Delaware Mitigates Litigation Risk In Going Private Transactions

SMART SUMMARY

• Recent amendments to the Delaware General Corporation Law afford safe-harbor protections for sponsors taking part in going private transactions, welcome clarifications that should (in the long run) reduce litigation risks.
• The amendments demonstrate Delaware's commitment to remaining a top jurisdiction for blue-chip corporate law and M&A.

Recent Delaware law developments should reduce litigation risks for sponsors engaged in going private transactions. First, for controlling stockholder "going private" transactions where a private equity sponsor may seek to squeeze out minority stockholders, Section 144 of the Delaware General Corporation Law (the "DGCL") now provides a safe-harbor to potentially insulate such transactions from stockholder challenge and judicial review. Second, the Delaware Supreme Court recently reaffirmed the high bar for establishing "aiding and abetting" claims against a third-party acquiror. More detail can be found here.