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Introduction to the Law of Corporations: Cases and Materials

Fliegler v. Lawrence

Section 144 provides alternate methods to insulate interested director transactions from attack for voidness. In addition to seeking the approval of a majority of the disinterested directors, a board can seek the approval of the stockholders. Notice that the statute requires only that the challenged transaction is approved by a majority of the stockholders in order to gain the protection of the statutory safe harbor and not necessarily a majority of disinterested stockholders.

Remember the protections of § 144 extend only to the question of void or voidability of an interested director transaction and not further.  One can see how there would be many situations where one might not want stockholder approval of an interested director transaction to do much more than simply rescue a transaction from voidness. Where a controlling stockholder approves a transaction with itself (as a director) we may be okay with that transaction not being void, but we might still want the interested director/stockholder to be required to prove the transaction is nevertheless entirely fair to the corporation.    

The court in the following case, Fliegler, recognizes this problem and makes it clear that for directors who are seeking the additional protection of the business judgment presumption, they would have to do more than just comply with § 144(a)(2).  For those directors, they will have to take the additional step of complying with the requirements of common law stockholder ratification doctrine and seek informed approval of a majority of disinterested stockholders.