Six months ago, Delaware Vice Chancellor Laster issued a post-trial opinion in In re Trados Inc. Shareholder Litigation, 73 A.3d 17 (Del. Ch. Aug. 16, 2013), which sparked a great deal of interest. In Trados the court held that management directors, the directors appointed by the venture capital (VC) investors, and one ostensibly independent director with strong ties to another VC were personally interested in a merger transaction that triggered payments on the preferred stock to VC investors while paying common stockholders nothing. Moreover, the court found the board had wrongfully considered only the interests of the preferred stockholders, to the exclusion of common stockholders, and failed to institute any procedural safeguards for common shareholders in approving the merger. These facts combined to require application of the entire fairness standard of review. Even though the court found the board’s process was procedurally unfair, it nevertheless found the transaction satisfied the entire fairness standard based on price alone.
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