OPINION

BOUCHARD, C.

This opinion concerns the proposed settlement of a stockholder class action challenging Zillow, Inc.’s acquisition of Trulia, Inc. in a stock-for-stock merger that closed in February 2015. Shortly after the public announcement of the proposed transaction, four Trulia stockholders filed essentially identical complaints alleging that Trulia’s directors had breached their fiduciary duties in approving the proposed merger *887at an unfair exchange ratio. Less than four months later, after taking limited discovery, the parties reached an agreement-in-principle to settle.

The proposed settlement is of the type often referred to as a “disclosure settlement.” It has become the most common method for quickly resolving stockholder lawsuits that are' filed routinely in response to the announcement of virtually every transaction involving the acquisition of a public corporation. In essence, Trulia agreed to supplement the proxy materials disseminated to its stockholders before they voted on the proposed transaction to include some additional information that theoretically would allow the stockholders to be better informed in exercising their franchise rights. In 'exchange, plaintiffs dropped their motion to preliminarily enjoin the transaction and agreed to provide a release of claims on behalf of a proposed class of Trulia’s stockholders. If approved, the settlement will not provide Trulia stockholders with any economic benefits. The only money that would change hands is the payment of a fee to plaintiffs’ counsel, ■ :. , • . ■

Because a class action impacts the legal rights of absent class members, it is the responsibility of the Court of Chancery to exercise independent judgment to determine whether a proposed class settlement is fair and reasonable to the affected class members. For the reasons explained in this opinion, I conclude that ,the terms of this proposed settlement are not fair or reasonable because none of the supplemental disclosures were material or even helpful to Trulia’s stockholders, and thus the proposed settlement does not afford them any meaningful consideration to warrant providing a release of claims to the defendants. Accordingly, .1 decline to approve the proposed settlement. .

On a broader level, this opinion discusses some of the dynamics that have led to the proliferation of disclosure settlements, noting the concerns that scholars, practitioners and members of the, judiciary have expressed that these settlements rarely yield genuine benefits for stockholders and threaten the loss of potentially valuable' claims that .have not been investigated with rigor. I also discuss - some of the particular challenges the Court faces in evaluating disclosure settlements through a non-adversarial process. ■

Based on these considerations, this opinion offers the Court’s perspective’ that disclosure'claims arising in deal litigation optimally should be adjudicated' outside of the context’ of a proposed settlement so that the Court’s consideration of the merits of the disclosure claims can occur in an adversarial process without the defendants’ desire to obtain an often overly broad release hanging in the balance. The opinion-further explains that, to the extent that litigants continue to pursue disclosure settlements, they can expect that the Court will be increasingly-vigilant in scrutinizing the “give” and the “get” of such settlemenfs to ensure that they áre genuinely fair and reasonable to the absent class mémbers.

I. BACKGROUND

The facts recited in this opinion are based on the allegations of the Verified Amended Class Action Complaint in C.A. No. 10022-CB, which was designated as the operative complaint in the consolidation action; the brief plaintiffs submitted in support of their motion for a preliminary injunction; and the briefs and affidavits submitted in connection with the proposed settlement. Because of the posture of the litigation, the recited facts do not represent factual findings, but rather, the *888record as it was presented for the Court to evaluate the proposed settlement.

A. The Parties

Defendant Trulia, Inc., a Delaware corporation, is an online provider of information on homes for purchase or- for rent in the United States. Individual defendants Pete Flint, Robert Moles, Theresia Gouw, Gregory Waldorf, Sami Inkinen, Erik Bardman, and Steve Hafner were members of Trulia’s board of directors when the merger was approved.

Defendant Zillow, Inc., a Washington corporation, is a real estate marketplace that helps home buyers, sellers, landlords and others find and share information about homes. Defendant Zebra Holdco, Inc. (“Holdco”),. now known as Zillow Group, Inc., is a Washington corporation that was formed to facilitate the merger at issue and is now the parent company of Zillow and Trulia.

Plaintiffs Christopher Shue, Matthew Sciabacucci, Chaile Steinberg, and Robert Collier were Trulia stockholders- at all times relevant to this action.

B. The Announcement of the Merger and the Litigation

On July 28, 2014, Trulia and Zillow announced that they had entered into a definitive merger agreement under which Zillow would acquire Trulia for approximately $3.5 billion in stock.1 The transaction was structured to include two successive stock-for-stock mergers whereby separate subsidiaries of Holdco would acquire both Trulia and Zillow. After these mergers, Trulia and Zillow would exist as wholly-owned subsidiaries of Holdco, and the former stockholders of Trulia and Zil-low would receive, respectively, approximately 33% and 67% of the outstanding shares of Holdco.

After the merger was announced, the four plaintiffs filed class action complaints challenging the Trulia merger and seeking to enjoin it. Each of the complaints alleged essentially identical claims: that the individual defendants had breached their fiduciary duties, and that Zillow, Trulia, and Holdco aided and abetted those breaches.

