What is an in-house counsel to do when a controlling shareholder seeks to enter into a transaction with the corporation? Establishing a special committee of the board of directors to negotiate the deal may provide some defense to the company’s directors and controlling shareholder against other shareholders’ lawsuits.
That step alone, however, may not be enough. Courts are taking a hard look at such special committees; if a factual dispute exists about whether those committees fulfilled their gatekeeping role, judges may place the burden of proof on the defendant at trial.
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