September 19, 2008

Will Uncle Sam be a Controlling Stockholder with Fiduciary Duties at AIG?

Here is a guest blog from Steven Haas of Hunton & Williams:

The bailout of AIG gave the Federal Reserve a warrant to obtain 79.9% of the company’s outstanding shares. Since AIG is a Delaware corporation, it would appear the Fed would then owe fiduciary duties to AIG’s minority stockholders. In theory, all of this could mean that any subsequent transaction between AIG and the Fed could be reviewed for entire fairness under Delaware law. Of course, there’s also Delaware case law stating that a controlling stockholder can exercise its rights in its capacity as a creditor without self-sacrifice. And I’ll leave it to the Con law experts to consider sovereign immunity and other federal issues. Nevertheless, I’m sure there’s some plaintiffs lawyers dreaming right now, and we’re all waiting with curiosity to see the Fed file a 13D…

[Note that yesterday, I also blogged on unrelated issues regarding the 79.9% stake in AIG on (eg. Section 16 reporting by the Fed).]