Squeeze-outs / Going-privates

In a squeeze-out a/k/a cash-out merger, a controlling shareholder acquires complete ownership of the corporation’s equity, squeezing/cashing out the minority. Technically, the transaction is structured as a merger between the controlled corporation and a corporation wholly-owned by the controlled corporation’s controlling shareholder. The controlling shareholder retains all the equity of the surviving corporation, while the merger consideration for the outside shareholders is cash (or something else that is not stock in the surviving corporation). If the controlled corporation was previously publicly traded on a stock exchange, the transaction is also known as a going private merger because the surviving corporation will no longer be public, i.e., it will be delisted from the stock exchange.

There can be good economic reasons for a squeeze-out. It facilitates subsequent everyday business between the controller and the corporation, among other things because there are no more conflicts of interest to manage (cf. Sinclair). Private corporations do not need to make filings with the SEC and the stock exchange. Finally, the controlling shareholder may be more motivated to develop the corporation's business when owning 100% of it.

At the same time, squeeze-outs pose an enormous conflict of interest. Any dollar less paid to the minority is a dollar more to the controlling shareholder. For this reason, the SEC requires additional disclosure under rule 13e-3, and Delaware courts police squeezeouts under the duty of loyalty. In fact, controlling shareholders' duty of loyalty was developed principally in squeeze-out mergers, in particular the adaptation in Kahn v. MFW below.

Question:

Can you think of another, procedural reason why squeeze-outs generate most duty of loyalty cases against controlling shareholders in Delaware courts? Hint: Consider Zuckerberg and its scope of application.