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Program on Corporate Governance Advisory Board
- Peter Atkins
- David Bell
- Kerry E. Berchem
- Richard Brand
- Daniel Burch
- Paul Choi
- Jesse Cohn
- Arthur B. Crozier Christine Davine
- Renata J. Ferrari
- Andrew Freedman
- Ray Garcia
- Byron Georgiou
- Joseph Hall
- Jason M. Halper William P. Mills
- David Millstone
- Theodore Mirvis
- Philip Richter
- Elina Tetelbaum
- Sebastian Tiller
- Marc Trevino Jonathan Watkins
- Steven J. Williams
HLS Faculty & Senior Fellows
The Delaware Law Series
When (and When Not) to Form a Special Committee in Activist Defense and M&A
Melissa Sawyer, Lawrence S. Elbaum, and Jacob M. Croke are Partners at Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell memorandum by Ms. Sawyer, Mr. Elbaum, Mr. Croke, Emma Ouellet Lizotte, H. Rodgin Cohen, and Marc Treviño.
Summary
Establishing a special committee is a common corporate governance practice in the context of transactions involving insiders, controlling stockholders or other related persons (so called “conflict transactions”). Special committees are designed to create a record of independent decision-making. That said, in other circumstances, special committees are not generally necessary or advisable and may be counterproductive. In most cases, a well-advised board can respond effectively to an unsolicited proposal or address an activist threat without a special committee. This memo addresses key points boards should bear in mind when considering whether to form a special committee and offers practical guidance and potential alternatives.
Keynote Address by Chair Atkins on Revitalizing Public Company Appeal
Paul S. Atkins is the Chairman of the U.S. Securities and Exchange Commission. This post is based on his recent keynote address. The views expressed in the post are those of Chairman Atkins and do not necessarily reflect those of the Securities and Exchange Commission or its staff.
Good evening, ladies and gentlemen. Thank you, Larry [Cunningham], for your generous introduction and your kind invitation for me to be here today. It is an honor and pleasure for me to participate in the Weinberg Center’s twenty-fifth anniversary. Larry, I should also like to congratulate you on your recent appointment as director of the Center. I know that you are deeply devoted to the Center’s mission, and I am confident that you will contribute to its work in extraordinary ways, consistent with the excellence that has defined your career.
Tonight marks my third time attending this forum, but my first as SEC Chairman. So, I am sure that you appreciate that the views I express here are in my capacity as Chairman and do not necessarily reflect those of the SEC as an institution or of my fellow Commissioners. With that disclaimer out of the way, it is a pleasure to return to the Weinberg Center—and a special privilege to do so tonight. For a quarter century, the Center has distinguished itself as one of the premier and longest-standing corporate governance institutions in academia. Its insights command the attention of practitioners in boardrooms and courtrooms alike. And tonight, we convene not only to honor the Center’s legacy, but also to build on it.
What to Keep in Mind for Your Next Purchase Price Adjustment Provision
Frank Favia and Jonathan Dhanawade are Partners, and Andrew Stanger is Knowledge Counsel at Mayer Brown. This post is based on their Mayer Brown memorandum, and is part of the Delaware law series; links to other posts in the series are available here.
Deal parties often opt to delegate purchase price adjustment (“PPA”) disputes to an accounting expert in the belief that such private proceedings will avoid the involvement of courts and related expenses. A recent Delaware Chancery Court decision provides important guidance on commonly used accounting principles for post-closing PPA disputes and the interplay between PPA mechanisms and indemnification provisions. It also demonstrates that an expert determination of PPA disputes, as typically formulated in M&A agreements, can be subject to more court oversight than the parties might anticipate, adding considerable time and expense to the process. The court’s ruling underscores the importance of clear contractual drafting and careful navigation of post-closing dispute processes.
Delaware Supreme Court Continues to Narrow Aiding and Abetting Liability for Acquirers
Robin E. Wechkin is Counsel at Sidley Austin LLP. This post is based on her Sidley memorandum and is part of the Delaware law series; links to other posts in the series are available here.
Overview and Legal Framework
On June 17, 2025, the Delaware Supreme Court for the second time in six months reversed a post-trial damages award against an acquiring company accused of aiding and abetting breaches of fiduciary duty by target company management. The June 17 decision is In re Columbia Pipeline Group, Inc., Merger Litigation, 2025 WL 1693491 (Del. June 17, 2025). The earlier decision is In re Mindbody, Inc. Stockholder Litigation, 332 A.3d 349 (Del. 2024).
