Sellers Beware: Fiduciary Duty Risks to Directors | Sheppard Mullin Richter & Hampton LLP jdsupra.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from jdsupra.com Daily Mail and Mail on Sunday newspapers.
Sellers Beware: Fiduciary Duty Risks to Directors Wednesday, March 17, 2021
A recent decision by a New York federal district court illustrates significant potential pitfalls for sellers in leveraged buyouts and similarly structured transactions. In particular, it highlights the potential risks under fiduciary duty theories to directors and private equity-appointed directors, even in multi-step transactions with customary disclaimers and exculpatory by-laws.
In
In re Nine West LBO Securities Litigation, Case No. 20-2941. 2020 WL 7090277 (S.D.N.Y. Dec. 4, 2020), the United States District Court for the Southern District of New York entered an order granting in part and denying in part motions to dismiss for various claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and violations of 15 Pa. Cons. Stat. §§ 1551 and 1553. The Court’s reasoning potentially creates serious ramifications with respect to fiduciaries’ obligations to
Much ado about … not much? While not a major paradigm shift in the fiduciary duty standard applicable to directors considering corporate change-of-control transactions, t.
Review of Target Board LBO Practices May Be Warranted Based on the Nine West Decision-But We Believe the Decision s Impact Has Been Overstated lexology.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from lexology.com Daily Mail and Mail on Sunday newspapers.
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A recent ruling from the United States District Court for the Southern District of New York sent shock waves through the legal and financial community, with some shouting that this “could be a gamestopper for the private equity business.”
1 Although the ruling in
In re Nine West LBO Securities Litigation
2 breaks new ground and arguably narrows the protections available to directors under the normally-broad business judgment rule, there are clear lessons others can take from this saga to prevent a similar fate.
The headline issue that has people up in arms is the court’s holding that directors of a selling corporation may lose the benefit of the business judgment rule and be held liable, under a breach of fiduciary duty theory, for not undertaking a reasonable investigation into the company’s post-sale solvency and the propriety and effect of any contemplated post-closing transactions that could be considered