By: Adam Chelminiak

The Corporation Law Section of the Delaware State Bar Association recently published its proposed amendments to the Delaware General Corporation Law (DGCL) for 2019.¹

The amendments reflect a broad effort to modernize the DGCL’s provisions addressing electronic documentation of actions and electronic transmissions of items such as notices and consents. The most significant changes contemplated by the proposed amendments are: (i) the introduction of safe harbor procedures for electronic documentation, execution and delivery of various acts and transactions; (ii) revisions to the default provisions for the delivery of stockholder notices; and (iii) revisions to the provisions governing delivery of stockholder consents by electronic submission. The proposed amendments also include important clarifying changes to the provisions of Section 141(f) with concern to board actions by written consent.

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By: Marc Casarino and Lori Smith

In an April 16, 2019 rejection of the trial court’s analysis in Aruba Networks, the Delaware Supreme Court further clarified its recent pronouncements regarding the use of deal pricing as a measure of fair value in statutory appraisals under section 262 of the Delaware General Corporation Law.^[1] When a tender offer is made for a target company’s stock, section 262 provides a mechanism for dissenting stockholders to seek judicial appraisal of their stock rather than accepting the deal pricing. The court is charged with valuing the target company as an ongoing business at the time of the transaction, without regard to post-transaction events or any other business combination. In short, a section 262 appraisal should value the target company as a going concern and not as would be valued by a third party in an acquisition. (more…)

By: Marc Casarino

Delaware courts evaluate a self-dealing transaction with a controlling stockholder through the lens of entire fairness — meaning that both the deal process and price must be deemed fair. The burden of proving entire fairness lies initially with the board of directors and can be a challenging standard to satisfy. There presently are only limited means to blunt the onerous burden of the entire fairness standard. For example, the board of directors can shift the burden of proof to a challenging party if the transaction was approved by a majority of the minority stockholders or by an effective special committee of disinterested directors. Alternatively, where completion of the transaction is predicated at the outset of negotiations upon approval of the majority of the minority stockholders and an effective special committee of disinterested stockholders, the court will defer to the business judgment of the board rather than require proof of entire fairness. (more…)