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- Title
EXPANDING MFW: DELAWARE LAW SHOULD OFFER A BUSINESS JUDGMENT RULE SAFE HARBOR FOR ALL CONFLICTED CONTROLLER TRANSACTIONS.
- Authors
Lindsey, Alex
- Abstract
While courts usually defer to a board's business decisions under the business judgment rule, courts will apply a much less deferential standard of review due to loyalty concerns if a conflicted controller is involved in a business decision such as a merger. However, in Kahn v. M & F Worldwide ("MFW") when a squeeze out merger was challenged by a minority stockholder, the Delaware Supreme Court reviewed the transaction under the deferential business judgment rule standard because the Court found that the structure of the transaction neutralized the controller loyalty concerns. Building on this reasoning, the Court developed a checklist of procedural protections (the "MFW factors") that, if followed, can allow a controller to earn business judgment rule deference in a squeeze out merger transaction. The Delaware Chancery Court has since applied the MFW factors and granted business judgment rule deference in other types of conflicted controller transactions such as controller compensation packages. However, the legitimacy of this expansion of MFW remains uncertain. This Note discusses the background leading up to the development of the MFW factors, analyzes the effectiveness of the MFW factors in squeeze out mergers specifically, and considers the expansion of the MFW factors beyond squeeze out mergers. Ultimately, this Note proposes that, even though the MFW factors were developed in the context of squeeze out mergers specifically, the MFW factors should be expanded to apply to all conflicted controller transactions because the factors target the loyalty concerns present in all conflicted controller transactions.
- Subjects
SAFE harbor; MINORITY stockholders; MERGERS &; acquisitions; APPELLATE courts; CONSTITUTIONAL courts; COMMERCIAL courts; CUSTOMER loyalty
- Publication
Fordham Journal of Corporate & Financial Law, 2023, Vol 29, Issue 1, p339
- ISSN
1532-303X
- Publication type
Article