In both cases, stockholder plaintiffs alleged that target company officers looking for an exit elevated their personal financial interest in getting a deal done over their fiduciary duty to extract the best possible sale price for stockholders. In Mindbody, the plaintiffs’ theory was that the acquirer aided and abetted management’s breach of disclosure duties by allowing a misleading proxy statement to be filed. In Columbia Pipeline, the plaintiffs’ theory was broader: Plaintiffs alleged that the acquirer aided and abetted not only disclosure breaches but also sale process breaches throughout the parties’ negotiations. In both cases, the Supreme Court focused on a single element of an aiding and abetting claim — “knowing participation” in the underlying breach. The Court set out detailed and demanding standards for both “knowing” (i.e., scienter), and “participation” (i.e., substantial assistance).
A Decade Later, the Corwin Doctrine Still Packs a Knockout Punch
Edward B. Micheletti is a Partner, and Nick G. Borelli is an Associate at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on their Skadden memorandum, and is part of the Delaware law series; links to other posts in the series are available here.
The Delaware Supreme Court’s 2015 decision in Corwin v. KKR Financial Holdings LLC [1] reshaped the landscape of merger and acquisition litigation by establishing a powerful defense for Delaware companies. Under the Corwin doctrine, when there is no conflicted controller, and a transaction is approved by a fully informed, uncoerced stockholder vote, an irrebuttable business judgment presumption applies, leaving only claims for waste.
This high bar for stockholder-plaintiffs has made Corwin a cornerstone of Delaware corporate law. The doctrine has been applied in a number of cases in the past year, which demonstrate Corwin’s continuing vitality as a tool to dismiss post-closing fiduciary duty claims.
This article examines several cases — Anaplan, Krevlin v. Ares, Zendesk, and Desktop Metal [2] — which exemplify how Delaware courts have applied Corwin to dismiss matters, and provide insights for practitioners navigating deal-related disputes. Most importantly, these cases demonstrate that, even amidst important statutory changes like newly-amended Section 144 of the Delaware General Corporation Law (which provides safe harbors for conflicted transactions), Corwin remains a potent weapon in the corporate arsenal and complements the new safe harbors with a potential, alternate route for dismissal.
Delaware Rulings on M&A Indemnification Provisions Stress the Need for Careful Drafting
Edward B. Micheletti is a Partner, and Nick G. Borelli and Jonathan F. Garcia are Associates at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on their Skadden memorandum, and is part of the Delaware law series; links to other posts in the series are available here.
Delaware courts are frequently called upon to interpret indemnification provisions linked to representations and warranties, which serve as potential remedies for losses, dictating when and how one party must make whole the other. Transaction parties often heavily negotiate indemnification provisions because they are valuable mechanisms for allocating risks and transaction costs.
Three recent Delaware opinions underscore the importance of (i) defining the scope of indemnification to avoid ambiguity, (ii) signaling when compliance with a provision is material and (iii) determining how to calculate damages.
Delaware Courts Nix Unripe Challenges to Advance Notice Bylaws and Uphold Bylaws Adopted ‘on a Clear Day’
Jenness E. Parker is a Partner, Lauren Rosenello is a Counsel, and Emily M. Marco is an Associate at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on their Skadden memorandum, and is part of the Delaware law series; links to other posts in the series are available here.
Advance notice bylaws are commonplace among public companies, with nearly all S&P 500 companies having some form of these requirements. Traditionally, stockholder challenges to these bylaws arose where the investor had a real gripe: having their efforts to nominate a director slate blocked by an incumbent board. More recently, after the Securities and Exchange Commission’s (SEC’s) began requiring a universal proxy, many companies refreshed their advance notice bylaws, leading to a flurry of books and records demands and stockholder challenges.
The Delaware Supreme Court weighted in on one such challenge in Kellner v. AIM ImmunoTech Inc., 320 A.3d 239 (Del. 2024) (Kellner II), holding that “[i]n a challenge to the adoption, amendment, or enforcement of a Delaware corporation’s advance notice bylaws that is ripe for judicial review, the court” will first evaluate the bylaws legal validity, and then look to whether the bylaw was equitably applied. Kellner II, 320 A.3d at 259.
In the year since Kellner II was decided, four advance notice bylaw cases have come before the Delaware Court of Chancery. In two of those cases, the court dismissed the complaints as unripe pursuant to Kellner II’s direction that the threshold question is whether an “genuine and extant controversy” exists — meaning the stockholder has suffered an identified harm, not merely a hypothetical one. In two other cases, the controversy was ripe and, pursuant to Kellner II, the court applied enhanced scrutiny, but ultimately enforced the advance notice bylaws because they were adopted on a “clear day” (i.e., not in response to any threat) and were not inequitable.
An Update to Aiding and Abetting Liability: M&A Buyers (Should Still) Beware
Ethan Klingsberg and Meredith Kotler are Partners, and Victor Ma is a Senior Associate at Freshfields Bruckhaus Deringer LLP. This post is based on their Freshfields memorandum and is part of the Delaware Law series; links to other posts in the series are available here.
