The Court of Chancery’s recent decision in Salladay v. Lev, (Del. Ch. Feb. 27, 2020), denied the director-defendants’ attempt to invoke procedural safeguards—a special committee and independent stockholder approval—to dismiss a stockholder suit challenging a going-private merger. While there was no controlling stockholder and the defendants contended that any board-level conflicts were appropriately addressed, Vice Chancellor Sam Glasscock III reasoned that a special committee of independent directors was not utilized ab initio in the buyout discussions, and that the disclosures to stockholders were materially incomplete.

The Merger

In 2017, Intersections Inc. (the company) experienced financial difficulties due to a delayed rollout of a new version of its signature product. It formed a special committee of independent directors to explore financing options (the committee). The committee hired Houlihan Lokey, Inc. as its financial adviser. After the company secured some financing, the committee ceased functioning.

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