In re Match Group Derivative Litigation

In Match, the court deals with a common loyalty problem: what is the standard of review when a controlling stockholder receives a "non-ratable" benefit? A controlling stockholder, because of her ability to control and direct management decisions of the corporation, has a fiduciary obligation to deal with minority stockholders fairly. Transactions between the controller and the corporation will not receive the protection of the business judgment presumption.

Rather, the controlling stockholder bears the burden of proving the fairness of its dealings with the corporation. The "entire fairness" standard requires the court to examine two aspects of the board's dealings with the corporation: whether the board dealt fairly with the corporation and whether the challenged transaction was at a fair price to the corporation. The more the interested director/controller deals with the corporation in a manner that mimics an arm's length transaction, the more likely the court is to grant the transaction the deference of business judgment.

As you read Match, consider ask yourself if you were advising the controller how he might structure his dealings with the corporation to make sure the actions of the controller and the board comported with the entire fairness standard as described by the court. Or, how might the controller structure the transaction in order to get the protection of the business judgment presumption.