About two years ago, we wrote a post about a series of high-profile M&A cases in the Delaware Court of Chancery that highlighted the potential liability of third-party acquirors for aiding and abetting breaches of fiduciary duties by the board and executives of target corporations. More recently, the Delaware courts have provided additional guidance on how a third-party acquiror may become liable for aiding and abetting a target-side breach of fiduciary duties. The principles laid out in these new cases will facilitate the defense of aiding and abetting claims. Nonetheless, the risk of aiding and abetting claims against M&A acquirors remains and therefore guidance for mitigating this risk continues to be relevant.
Chancery Court Applies Conditional Probability to Calculate Damages in Earnout Dispute
Rory K. Schneider is a Partner at Mayer Brown LLP. This post is based on his Mayer Brown memorandum, and is part of the Delaware law series; links to other posts in the series are available here.
A recent Delaware Chancery Court opinion offers a significant example of how courts may apply complex probability analysis to determine the amount of damages in an earnout dispute. The case arose from Alexion Pharmaceuticals, Inc.’s 2018 acquisition of Syntimmune, Inc. Our previous Legal Update analyzed in depth the Chancery Court’s September 2024 opinion (the “Liability Opinion”),[1] in which the Court concluded, among other things, that the buyer had failed to use commercially reasonable efforts to achieve certain post-closing milestones that could have resulted in the payment of hundreds of millions of dollars to the former stockholders of the target company under the terms of the merger agreement. The Liability Opinion left undecided the amount of the damages to which the former stockholders were entitled for that breach.
The Court addressed the calculation of damages in its June 2025 opinion (the “Damages Opinion”), [2] where it engaged in a painstaking analysis of the former stockholders’ expectation damages based on the probability that each unachieved milestone would have been attained absent the breach, and rejected the former stockholders’ attempt to invoke the “prevention doctrine” to secure full payment of each milestone. The Damages Opinion is yet another reflection of the uncertainty that arises in agreements that have a significant earnout component extending long after the closing—as is frequently the case in life sciences M&A transactions. The challenges associated with establishing the probability of uncertain events may result in an award that sellers consider an underpayment and that buyers consider an overpayment. This Legal Update discusses these issues and provides key takeaways from the Damages Opinion.
Court Permits “Do-Over” for Non-Compliant Nomination Notice under Company’s Advance Notice Bylaw
Gail Weinstein is a Senior Counsel, Philip Richter is a Partner, and Steven Epstein is the Managing Partner at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. Richter, Mr. Epstein, and Steven J. Steinman, and is part of the Delaware law series; links to other posts in the series are available here.
In Vejseli v. Duffy (“Ionic”) (May 21, 2025), the Delaware Court of Chancery, in a post-trial decision, held that the directors of Ionic Digital, Inc., who were facing an imminent proxy contest over control of the board, (i) breached their fiduciary duties when they reduced the size of the board so that only one director would be elected at the upcoming annual meeting; but (ii) did not breach their fiduciary duties when they rejected Plaintiffs’ nomination notice on the basis that it did not comply with the requirement under the company’s advance notice bylaw that all agreements relating to the nominations be disclosed. The court ordered that, given the directors’ breach in reducing the board size, the company had to reopen its window for nominations so that all stockholders, including Plaintiffs, could nominate the two directors that would have been up for election if the board size had not been reduced.
Key Points
- The court stressed the critical informational function served by an advance notice bylaw requirement that all agreements relating to the nomination be disclosed. Of note, the court suggested that even such agreements that had been recently terminated potentially had to be disclosed. And, in any event, the court held, a provision in a terminated agreement that survived termination of the agreement had to be disclosed.
- The court permitted Plaintiffs a “do-over” although they had submitted a non-compliant nomination. The court explained that, although normally a party that submitted a non-compliant nomination notice would not be permitted to submit a corrected notice, in this case, where it was the wrongful conduct of board that necessitated reopening the nomination window, there was no reason not to permit Plaintiffs to submit a new nomination notice.
- The court, applying the Coster standard of review to both actions by the board, focused on the directors’ motivations and justifications. The court reaffirmed that the standard established in Coster v. UIP (Del. Supreme Court 2023) applies to board actions that are defensive in nature, not adopted on a “clear day,” and affect the stockholder franchise. While some practitioners speculated that the Coster standard might be more objective than the former Blasius standard, with less focus on directors’ motivations and justifications, in each case in which the new standard has been applied (Coster, Kellner v. AIM (2024), and Ionic), the judicial focus has been on the directors’ motivations and justifications—suggesting that the court’s analyses and outcomes may not may not be significantly different than they were under Blasius.