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. The courts have developed the intermediate standard – a preliminary inquiry – to assist the courts in determining whether in a given fact scenario the court should deploy the business judgment presumption or whether the actions of the a board should be subject to the more intenstive entire fairness scrutiny. 

These fact scenarios include situations when 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 stocholders' voting rights. Each of these situations will engender additional judicial scrutiny before they are let to stand.