In a recently issued letter decision, the Delaware Court of Chancery reiterated the general rule that directors have an unencumbered right to access corporate information (with certain exceptions). The case involves a dispute between two groups of directors—those affiliated with a controlling stockholder, and those that are not. An affiliated director filed a motion to compel the production of information, including corporate communications between (1) unaffiliated directors and officers of the corporation and company counsel; and (2) members of a special committee formed specifically to negotiate with the controlling stockholder and that committee’s own independent counsel. The court largely granted the affiliated director’s request, with the exception of communications between the special committee and its counsel.
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The Corporate Council of the Corporation Law Section of the Delaware State Bar Association released proposed legislation to amend certain provisions of the Delaware General Corporation Law (DGCL). The proposed amendments are primarily technical and attempt to clarify and resolve certain ambiguities and inconsistencies in the DGCL by, among other changes, (1) further align the merger statutes with the appraisal statute and (2) clarify the manner in which defective corporate acts may be ratified.
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In a stark application of the adage that one should be careful what one wishes for—because one may get it—on May 30, Vice Chancellor Sam Glasscock III of the Delaware Chancery Court issued an opinion in In re Appraisal of SWS Group, Inc. (C.A. No. 10554-VCG), a stockholder lawsuit seeking appraisal for the shares of SWS Group, Inc. (SWS), a financially struggling bank and broker-dealer firm. The appraisal claim arose out of the merger of SWS with Hilltop Holdings Inc. (Hilltop) in January 2015. The court’s decision on the fair value of the SWS shares reduced the price paid to dissenting stockholders from the merger price of $6.92 per share, payable in a mixture of cash and stock, to $6.38, payable in cash. This decision, and the resulting 7.8 percent reduction in consideration, demonstrates the risks inherent in “appraisal arbitrage.”
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