On September 11, 2014, Holdco filed a registration statement containing Trulia and Zillow’s preliminary joint proxy statement with the United States Securities and Exchange Commission. On September 24, 2014, one of the four plaintiffs filed a motion for expedited proceedings and for a preliminary injunction.

On October 13, 2014, the Court granted an unopposed motion to consolidate the four cases into one action and to appoint lead counsel. On October 14, at 10:37 a.m., plaintiffs filed a motion to expedite the proceedings in the newly consolidated case. The Court never heard the motion, however, because the parties promptly agreed on an expedited schedule, which they documented in a stipulated case schedule filed on October 14 at 12:12 pin., less than two hours after the motion to expedite was filed.

Over the next few weeks, plaintiffs reviewed documents produced by defendants and deposed one director of Trulia (Chairman, CEO, and co-founder Pete Flint) and a banker from J.P; Morgan Securities *889LLC, Trulia’s financial advisor in the transaction.

On November 14, 2014, plaintiffs filed a brief in support of their motion for a preliminary injunction. In that brief, plaintiffs asserted that the individual' defendants had breached their fiduciary duties by “failing to obtain the highest exchange ratio available for the Company’s stockholders in a single-bidder process, failing to properly value the Company, agreeing to preclusive provisions in the Merger Agreement that impede the Board’s ability to consider and accept superior proposals, and. disseminating materially false and misleading disclosures to the Company’s stockholders....”2 The discussion of the merits in that brief, however, focused only on disclosure issues. Plaintiffs provided no argument in support of any other aspect of their claims.

On November 17, Trulia and Zillow filed a definitive joint proxy .statement regarding the transaction on Schedule 14A (the “Proxy”).

C. The Parties Reach a Settlement

On November 19, 2014, the parties entered into a Memorandum of Understanding detailing an agreement-in-principle to settle the litigation for certain disclosures to supplement those contained in the Proxy, subject to confirmatory discovery. The same day, Trulia filed a Form 8-K with the Securities and Exchange Commission containing the disclosures (the “Sup■plemental Disclosures”).

. On December 18,2014, Trulia and Zillow held special meetings of stockholders at which each company’s stockholders voted on and approved the transaction. Trulia’s stockholders overwhelmingly supported the transaction. Of the Trulia shares that voted, 99.15% voted in favor of the transaction. In absolute terns, 79.52% of Tru-lia’s outstanding shares voted in favor the transaction.3

On February 10, 2015, plaintiffs conducted a confirmatory deposition of a second Trulia director, Gregory Waldorf. On February 17, 2015, the transaction closed.

On June 10, 2015, the parties executed " a Stipulation and Agreement of Compromise, Settlement, and Release (the “Stipulation”) in support of a proposed settlement reiterating the terms of the ' Memorandum of' Understanding. In the ■ Stipulation, the parties agreed to seek certification of a class consisting of all Trulia stockholders from July 28, 2014 (when the transaction was announced) through February 17, 2015 (when the transaction closed). The Stipulation included an extremely 'broad release encompassing, among .other things, “Unknown. .Claims”4 and claims “arising under federal, state, foreign, statutory, regulatory, common law or other law or rule”, held by any member of the proposed class relating in any conceivable . way to the . transaction.5 The Stipulation further provided that plaintiffs’ counsel intended to seek. an award • of attorneys’ fees and expenses *890not to exceed $375,000, which defendants agreed not to oppose.

Beginning on July 17, 2015, Trulia disseminated notices to the proposed class members in accordance with a scheduling order the Court had entered.

D. Procedural Posture

On September 16, 2015, after receiving a brief and an affidavit from plaintiffs advocating for approval- of the proposed settlement, I held &' hearing to consider the fairness of the terms of the proposed settlement. Defendants made no submissions concerning the proposed settlement before the hearing, and no stockholder filed an objection to it. After the hearing, I took the request to approve the settlement under advisement and asked the parties for supplemental briefing on whether disclosures must meet the legal. standard of materiality in order to constitute, an adequate benefit to support a settlement, and on the rationale and justification for including “unknown claims” .among the claims that would be released by the proposed settlement.

On September 22, 2015, Sean J. Griffith, a professor at Fordham University School of Law who has researched disclosure settlements and objected to them in the past,6 requested permission to appear as amicus curiae in order to -submit a ¡brief on the topics for which I requested supplemental briefing. Lapproved this request on September 23, and the parties submitted their supplemental briefing on October 16.

Along with their supplemental briefing, plaintiffs submitted an affidavit from Timothy J. Meinhart, a- managing director of Willamette Management Associates, which -provides business valuation and transaction financial advisory services. The. affidavit addresses certain concerns about some (but not all) of the disclosures that I. :raised at the settlement hearing. Plaintiffs .and defendants also informed the Court that,.following .the hearing, the parties had agreed to a revised stipulation with a narrower release.

