In a recent decision, In re Volcano Corp. Stockholder Litig., the Delaware Court of Chancery extended and confirmed an important line of case law that substantially inoculates transactions from litigation challenge so long as they have been approved by independent stockholders on the basis of proper disclosure.
The doctrinal trend began with the Court of Chancery’s 2014 ruling in In re KKR Financial Holdings. The court there recognized uncertainty in the case law as to effect of stockholder approval when stockholder plaintiffs challenged a corporate transaction after closing. Clarifying conflicting decisions, the court made clear that “the legal effect of a fully informed stockholder vote” approving a “transaction with a non-controlling stockholder is that the business judgment rule applies and insulates the transaction from all attacks other than waste, even if a majority of the board approving the transaction was not disinterested or independent.”
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