Guidance For Special Committees Handling Conflict Transactions
To manage conflict transactions within Delaware corporations, the boards of directors are advised to form special committees consisting of independent directors. The transactions may involve controlling stockholders, corporate insiders or affiliated entities and may include:
- “Going private” transactions
- Purchases or sales of assets
- Mergers and acquisitions
The committee should be well prepared and educated in the rules of the committee processes. Delaware’s standard of review for conflict transactions is “entire fairness” in terms of the price and process of a transaction. Members of the committee should have the ability to negotiate or reject the conflict transaction.
Corporate decision-makers often realize that they need legal counsel as special committees prepare to execute their duties. Chipman Brown Cicero & Cole, LLP, in Wilmington, Delaware, advises corporate clients forming special committees to help them prevent conflicts of interest, preserve stockholder value and stay ready for potential challenges in litigation before the Delaware Court of Chancery.