Once the entire fairness standard is triggere the corporate board has the burden to demonstrate that the transaction is inherently fair to the stockholders by demonstrating both fair dealing (i.e., process) and fair price (i.e., substance). Overview of the Business Judgment Rule. The business judgment rule is “a rule of law that . Legal standard of review used to evaluate “interested transactions,” or dealings between a corporation and a controlling shareholder.
It includes two aspects: fair dealing and fair price. Entire fairness standard of review. Legal standard used to evaluate “interested transactions,” or dealings between a corporation and a controlling shareholder. The burden of proof lies with the plaintiff to prove that this standard has not been met. If the the plaintiff meets the burden, the defendant fiduciary can still meet the duty of care by showing entire fairness , meaning that both a fair process was used to reach the decision and that the decision produced a substantively fair . The Delaware Court of Chancery has issued an important decision clarifying the application of the “ entire fairness ” and “business judgment rule” standards in a going-private transaction involving a controlling stockholder.
Shareholder Litigation, C. CC (Del. Ch. Oct. 2009). Allan state these levels are: the deferential business judgment rule, the Unocal or Revlon enhanced scrutiny standard the stringent standard of entire fairness.
The first and most deferential standard , the business judgment rule, has become virtually a rubber-stamp in Delaware corporate law for corporate boards to . Delaware has three tiers of review for evaluating director decision-making: the business judgment rule, enhanced scrutiny, and entire fairness. It presumes that “in making a business decision the directors of a corporation acted on an informed . While not insurmountable, the entire fairness standard is so exacting that the determination of the appropriate standard of judicial review frequently is determinative of the outcome of the derivative litigation. The Delaware Supreme Court has indicated that the entire fairness standard was applicable only in cases in .