Most readers of this publication will likely be familiar with the MFW conditions announced by the Delaware Supreme Court in 2014, and which, when present, alter the standard of review of transactions between a Delaware corporation and a controller from the traditional—and onerous—entire fairness standard of review to the application of the business judgment rule, see, Kahn v. M&F Worldwide, 88 A.3d 635 (Del. 2014). As the state Supreme Court held in that case, business judgment will be the standard of judicial review of such a transaction “where the merger is conditioned ab initio upon both the approval of an independent, adequately-empowered special committee that fulfills its duty of care; and the uncoerced, informed vote of a majority of the minority stockholders.”

While the MFW conditions were perhaps easy enough to understand in concept, in practice several issues in their application have arisen and been addressed by the courts of Delaware. One such issue has been the precise timing by which a potential transaction between a corporation and a controller must be clearly subject to the MFW conditions—that is, when is it ab initio? The Delaware Supreme Court has dilated on this topic twice recently, with the most recent occasion being in the matter Olenik v. Lodzinski, 2019 Del. LEXIS 177 (Del. 2019). In Olenik, the Supreme Court explained that to effectively obtain the substantial benefits that inure from conditioning a transaction between a corporation and its controller on the MFW conditions, those conditions must be adopted before “substantive economic negotiations” take place.