Specifically, the parties removed “Unknown Claims” and “foreign” claims from the ambit of the release' ánd added'a carve-oút so that the release would not cover “any claims that arise under the Hart-Scott-Rodino, Sherman, or Clayton Acts; or any other state or federal antitrust law.” As revised, the release still encompasses “any claims arising under federal, state, statutory, regulatory, common law, or other law or rule” held by any member of the proposed class relating in any conceivable way to the transaction, with the exception of the carve-out for claims arising under state and federal antitrust law.7

II. LEGAL ANALYSIS

A. Legal Standard

Uridér Court of Chancery Rule 23, the Court must approve the dismissal or settlement of a class action.8 Although Delaware has long favored the voluntary settlement of litigation,9‘the fiduciary character of a class action'requires the Court to independently examine the fairness of a class action settlement before approving *891it.10 “Approval of a class action settlement requires more than a cursory scrutiny by the court of the issues presented.”11 The Court must exercise its own judgment to determine whether the settlement is reasonable, and intrinsically fair.12 In doing so, the Court evaluates not only the claim, possible defenses, and obstacles to its successful prosecution,13 but also “the reasonableness of the ‘give’ and the ‘gét,’ ”14 or what the class members receive in exchange for ending the litigation.

Before turning to that analysis here, I pause to discuss some of the dynamics that have led to the proliferation of disclosure settlements15 and the concerns that have been expressed about this phenomenon, and to offer thé Court’s perspective on how disclosure claims iñ déal litigation should be adjudicated in the future.' ‘ '

B. Considerations Involving Disclosure Claims in Deal Litigation

Over two decades ago, Chancellor Allen famously remarked in Solomon v. Pathe Communications Corporation that “[i]t is a fact evident to all of those who are familiar with,, shareholder litigation that surviving a motion to dismiss means, as a practical matter,' that economically] rational defendants ... will settle such claims, often for a peppercorn and' a fee.”16 The' Chancellor’s remarks were not made in the context of a settlement; but they touch upon some of the same dynamics that have fueled disclosure settlements of deal litigation.

Today, the public announcement of virtually -every transaction involving the acquisition of a public corporation provokes a-flurry of class action lawsuits alleging that the target’s directors breached their fiduciary duties by agreeing to sell -the corporation for ah'unfair price. On occasion, ^although it is ■ relatively infrequent, such litigation has generated meaningful economic 'benefits for stockholders when, for'example, the integrity of a sales process has been corrupted by conflicts of interest on the part of corporate fiduciaries or their advisors.17 But far too often *892such litigation serves no useful purpose for stockholders. Instead, it serves only to generate fees for certain lawyers who are regular players in the enterprise of routinely filing hastily drafted complaints on behalf of stockholders on the heels of the public announcement of a deal and settling quickly on terms that yield no monetary compensation to the stockholders they represent.

In such lawsuits, plaintiffs’ leverage is the threat of an injunction to prevent a transaction from closing. Faced with that threat, defendants are incentivized to settle quickly in order to mitigate the-considerable expense of litigation and the distraction it entails, to achieve closing certainty, and to obtain broad releases as a form of “deal insurance.” These incentives are so potent that many defendants self-expedite the litigation by volunteering to produce “core documents” to plaintiffs’ counsel, obviating the need for plaintiffs to seek the Court’s permission to expedite the proceedings in aid of a preliminary injunction application and thereby avoiding the only gating mechanism (albeit one friendly to plaintiffs18) the Court has to screen out frivolous cases and to ensure that its limited 'resources are used wisely.19

Once the litigation is on an . expedited track and the prospect of an injunction hearing looms, the most common currency used to procure a settlement is the issuance of supplemental disclosures to the target’s stockholders before they are asked to vote on the proposed transaction. The theory behind making these disclosures is that, by having the additional information, stockholders will be -better informed when exercising their franchise rights.20 Given the Court’s historical practice of approving disclosure settlements when the additional information is not material, and indeed may be of only minor *893value to the stockholders,21 providing supplemental disclosures is a particularly easy “give” for defendants to make in exchange for a release.

Once an agreement-in-principle is struck to settle for supplemental disclosures, the litigation takes on an entirely different, non-adversarial character. Both sides of the caption then share the same interest in obtaining the Court’s approval of. the settlement.22 The next step, after notice has been provided to the stockholders, .is a hearing in which the Court must evaluate the fairness of the proposed settlement. Significantly, in advance of such hearings, the Court receives briefs and affidavits from plaintiffs extolling the value of the supplemental disclosures and advocating for approval of the proposed settlement, but rarely receives any submissions expressing an opposing viewpoint.23

Although the Court commonly evaluates the proposed settlement of stockholder class and derivative actions without the benéfit of hearihg opposing viewpoints, disclosure settlements'1 present some unique challenges. If is one thing for the Court to judge the fairness of a settlement, even in a non-adversarial' context, when there has been significant discovery or meaningful motion practice to -inform the Court’s evaluation. It is-quite another to do so when little or no motion practice has occurred and the discovery - record is sparse, as is typically the Case in an expedited deal litigation leading to an equally expedited resolution based on supplemental disclosures before the transaction closes. In this case, for example, no motions were decided (not even a motion to expedite), and discovery was limited to the production of less than 3,000 pages of documents and- the taking of three depositions, two of which were taken before the parties agreed in principle to settle and one of which was a “confirmatory” deposition taken thereafter.24

