Disinterested director approval is a significant factor in the determination of the level of judicial review given to corporate transactions under Delaware law. Thus, decisions of disinterested directors, in the first instance, are protected under the business judgment rule, an evidentiary presumption that “in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company [and its stockholders].”[1]�
A stockholder challenging director action can rebut this presumption by showing that the directors breached any one of the “triad” of fiduciary duties: care (the failure to act on an informed basis), loyalty (where a majority of the directors have a material financial interest in the transaction not shared by all stockholders) or good faith. In that event, the burden shifts to the directors to prove that the transaction was entirely fair.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
