LITIGATION TRENDS 2025 | 113 T O C E M P E S G A N T I I P C A P R O W C S P O R T C O N T A C T I N T A P P P A T C C L S E C directors are not disinterested directors, then the transaction must be approved (or recommended for approval) by a committee that consists of two or more directors, each of whom the board has determined to be a disinterested director with respect to the transaction); or (ii) the transaction is approved or ratified by an informed, uncoerced, affirmative vote of a majority of the votes cast by the disinterested stockholders. ■ Controlling Stockholder Going Private Transactions: New Section 144(b) of the DGCL provides a safe harbor for controlling stockholder going private transactions if: (i) the material facts as to such controlling stockholder transaction are disclosed or known to all members of a committee of the board of directors to which the board has expressly delegated the authority to negotiate (or oversee the negotiation of) and to reject such controlling stockholder transaction and such controlling stockholder transaction is approved (or recommended for approval) in good faith and without gross negligence by a majority of the disinterested directors then serving on the committee; and (ii) such controlling stockholder transaction is conditioned, by its terms, as in effect at the time it is submitted to stockholders for their approval or ratification, on the approval of or ratification by disinterested stockholders, and such controlling stockholder transaction is approved or ratified by an informed, uncoerced, affirmative vote of a majority of the votes cast by the disinterested stockholders. The amendments eliminate, among other things, timing constraints under existing Delaware case law for when the dual protections must be implemented to afford the protection of the safe harbor, as well as the requirement that the committee must be entirely disinterested and independent. ■ Other Transactions Involving Controlling Stockholders: For transactions involving controlling stockholders other than going private transactions, new Section 144(c) of the DGCL provides a safe harbor if such transactions are approved by either a disinterested director committee or a disinterested stockholder vote, as described more fully above. These amendments supplant existing case law requiring the dual protections of both disinterested committee approval and a disinterested stockholder vote to reclaim the protections of the business judgment rule in all transactions in which a controlling stockholder stands on both sides and receives a material, non-ratable benefit. ■ Definition of Controlling Stockholder and Exculpation: Amended Section 144 of the DGCL defines a controlling stockholder or control group as anyone who (i) owns or controls a majority in voting power of outstanding stock, (ii) has the right to nominate the majority of the board, or (iii) “[h]as the power functionally equivalent to that of a stockholder that owns or controls a majority in voting power of the outstanding stock” by owning at least one third of the voting power or the power to elect a majority of the directors and the ability to “exercise managerial authority over the business and affairs of the corporation.” Additionally, controlling stockholders cannot be held liable for monetary damages for breaches of their duty of care. ■“Disinterested Director” Presumption: Amended Section 144 of the DGCL defines a “disinterested director” as one who is (i) not a party to the transaction, and (ii) lacking both a material interest in a transaction or a material relationship with a person who has a material interest in the transaction. A director of a corporation whose stock is traded on a national stock exchange is presumed to be a disinterested director if the board has determined that the director satisfies the relevant stock exchange listing criteria for independence vis-à-vis the company and the controller or control group. This presumption “shall be heightened” and may only be rebutted by “substantial and particularized facts” that the director has a material interest (as defined by the statute) in S Securities Litigation 112 | Weil, Gotshal & Manges LLP
RkJQdWJsaXNoZXIy MTI5NDgyMg==