Supreme Court Ruling On Disclosure Obligation

Last October 12th, the Supreme Court dismissed the investors' appeal, who, by way of a class proceeding, were alleging wrongdoing on the part of Danier Leather Inc. (Danier)¹ for omitting to disclose poor intra-quarterly results before the closing of its initial public offering.

Many legal issues were ruled by the Supreme Court in this matter, but we wish to deal in particular with the conclusions concerning the Business Judgment Rule in the context of non disclosure of lower results to the results forecasted in the prospectus.

The Business Appreciation Rule is a shield often used in the defense of directors when business decisions become matters of litigation, and thus, frequently constitutes a defense in a liability proceeding against directors.