*894The lack of an adversarial process often requires that the Court become essentially a forensic examiner of proxy materials so that it can play devil’s advocate in probing the value of the “get” for stockholders in a proposed disclosure settlement. Consider the following example. During discovery, plaintiffs will typically receive copies of board presentations made by financial ad-visors .who ultimately opine on the fairness of the. transaction from a financial point of view. It is all too common for a plaintiff to identify. and obtain supplemental; disclosure of a laundry list of minutiae in a financial advisor’s board presentation that does not appear in the summary of the advisor’s analysis in the proxy materials— summaries that commonly run ten or more single-spaced pages in the first instance. Given that the newly added pieces of information were, by definition, missing from the original proxy, it is not difficult for an advocate to make a superficially persuasive argument that it is better for stockholders to have more information rather than less. In an adversarial process, defendants, armed with the help of their financial ad-visors, would be quick to contextualize the omissions and point out why the missing details are immaterial (and may even be unhelpful) given the summary of the advisT or’s analysis already disclosed in the proxy. In the settlement context, however, it falls to law-trained judges to attempt to perform this function, however crudely, as best they can.

It is beyond doubt in my view that the dynamics described above, in particular the Court’s willingness in the past to approve disclosure settlements of marginal value ánd to Routinely grant broad releases to defendants and six-figure fees to plaintiffs’ counsel-in the process,25 have caused deal litigation to explode in the United States beyond the realm of reason. In just the past decade, the percentage of transactions of $100 million or more that have triggered stockholder litigation in this country has more than doubled, from 39.3% in 2005 to a peak of 94.9% in' 2014.26 Only recently has the percentage decreased, falling to 87.7% in 2015 due to a decline near the end of the year.27 In Delaware, the percentage of such cases settled solely on the basis of supplemental disclosures'grew significantly from 45.4% in 2005 to a high of 76.0% in' 2012, and only recently has seen some decline.28 The increased prevalence of deal litigation and *895disclosure settlements has drawn the attention of academics, practitioners, and the judiciary.

Scholars have criticized disclosure settlements, arguing that non-material supplemental disclosures provide no benefit to stockholders and amount to little more than deal “rents” or “taxes,” while the liability releases that accompany settlements threaten the loss of potentially valuable claims related to the transaction in question or other matters falling within the literal scope of overly broad releases.29 One recent study provides empirical data suggesting that supplemental disclosures make no difference in stockholder voting, and thus provide no benefit that could serve as consideration' for a settlement.30 Another paper, written by a practitioner, provides examples of cases in which, unexplored .but valuable claims that almost were released through disclosure settlements later yielded significant recoveries for stockholders.31 A particularly vivid example is the recently concluded Rural/Metro case.32 In that case, the Court of Chancery initially considered it a “very close call”33 to reject a disclosure settlement that would have released claims which subsequently yielded stockholders over $100 million, mostly from a post-trial judgment, after new counsél took over the case.34 -

Members of this Court also have voiced their concerns over thé 'deal settlement process, expressing doubts about the value of relief obtained in disclosure settlements, and explaining their reservations over the *896breadth of the releases sought and the lack of any meaningful investigation of claims proposed to be released.35 Judges outside of Delaware have expressed similar con-eerns.36

Given the rapid proliferation and current ubiquity of deal litigation, the mounting evidence that supplemental disclosures rarely yield genuine benefits for stockholders, the risk of stockholders losing potentially valuable claims that have not been investigated with rigor, and the challenges of assessing disclosure claims in a non-adversarial settlement process, the Court’s historical predisposition toward approving disclosure settlements needs to be reexamined. In the Court’s opinion, the optimal means by which disclosure claims in deal litigation should be adjudicated is outside the context of a proposed settlement so that the Court’s consideration of the merits of the disclosure claims can occur in an adversarial process where the defendants’ desire to obtain a release does not hang in the balance.

Outside the settlement context, disclosure claims may be subjected to judicial review in at least two ways. One is in the context of a preliminary injunction motion, in which case the adversarial process would remain intact and plaintiffs would have the burden to demonstrate on the merits a reasonable likelihood of proving that “the alleged omission or misrepresentation is material.”37 In other words, plaintiffs would bear the burden of showing “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.”38

A second way is when plaintiffs’ counsel apply to the Court for an award of attorneys’ fees after defendants voluntarily decide to supplement their proxy materials by making one or more of the disclosures sought by plaintiffs, thereby mooting some *897or all of their claims. In that scenario, where securing a release is not at issue, defendants are incentivized to oppose fee requests they view as excessive.39 Hence, the adversarial process would remain in place and assist the Court in its evaluation of the nature of the benefit conferred (ie., the value of the supplemental disclosures) for purposes of determining the reasonableness of the requested fee.

