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Having a Board of Director: Three Things to Consider

February 13, 2017

R. Shawn McBride recently published an article to the McBride For Business Blog on a topic that might be of interest: Having a Board of Directors: Three Things to Consider.

He examines how companies are using a board of directors for advice.

You can see the full article here.

This posting is intended to be a tool to familiarize readers with some of the issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Read the rest

Maryland Law Update: How a Board Might Exercise Business Judgment When a Shareholder Makes a Demand (Part III)

August 11, 2016

In Oliveira v. Sugarman,[1] the Court of Special Appeals of Maryland said that, in reviewing corporate decisions made by a board of directors, it needs to consider the business judgment rule—a presumption that the board acted on an informed basis, in good faith, and in the honest belief that the action taken was in the best interests of the company. The court explained that a shareholder derivative action, like this one, begins with a demand on the board and the board is required to make a decision as to whether to pursue the demanded lawsuit.… Read the rest

Maryland Law Update: How a Board Might Exercise Business Judgment When a Shareholder Makes a Demand (Part II)

August 4, 2016

In Oliveira v. Sugarman,[1] two shareholders of iStar Financial Inc. (“iStar”), a Maryland corporation, sued former and current members of the company’s board of directors and senior management regarding employee compensation plans. In 2009, iStar approved an executive compensation plan to award shares of the company based on stock performance in order to retain key employees and to reduce the company’s tax burden. During the financial crisis, however, iStar became concerned that it did not have enough shares available for the performance-based awards and that key employees might leave for better-paying opportunities.… Read the rest

Maryland Law Update: How a Board Might Exercise Business Judgment When a Shareholder Makes a Demand (Part I)

July 28, 2016

In our previous blog series on Texas Double-Derivative Shareholder Suit, we introduced the concept of business judgment rule—the presumption that directors or managers, in performing their functions, were honest and well-meaning and that their decisions were informed and in the best interests of the company. We then delved a little deeper into the concept in another blog on the business judgment rule under New York law and discussed when board decisions might not be protected under the business judgment rule.… Read the rest

Delaware Law Update: The Meaning of “Control” in “Controlling Stockholder” (Part II)

April 21, 2016

In Calesa Associates, L.P. v. American Capital, Ltd., a group of minority stockholders of Halt Medical, Inc. (the “company”) filed a lawsuit for breaches of fiduciary duty in connection with a corporate transaction against current and former directors of the company and a stockholder that allegedly controlled them, American Capital, Ltd. and its affiliates (collectively, “American”).[1]  According to the minority stockholders, American owned 26% of the company prior to the transaction at issue and exercised sufficient control over the company’s board of directors. … Read the rest

Delaware Law Update: When Is a Stockholder’s Pre-Suit Demand Excused? (Part II)

April 19, 2016

Delaware County Employees Retirement Fund v. Sanchez involved a complicated business transaction between a private company wholly owned by the family of A.R. Sanchez and a public company in which the Sanchez family formed the largest stockholder bloc.[1]  The plaintiff stockholders alleged that the transaction between the two companies resulted in a gross overpayment by the public company and unfairly benefited the private company (that is, the Sanchez family).  The Court of Chancery dismissed the complaint, finding that the plaintiffs failed to show that a pre-suit demand on the public company’s board of directors was excused. … Read the rest

Delaware Law Update: The Meaning of “Control” in “Controlling Stockholder” (Part I)

April 14, 2016

We write frequently about minority shareholder rights here.  We started with Ritchie v. Rupe, a Texas Supreme Court case that completely changed the lay of the land by making it harder for minority shareholders to bring lawsuits based on oppressive conduct by majority shareholders (see here).  We discussed Bontempo v. Lare (available here), a Maryland case on remedies for shareholder oppression, which, in addition to dissolution, recognized equitable remedies such as accounting for allegedly misappropriated funds, appointment of a receiver for the purposes of continued operation of the corporation, issuance of an injunction to prohibit oppressive conduct, and damages to minority shareholders as compensation for oppressive conduct, to name just a few. … Read the rest

Delaware Law Update: When Is a Stockholder’s Pre-Suit Demand Excused? (Part I)

April 12, 2016

In our recent blog post on Wandel v. Dimon, we discussed stockholder’s pre-suit demand.[1]  For those who are not familiar with pre-suit demand, Delaware law requires stockholders to serve a pre-suit demand on the corporation’s board of directors before they can bring a derivative lawsuit on behalf of the corporation, unless doing so would be futile.  In Wandel, the stockholders failed to serve a pre-suit demand and claimed that it would have been futile because at least a majority of the board was not independent. … Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.