The new recently updated Sixth Edition of The Business
Judgment Rule: Fiduciary Duties of Corporate Directors explores the
latest developments in the law in Delaware and all other jurisdictions that
have addressed business judgment rule and related corporate governance
issues, as well as the most recent cases exploring the breadth and limits of
the business judgment rule.
Meticulously researched and expertly analyzed by Stephen A. Radin, partner at
Weil, Gotshal & Manges, LLP, and one of the most respected and experienced
practitioners in the field, The Business Judgment Rule: Fiduciary Duties
of Corporate Directors provides the timely authoritative guidance you
need. The author seamlessly combines cases, statutory provisions and
commentary to help you make sense of the constantly changing body of law, even
as the courts struggle to adapt the rule in new contexts.
The Business Judgment Rule, Sixth Edition spotlights such vital
areas as—
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duty of care issues
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duty of loyalty issues
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disinterestedness and independence issues
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the emerging good faith doctrine
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oversight and the Caremark doctrine
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compensation
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stock option backdating
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controlling shareholder transactions
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special committees
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disclosure obligations
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appraisal
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financially troubled companies and the zone of insolvency
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defensive measures
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deal protection measures
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shareholder derivative litigation
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the pre-litigation demand requirement
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Section 220 demands
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indemnification of directors and officers
The Business Judgment Rule: Fiduciary Duties of Corporate
Directors, Sixth Edition is a powerful legal tool. It’s the most
complete, most current, most practical guide in the corporate governance arena
available to working professionals today.
VOLUME I
Chapter I. The Business Judgment Rule–An Introduction
A. Historical Origins
B. Rationale
C. The Rule’s Presumption and Its Effect
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1. The Presumption
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2. The Shareholder Plaintiff’s Burden
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3. The Fairness Standard Where the Presumption Is Overcome
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4. Business Judgment Versus Fairness
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5. Collective Versus Director-By-Director Review of Director Conduct
D. Elements of the Rule
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1. A Business Decision
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2. Disinterestedness and Independence
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3. Due Care
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4. Good Faith
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5. No Abuse of Discretion
E. Fraud, Illegality and Ultra Vires Conduct
F. Waste
G. Application of the Business Judgment Rule to Officers
H. Efforts to Codify the Business Judgment Rule
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1. The Model Business Corporation Act
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2. Principles of Corporate Governance: Analysis and Recommendations
Chapter II. Fiduciary Duties of Corporate Directors and Controlling
Shareholders
A. The Director’s Duty of Care
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1. The Relationship Between the Business Judgment Rule and the Duty of Care
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2. The General Standard of Care
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3. Oversight and Monitoring
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4. Liability
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5. Reliance and Delegation
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6. Shareholder Ratification
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7. Director Protection Statutes
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8. Directors of Financial Institutions
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9. Considerations Involving Damages
B. The Director’s Duty of Loyalty
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1. The Relationship Between the Business Judgment Rule and the Duty of Loyalty
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2. Interested Director Transactions
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3. The Corporate Opportunity Doctrine
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4. Director and Officer Compensation
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5. Stock Options
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6. Insider Trading
C. The Controlling Shareholder’s Duty of Loyalty
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1. The Definition of Control
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2. The Controlling Shareholder’s Rights as a Shareholder Versus its Fiduciary
Duties as a Controlling Shareholder
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3. Sale of Control at a Premium
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4. The General Scope of the Controlling Shareholder’s Obligation to
Demonstrate Fairness
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5. Parent-Subsidiary Transactions: Sinclair and Its Progeny
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6. Wholly-Owned Subsidiaries
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7. Two Roads to Going Private: Merger Agreements and Tender Offers Followed by
Short-Form Mergers
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8. Merger Agreements with Controlling Shareholders
VOLUME II
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8. Merger Agreements with Controlling Shareholders (Cont'd)
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9. Tender Offers by Controlling Shareholders Followed by Short-Form Merger
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10. Efforts to Unify the Legal Standards Governing the Two Roads to Going
Private
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11. The Fairness Standard in Controlling Shareholder Transactions Other Than
Going Private Transactions
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12. Principles of Corporate Governance and the Committe on Corporate Laws
Guideline
D. Appraisal
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1. Procedural Prerequisites
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2. Determining Fair Value
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3. Differences Between Appraisal and Fiduciary Duty Proceedings
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4. When Appraisal Constitutes an Exclusive Remedy
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5. The Different Rules Governing Short-Form Mergers
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6. Quasi-Appraisal
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7. Interest in Appraisal Cases
E. The Duty of Disclosure
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1. The Reach of the Duty of Disclosure and the Difference Between Cases Where
Shareholder Action Is and Is Not Requested
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2. The Role of the Business Judgment Rule
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3. Materiality
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4. Remedies
F. Acquiescence
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1. The Supreme Court’s Bershad Rule
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2. Court of Chancery Decisions Limiting Bershad in Light of Lynch and Rabkin
G. Wrongful Coercion
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1. Voting
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2. Offers to Purchase Shares
H. Conflicts Among Shareholders
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1. The Extent to Which Common Shareholders Must Be Treated Equally
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2. Involving Different Classes of Common Stock
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3. Preferred Shareholders
I. Fiduciary Duties of Directors of Financially Troubled Corporations
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1. Fiduciary Duties Generally Not Owed to Creditors of Solvent Corporations
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2. The Fiduciary Duties Owed to Creditors – and the Community of Interests –
of Insolvent Corporations
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3. Determining When a Corporation Is Insolvent
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4. The “Vicinity” or “Zone” of Insolvency
Chapter III. The Business Judgment Rule in Transactions Involving Defensive
Measures, Corporate Control and Merger Agreements
A. Introductory Issues
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1. Should the Rule Apply to Defensive Measures at All?
