InZimmerman v. Crothall , C.A. No. 6001-VCP (Del. Ch. March 5, 2012), the Delaware Court of Chancery, ruling on a motion for summary judgment, found that the defendants – directors and venture capital investors of Adhezion Biomedical – failed to establish that Adhezion’s issuance of preferred equity and convertible debt to the defendants that was not offered to all holders on the same terms were not self-interested transactions. In so doing, however, the court indicated that equity or debt offerings made to all holders on the same terms may be subject to business judgment review, even if otherwise interested directors and/or controlling holders participate in the offering.

Adhezion is a private company engaged in the development and manufacture of medical products. As with many early-stage companies, Adhezion raised most of its financing from venture capital investors. In early 2008, Adhezion issued 375,000 Series A Preferred Units to Originate Ventures for $3 million and, later that year, issued 281,917 Series A Preferred Units to Liberty Ventures II for approximately $2 million, according to the opinion. In connection with these investments, Originate and Liberty secured the right to appoint one director to Adhezion’s board. The remaining directors consisted of the chief executive officer and two independent directors.

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