Given the improving economy, bankruptcy filings are at the lowest levels since before the Great Recession. Instead, many companies are implementing out of court by balance sheet debt restructurings or sales. Often the senior secured lenders pressure the company to commence a sale process and the company’s board must grapple with the alternatives of pursuing an expedited sale process or pursuing alternative restructurings that could result in a better recovery for shareholders. The board engages a financial adviser as an expert to evaluate strategic alternatives, one of which is fashioning and implementing a sales process.

With this background in mind, a decision issued by Delaware Chancery Court Vice Chancellor J. Travis Laster on March 7 in In re Rural Metro Stockholder Litigation, C.A. No. 6350-VCL, attracted attention nationwide from law firms and industry associations in the form of alerts and even coverage by The Wall Street Journal. In a 91-page decision, the court held a financial adviser hired by a company liable for aiding and abetting a board of directors’ breach of fiduciary duty in the sale of a solvent company for cash. In addition to the holding, which for obvious reasons attracted the attention of advisers, the opinion painstakingly reviews the entire process of corporate sales, examining the motivations and control of board members, senior management and third-party advisers.

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