In either of these scenarios, to the extent fiduciary duty claims challenging the sales' process remain in the case, they may be amenable to dismissal. Harkening back to Chancellor Allen’s words in Solomon, the Court would be cognizant of the need to “apply the pleading test under Rule 12 with special care” in stockholder litigation because “the risk of strike suits means that too much turns on the mere survival of the complaint.”40 In that regard, both the litigants and the Court are aided today by thirty years of jurisprudence that now exists interpreting the principles enunciated in Unocal and Revlon that often are central to reviewing fiduciary conduct in deal litigation.41

The preferred scenario of a mootness dismissal appears to be catching on. In the wake of the Court’s increasing scrutiny of disclosure settlements, the Court has observed an increase in the filing of stipulations in which, after disclosure claims have been mooted by defendants electing to supplement their proxy materials, plaintiffs dismiss their actions without prejudice to the other members of the putative class (which has not yet been certified) and the Court reserves jurisdiction solely to hear a mootness fee application.42 -From the Court’s perspective, this arrangement provides a logical and sensible framework for concluding the litigation. After being afforded some discovery to probe the merits of a fiduciary challenge to the substance of the board’s decision to approve the transaction in question, plaintiffs can exit the litigation without needing to expend additional resources (or causing the Court and other parties to -expend further resources) on dismissal motion practice after the transaction' has closed. Although defendants will not have obtained a formal release, the filing of a stipulation of dismissal *898likely represents the end of fiduciary challenges over the transaction as a practical matter. ...

In the mootness fee scenario, the parties also have the option to resolve the fee application privately without obtaining Court approval. Twenty years ago, Chancellor Allen acknowledged the right of a corporation’s directors to exercise business judgment to expend corporate funds (typically funds of the acquirer, who assumes the expense of defending the litigation after the transaction, closes) to resolve an application for attorneys’ .fees when the litigation has become moot, with the caveat that notice must be provided, to the stockholders. to protect against “the risk of buy off” of plaintiffs’ counsel.43 As the Court recently stated, “notice is appropriate because it provides the information necessary for an interested person to object to the use of corporate funds, such, as by ‘challenging] the fee payment as waste in a separate litigation,’ if the circumstances warrant.”44 In other words,, notice to stockholders is designed to guard against potential abuses in the private resolution of fee demands for mooted representative actions. With that protection in place,- the Court has accommodated the use of the private resolution procedure on.several recent occasions and reiterates here the propriety of proceeding in that fashion.45

Returning to the historically trodden but suboptimal path of seeking to resolve disclosure claims in deal litigation through a Court-approved settlement, practitioners should expect that the Court will continue to be increasingly vigilant in applying its independent judgment to its case-by-case assessment of the reasonableness of the “give” and “get” of such settlements in light of the concerns discussed above. To be more specific, practitioners should expect that disclosure settlements are likely to be met with continued disfavor in the future unless the supplemental disclosures address a plainly material misrepresentation or omission, and the subject matter of the proposed release is narrowly circumscribed to encompass nothing more than disclosure claims and fiduciary duty claims concerning the sale process, if the record shows that such claims have been investigated sufficiently.46 In using the term “plainly material,” I mean that it should not be a close call that the supplemental information is material as that term is defined under Delaware law. Where‘the *899supplemental information is not plainly material, it may be appropriate for the Court to appoint an amicus curiae to assist the Court in its evaluation of the alleged benefits of the supplemental disclosures, given the. challenges posed by the non-adversarial nature of the typical disclosure settlement hearing.47

Finally, some have expressed concern that enhanced judicial scrutiny of disclosure settlements could lead plaintiffs to sue fiduciaries of Delaware corporations in other jurisdictions in the hope of finding a forum more hospitable to signing off oh settlements of no genuine value. It is within the power of a Delaware corporation to enact a forum selection bylaw to address this concern.48 In any event, it' is the Court’s opinion, based on its extensive experience in adjudicating cases of this nature, that the historical predisposition that has been shown towards approving disclosure settlements must evolve for the reasons explained above. We hope and trust that our sister courts will reach the same conclusion if confronted with the issue.

With -the foregoing considerations in mind, I consider next the “give” and the “get”, of the proposed settlement in this case.

C. The Supplemental Disclosures Are not Material and Provided no Meaningful Benefit to Stockholders

Under. Delaware law, when directors solicit stockholder .action,, they must “disclose fully and fairly all material information within the board’s control.”49 Delaware has adopted the standard of materiality used under the federal securities laws. Information is material “if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.”50 In other words, information is material if, from the perspective of a reasonable stockholder, there is a substantial likelihood that it “significantly alter[s] the ‘total mix’ of information máde available.”51

. Here, the joint Proxy that Trulia and Zillow stockholders received in advance of their respective stockholders’ meetings to consider whether to approve the proposed *900transaction ran 224 pages in length, excluding annexes. It contained extensive discussion concerning, among other things, the background of the mergers, each board’s reasons for recommending approval of the proposed transaction, prospective financial information concerning the companies that had been reviewed by their respective boards and financial advisors, and explanations of the opinions of each company’s financial advisor. In the case of Trulia, the opinion of J.P. Morgan was summarized in ten single-spaced pages.

