DealLawyers.com Blog

Faegre Drinker’s Oderah Nwaeze and Angela Lam recently put together this handy overview of Delaware’s fiduciary duty of disclosure. The article reviews what the duty of disclosure requires, the settings in which disclosure claims are typically brought, and offers some guidance to boards on how to satisfy their duty of disclosure. This excerpt discusses one area where disclosure claims frequently arise – management projections:

– Delaware law does not require disclosure of all financial projections, especially if they are speculative, unreliable, or not relied upon by the financial advisor.

– But financial projections made in the ordinary course of business and used by financial advisors are typically considered reliable and should be disclosed if relied upon.

– The failure to disclose financial projections may be considered a material omission depending on the specifics.

– And selective disclosure of only some projections can be misleading, causing courts to find that the partial disclosure was inadequate if omitted information would be material to a reasonable stockholder.

Other sources of disclosure claims identified by the authors include financial advisor compensation and conflicts, descriptions of the merger sale process, and director nominations and removal.

– John Jenkins