2 Del. Decisions Call Out Conflicted Controlling Stockholders

Law360 (October 30, 2019, 6:06 PM EDT) -- Two recent Delaware Chancery Court decisions — Tornetta v. Musk et al. and In re BGC Partners Inc. Derivative Litigation — highlight the Delaware courts’ "reflexive skepticism," in the words of Vice Chancellor Joseph Slights, with respect to transactions involving conflicted controllers.

The court emphasized in these cases the potential for coercive influence by controlling stockholders over directors (who the controller typically can remove or not reappoint) and unaffiliated stockholders (who the controller can harm through retributive acts such as a squeeze-out merger or cutting dividends).

Retiring Delaware Chief Justice Leo Strine characterized controllers as “800-pound gorillas" in a previous case, quoted in...

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