The Supplemental Disclosures plaintiffs obtained in this case solely concern the section of the Proxy summarizing J.P. Morgan’s financial analysis, which the Tru-lia board cited as one of the factors it considered in deciding to recommend approval of the proposed merger.52 Specifically, these disclosures provided additional details concerning: (1) certain synergy numbers in J.P. Morgan’s value 'creation analysis; (2) selected comparable transaction multiples; ■ (3) selected public trading' multiples; and (4) implied terminal EBIT-DA multiples for á relative discounted cash flow analysis.

Relevant .to considering the materiality of. information disclosed in this section of the Proxy, then-Vice Chancellor Strine observed in In re Pure Resources, Inc. Shareholders Litigation that there were “conflicting impulses” in Delaware case law about whether, when- seeking stockholder action, directors must disclose “investment banker analyses in circumstances in which the bankers’ views about value have been cited as justifying the recommendation of the board,”53 The Court held that, under Delaware law, when the board relies on the advice of a financial advisor in making a decision that requires stockholder action, those stockholders are entitled to receive in the proxy statement “a fair summary of the substantive work performed by the investment bankers upon whose advice the recommendations of their board as to how to vote on a merger or tender rely.”54 This “fair summary” standard has been a guiding principle for this Court in considering proxy disclosures concerning the work of financial advisors for more than a decade.55

Á fair summary, however, is a summary. By definition, it need not contain all information underlying the financial ad-visor’s opinion or contained in its report to the board.56 Indeed, this Court has held *901that the summary does not need to provide sufficient data to allow the stockholders to perform their own independent valuation.57 The essence of a fair, summary is not a cornucopia of financial data, but rather an accurate description of the advisor’s methodology and key assumptions.58 In my view, disclosures that provide extraneous details do not contribute to a fair summary and do not add value for stockholders.59

With the foregoing principles in mind, I consider next whether any of the four specific Supplemental Disclosures that plaintiffs obtained here were material or whether they provided any benefit to Trulia’s stockholders at all.

I. Synergy Numbers in the Value Creation Analysis

The. Supplemental Disclosures provided some additional details in ¡the . sections of J.P. Morgan’s, analysis, entitled “Value Creation Analysis — Intrinsic Value Approach” and “Value Creation Analysis— Market-Based Approach.” . In the “Intrinsic Value Approach” analysis, J.P. Morgan compared the implied equity value derived *902from its discounted cash flow analysis of Trulia on a standalone basis to Trulia stockholders’ pro forma ownership of the implied equity value of the combined company. In the “Market-Based Approach,” J.P. Morgan compared the public market equity value of Trulia on a standalone basis to Trulia stockholders’ pro forma ownership of the implied equity value of the combined company.

As supplemented, the disclosure concerning thé Intrinsic Value Approach reads -in relevant part as follows, with the information that was added to the original disclosure in the Proxy appearing in bold-ed text:

The pro forma combined company equity value was equal to: (1) the Trulia standalone discounted cash flow value of $2.9 billion, plus (2) the Zillow'standal-one discounted cash flow value of $6.2 billion, plus (3) $2.2-billion, representing the present value of (a) Trulia’s management expected áfter-tax synergies of $2.4 billion, less (b) Trulia’s management estimates of (i) the one-time costs to achieve such synergies of $65.0 million and (ii) transaction expenses of $85 million. , The present value of after-tax synergies was. based on an estimate of $175.0 million in synergies to be fully realized starting in 2016, extrapolated through 2029 based on assumptions provided by Trulia’s management.60

Plaintiffs argue that the disclosure of the $175 million synergies figure in the quote above was important because it is substantially different .from- the $100 million in synergies that J.P. Morgan used -in the Market-Based Approach, which figure already was disclosed in the Proxy.61 According to plaintiffs, “[h]ad [stockholders] initially known that the market-based approach analysis was skewed downward by using lower synergies numbers, their view as to the resulting implied value and reliability of [J.P. Morgan’s] analysis may have changed appreciably.”62 There are three fundamental problems with this argument.

‘First, although plaintiffs question why J.P. Morgan used two different synergies figures in two different analyses, they provide no explanation as to why doing so would be inappropriate. To the contrary, it seems logical that an intrinsic value approach (which is based on a comparison derived from a discounted cash flow analysis) would use synergies based on long-term management projections, while a market-based approach (which is based on a comparison to the public market equity value of Trulia) would use synergies based on what would be publicly announced to investors. Regardless, the Proxy accurately disclosed which synergies assumptions the financial advisor deemed appropriate to use in each analysis.63

Second, the $175 million synergies figure that plaintiffs consider so important was not new information. It already was disclosed in the Proxy, which contained the following table providing information about management’s synergies expectations:64

*903The following table presents summary estimated synergies that Trulia’s management also prepared in respect of the combined company following the completion of the mergers for the calendar years ending 2014 through 2024 in connection with Trulia’s evaluation of'the mergers.

