Board Obligations in the Takeover Context
Decisions whether or not to sell the corporation are like other business decisions taken by the board. Absent special circumstances such decisions are going to be subject to the business judgment presumption. The cases that follow some of these special circumstances are present.
These cases involve fact scenarios where the board adopts defenses to fend off an unwanted buyer, or when the board of its own accord decides to engage in a sale of control of the corporation, or when the board takes an action that might interfere with stockholders' voting rights. Each of these situations will engender additional judicial scrutiny before they are let to stand.
The courts have developed the intermediate standard to assist the courts in determining whether in these specific factual scenarios the court should deploy the business judgment presumption or whether the actions of the a board should be subject to the more intensive entire fairness scrutiny. It is important to remember that Delaware's intermediate standard is a preliminary inquiry and not a liability inducing standard. Rather than create new "duties" or obligations, the intermediate standard provides courts a framework for analysing otherwise permissable board decisions in order to evaluate both the motive and means of the board's decisionmaking process. To the extent the board is able to demonstrate proper motive and means, then courts will defer the board's business judgment. However, if the decisionmaking process appears to be improperly motivated or relies on draconian means, then the board's decisionmaking process will be subject to entire fairness review.
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