Significant 2017 Decisions Affecting Private M&A: Part 2

The first two of the decisions in part two of this three-part series are Delaware Court of Chancery fiduciary duty cases relating to controlling stockholders. The third decision concerns a takeover defense, and makes clear that under Delaware law, bylaws cannot require supermajority stockholder approval for removal of directors.

Frederick Hsu Living Trust v. ODN Holding Corp. (April 14, 2017)

Selling company assets in order to generate funds to satisfy an obligation to redeem preferred stock may violate a board's fiduciary duties to residual claimants; fiduciary duties may require boards to commit an "efficient breach" of the redemption obligation.

In Frederick Hsu Living Trust, the Delaware Chancery Court refused to dismiss fiduciary duty claims against certain officers and directors of ODN Holding Corp. (the company) and its controlling venture capital fund for improperly favoring the fund's interests, to the detriment of other stockholders, in connection with