The Delaware Court of Chancery recently provided boards of directors with valuable lessons on how to effectively conduct and document a merger, a pair of Gibson, Dunn & Crutcher M&A partners wrote in a post published Tuesday on the Harvard Law Forum on Corporate Governance and Financial Regulation.
As reported previously by sibling publication the Delaware Business Court Insider, Vice Chancellor J. Travis Laster ruled on April 8 in Chen v. Howard-Anderson that shareholders of broadband service provider Occam Networks could indeed proceed with a suit based on their concerns about the decision by the company’s board to enter into a $171 million merger with a rival company. The judge rejected the directors’ motion for summary judgment, which was based on the argument that they had not breached their fiduciary duty.
As Delaware Business Court Insider noted, “Vice Chancellor J. Travis Laster held that some of the defendants’ decisions may have fallen outside the range of reasonableness.”
The case, wrIte Gibson Dunn partners Eduardo Gallardo and Robert Little, offers boards of Delaware companies instruction in “a significant number of issues” that “they should keep in mind when conducting or considering a sale of the company.”
With the Chen decision as a guide, Gallardo and Little’s tip for Delaware boards include:
•“In light of disclosure requirements in the proxy statement, carefully evaluate and document the reliability of internal assessments, projections and evaluations.”
•“Market checks must give potential acquirers a realistic chance to respond.”
•“Carefully ensure that the disclosure provided to stockholders completely and accurately describes the sale process.”
•“Insufficient disclosure can prevent a fully informed stockholder vote, which vote may lower the standard of review.”