(1) “Total Operating Synergies” means the expected EBIT effect of revenue synergies plus the EBIT effect of cost savings/cost avoidance less one-time costs to achieve and retain such synergies. “EBIT” means earning$ before interest and taxes. An assumed tax rate of 10% was applied to Total Operating Synergies to determine estimated after-tax synergies. Projected synergies (including costs to achieve synergies) were prepared by Trulia’s management through fiscal year 2016 after discussion with .Zillow’s management. The management of Trulia provided J.P. Morgan with assumptions relating to projected synergies for fiscal years 2017 through 2021 deemed appropriate by. Trulia’s management. The management of Tru-lia then directed J.P. Morgan to use these assumptions in extrapolating such estimated synergies for fiscal years extending beyond those for which the management of Trulia had provided projections. The management of Trulia then reviewed and approved such extrapolation of the synergies.65

Because the $175 million figure for 2016 synergies already appeared in this table, inserting it into a methodological paragraph a few pages later is of no benefit to stockholders. In my view, the supplemental disclosure may have added confusion more than anything else, because it lacks explanatory context and does not clearly describe the nature of management’s estimate of synergies that was disclosed in'the original Proxy.66.

Third, plaintiffs exaggerate the significance of juxtaposing the synergy figures used in the' Intrinsic Value Approach with those used in the Market-Based Approach. In contrast to the Intrinsic Value Approach, the Market-Based Approach was placed in the end of the summary of the financial advisor’s analysis in the “Other Information” section, was termed an “illustrative value creation analysis,” and “was presented merely for informational purposes.”67 As plaintiffs cbncedé, a “fair reading” of the Proxy indicates that the Market-Based Approach analysis was less important than the Intrinsic Value Approach analysis.68 Thus, the notion that the disclosure of the $175 million synergies figure used in one analysis (which already was disclosed in the Proxy) was significant because it was higher than the $100 million figure used in a second, different analysis is based on a false equivalence of the relative importance of the two analyses.

In sum, the disclosures in the original Proxy already provided a fair summary of *904J.P. Morgan’s methodology and assumptions in its two “Value Creation” analyses. Inserting additional minutiae underlying some of the assumptions could not reasonably have been expected to significantly alter the total mix of information and thus was not material. Indeed, in my view, the supplemental information was not even helpful to stockholders.

2. Individual Company Multiples in the. Selected Transaction Analysis

The Proxy disclosed that J.P. Morgan used publicly available information to analyze certain selected precedent transactions involving companies engaged in businesses that J,P. Morgan considered analogous to -Trulia’s businesses.69 The Proxy listed the date, the target, and the acquirer for each of 32 transactions that were considered. It also, disclosed the low and high forward EBITDA multiples for the group of transactions. Using a narrower range of multiples falling between the low and the high for the group, J.P. Morgan created an estimated range of equity values per share for Trulia common stock. This methodology was summarized in the Proxy as follows:

J.P. Morgan reviewed the implied firm value for each of the transactions as a multiple of the target company’s two-year forward EBITDA immediately preceding the announcement of the transaction. The analysis indicated a range of EBITDA multiples of 8.0x to 69.1x. Based on the result of this analysis and other factors that J.P. Morgan considered' appropriate, J.P. Morgan applied an EBITDA multiple range of lO.Ox to 23.0x to Trulia’s fiscal 2015 Adjusted EBITDA and arrived at an estimated range of equity values per share for Trulia common stock of $17.25-$38.50.70

Plaintiffs’ grievance is that the Proxy did not provide the relevant multiples for each of the 32 individual transactions. The individual multiples were added in the Supplemental Disclosures for those transactions for which the information was publicly available.71 The addition of this information made evident that multiples were not publicly available for 15 of the 32 transactions. Plaintiffs argue that, without the Supplemental Disclosures, stockholders would not have realized that J.P. Morgan’s analysis did not consider multiples for half of the precedent transactions it listed and was therefore less robust than the Proxy portrayed it to be.

The addition of the individual multiples and the revelation that some were not publicly available could not reasonably have been expected to significantly alter the total mix of information. No argument is made, for example, that having 16 similar transactions was not sufficient to perform the analysis that J.P. Morgan conducted. ' The discussion in the Proxy, moreover, including the portion quoted above, fairly summarized the methodology and assumptions J.P. Morgan used in conducting that analysis to extrapolate a range of per share values for Trulia stock. A fair summary does not require disclosure of sufficient data to allow stockholders to perform their own valuation.72

This conclusion ■ is supported by the Court’s decision in In re MONY Group *905Shareholder Litigation,73 There, the Court rejected a similar argument that the disclosure of transaction multiples was important because it showed that 25% of the multiples in a set of 71 transactions were unavailable. After noting that the plaintiffs had not argued that the financial ad-visor did not have sufficient data to- perform its analysis, the Court held that the additional information was “immaterial, as a matter of law,” and a “triviality [that] could not reasonably be expected to affect the total mix of information.”74 In my view, the addition of similar trivialities was not helpful to Trulia’s stockholders here.

