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Delaware Court Applies Business Judgment Review to Going Private Merger
30 May 2013
This case is the first in which the Delaware Court of Chancery has squarely held that business judgment review, rather than the more stringent entire fairness review, is applicable to a going private merger with a controlling stockholder, if adequate procedural protections are in place.
The court holds that business judgment review is applicable if such a transaction is conditioned from its inception on approval by (1) a special committee of independent directors and (2) a majority of the unaffiliated shares.
The Court of Chancery acknowledges that “rational minds can differ about this question, “ and that it is unclear whether the Delaware Supreme Court will endorse this test if the decision is appealed.
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