DealLawyers.com Blog

June 1, 2016

Projections: Board Found Liable for Not Using Them

Here’s the summary of this Fried Frank memo:

The Delaware Court of Chancery’s decision in Chelsea Therapeutics Stockholder Litigation (May 20, 2016) underscores the benefits of disclosure to stockholders with respect to a board’s decision—in valuing the company in connection with a sales process—to not take into account (or to modify or revise) projections prepared by management. It should be noted that the court’s discussion highlights that, as reflected in the trend of Delaware decisions over the past couple of years, as a practical matter, the only viable path to liability of directors in a post-closing damages action—absent egregious facts—is a claim that the directors were conflicted (i.e., that the directors were not independent and disinterested).