3. Individual Company Multiples in the Selected Public Trading Analysis.

The Proxy disclosed the names of sixteen publicly traded companies that J.P. Morgan used to construct ranges of forward EBITDA and revenue multiples for Trulia and Zillow.75 The Proxy provided these multiples for Trulia and Zillow based on their last unaffected trading day before the announcement of the merger, and provided the median multiples for the three groups into which J.P.: Morgan categorized the sixteen-comparable companies: “Real Estate,” “Software as a Service,” and “Other.” The Proxy «did not include individual multiples for the 'peer companies.

The Supplemental Disclosures added the revenue and EBITDA multiples for each of the sixteen companies. Citing In re Celera Corporation Shareholder Litigation,76 plaintiffs argue, ..in essence, that individual company multiples are material per se. That is not a fair reading of the case. In Celera, the Court, commented that “as a matter of best practices, a fair summary' of a comparable companies or transactions analysis probably should disclose the market multiples derived for the comparable companies or transactions.”77 Although , the decision reluctantly concluded that a multiples disclosure was compen-sable, it found it “questionable whether [the. multiples] altered the ‘total mix’ of available information” because that information “already was publicly available.”78 The individual company multiples in the Supplemental Disclosures here.also were already publicly available.79

*906More importantly, the original disclosures in Celera- simply listed the comparable companies with no summary multiple data at all.80 Although the supplemental disclosures in that case added summary data for each of three categories of companies, they did not provide any individual company multiples.81 In other words, the disclosures in Trulia’s Proxy, which provided the median multiples for three different categories of companies that J.P. Morgan considered in its judgment to be similar to Trulia, essentially started at the point •where Celera ended.82

Plaintiffs next argue that the individual multiples are important here because they allow stockholders to compare the selected companies’ EBITDÁ growth rates and EBITDA multiples to Trulia’s. Thiá argument is unpersuasive for two reasons. First, basic valuation principles already would suggest to stockholders that higher growth rafes should correspond to higher multiples.83 ' Second, the ' Supplemental Disclosures do not contain -EBITDA growth rates, so the figures necéssary to make that comparison are not present in any event. Thus, plaintiffs have not persuaded me that individual company multi- • pies are material or were even helpful in this case.

4. Implied Terminal EBITDA Multiples in the DCF Analysis

J.P. Morgan performed a relative discounted cash flow analysis to determine the per-share equity values of Trulia and Zillow, using expected cash flows from 2014 through 2028 based on management’s projections for each company and the perpetuity growth method to calculate the companies’ respective terminal values.84 The Proxy explained this methodology and provided the assumptions J.P. Morgan used in its analysis. Specifically, the Proxy disclosed management’s projections of unlevered free cash flows, the ranges of discount rates (11.0% to 15.0%) and perpetuity „ growth rates (2.5% to 3.5%) that were used, the terminal period projected cash flows, and other details.85 In .my view, these disclosures already provided-a more-than-fair. summary of "the relative discounted " cash, flow analysis that J.P. •Morgan performed.

The Supplemental Disclosures added to this summary the EBITDA exit multiple ranges for Trulia and Zillow that were *907implied by the range of terminal values calculated based on J.P. Morgan’s chosen inputs. Plaintiffs argue that, although J.P. Morgan used the perpetuity growth method and only derived the implied EBITDA exit multiples to check the strength of its methodology, the implied multiples were important to stockholders, who. would be concerned that the exit multiples for Trulia and Zillow are nearly identical despite differences in their current EBITDA growth rates, and that the exit multiples are much lower than the current EBITDA multiples of Trulia and its peers.86

The logic of plaintiffs’ argument is flawed in two respects. First, because the same range of perpetuity growth rates (2.5% to 3.5%) was used to calculate the terminal values for both companies, it should not have been surprising that the implied exit EBITDA multiples would be similar for both companies: 4.0x to 6.7x for Trulia and 4.1x to 6.8x for Zillow. Second, although Trulia’s then-current EBITDA growth rate was high, the exit EBITDA multiples are based on growth assumptions as of 2028, not 2015, and the' 2015 growth rate cannot realistically continue through the projection period.87 Basic principles of valuation suggest that it "would be more reasonable to forecast .that the growth of both Trulia.-and .Zillow. eventually, would fall to a market-based rate, making plaintiffs’ comparison to the current growth rates of Trulia and its peers inappropriate.88 Thus, not only is the supplemental disclosure immaterial, it also serves none of the purposes that plaintiffs allege.

For the reasons explained above, none of plaintiffs’ Supplemental Disclosures were material or even helpful to Trulia’s stockholders. The Proxy already provided a more-than-fair summary of J.P. Morgan’s financial analysis in each of the four respects criticized by the plaintiffs. As such, from the perspective of Trulia’s stockholders, the “get” in the form of the Supplemental Disclosures does not provide adequate consideration to warrant the “give” of providing a release of claims to defendants and their affiliates, in the form submitted89 or otherwise. Accordingly, I find that the proposed settlement is not fair or reasonable to Trulia’s stockholders.90

*908III. CONCLUSION

For the foregoing reasons, approval of the proposed settlement is DENIED.

IT IS SO ORDERED.