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2. The Unocal Doctrine
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3. The Revlon and QVC Doctrine
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4. The Blasius Doctrine
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5. Consideration of Non-Shareholder Constituencies
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6. Standing Considerations
B. White Squire Stock Transactions
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1. Friendly Stock Acquisitions
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2. Employee Stock Ownership Plans (“ESOPs”)
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3. Bridge Financing
C. Crown Jewel Asset Sales
D. White Knight Transactions and Deal Protection Measures in Merger
Agreements
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1. Leg-Up and Lock-Up Stock Options
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2. Lock-Up Asset Options
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3. No Shop, No Talk and Fiduciary Out Provision
VOLUME III
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3. No Shop, No Talk and Fiduciary Out Provision (Cont'd)
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4. Market Check and Go Shop Provisions
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5. Termination Fees and Expense Reimbursement Provisions
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6. Matching Rights
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7. Topping Fees
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8. Non-Termination Provisions
E. Self-Tender Offers, Exchange Offers and Extraordinary Dividends
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1. Self-Tender Offers and Exchange Offers
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2. Extraordinary Dividends
F. Super-Voting Common Stock
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1. Statutory Authority for Super-Voting Stock
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2. SEC Rule 19c-4 and Its Aftermath
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3. Cases Upholdingthe Adoption of Super-Voting Stock Plans
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4. Cases Enjoining the Adoption of Super-Voting Stock Plans
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5. Claims Involving Previously Adopted Super-Voting Stock Plans
G. Poison Pill Shareholder Rights Plans
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1. Adoption of Poison Pill Rights Plans
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2. Use of Poison Pill Rights Plans During a Contest for Control
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3. Shareholder Resolutions
H. Shareholder Meeting Dates and Shark Repellent Charter and Bylaw
Provisions
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1. Shareholder Meeting Dates
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2. Shark Repellent Charter and Bylaw Provisions
I. Golden Parachute Severance Agreements
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1. Barriers to Judicial Review
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2. The Standard of Review
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3. Legislation
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4. Funding Trusts
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5. Employee Tin Parachutes
J. Antitrust and Other Regulatory Defenses
K. The Pac-Man Defense
L. Litigation
M. Settlements
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1. Greenmail
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2. Standstill Agreements
Chapter IV. The Business Judgment Rule in Shareholder Derivative Litigation
A. The Nature of Shareholder Derivative Litigation and the Special Rules
Governing Shareholder Derivative Litigation
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1. Basic Principles
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2. Distinguishing Derivative from Non-Derivative Actions
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3. Heightened Pleading Requirements
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4. The Contemporaneous and Continuing Ownership Requirements
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5. The Fair and Adequate Representation Requirement
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6. Security for Expenses
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7. The Demand Requirement
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8. Termination by Special Litigation Committee
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9. Settlement
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10. Double Derivative Actions
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11. Diversity Jurisdiction Issues
B. The Demand Requirement
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1. Basic Principles
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2. Demand Futility
VOLUME IV
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2. Demand Futility (Cont'd)
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3. Wrongful Refusal
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4. Universal Demand States
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5. Section 16(b) Cases
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6. Demand on Shareholders
C. Termination by Special Litigation Committees
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1. The Power to Terminate
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2. The Scope of Judicial Review – Auerbach Versus Zapata
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3. Special Litigation Committee Independence
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4. Discovery on the Termination Issue
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5. The Special Litigation Committee – Some Practical Considerations
D. Derivative Litigation in General Partnerships, Limited Partnerships and
Limited Liability Companies
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1. The Demand Requirement
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2. Refusals of Demands
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3. Special Litigation Committees
E. Privilege and Work Product Considerations
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1. The Garner Doctrine
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2. Privilege in the Context ofa Board Committee Investigation
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3. Public Access to Court Filings
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4. Perrigo
F. Section 220 Books and Records Inspections
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1. The Development of Section 220 as a “Tool at Hand”
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2. The Required Showing of Mismanagement
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3. The Scope of the Inspection
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4. Privilege and Work Product Issues
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5. Confidentiality Issues
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6. Subsidiaries
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7. Requests for Books and Records by Directors and Former Directors
Chapter V. Indemnification and Insurance
A. Indemnification
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1. Policy Considerations
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2. Directors, Officers, Employees and Agents
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3. Mandatory Indemnification
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4. Permissive Indemnification
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5. Advancement
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6. Court-Ordered Indemnification and Advancement
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7. Types of Proceedings Covered
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8. Types of Conduct Covered
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9. Expenses Incurred Other Thanas a Defendant
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10. and Non-Exclusivity Provisions
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11. Additional Public Policy Limitations
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12. Notice to Shareholders
B. Insurance
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1. Statutory Provisions Authorizing Insurance
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2. The Need for Insurance
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3. Public Policy Limitations
C. The D & O Crisis of the Mid-1980s and Its Aftermath
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1. The Crisis
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2. Responses
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3. The Market Since the 1980s
Table of Cases and Other Authorities
