What is Corporate Takeover Litigation
When a proposed merger, acquisition, or buyout of a public company is announced, shareholders have the right to—and should—demand that directors and officers pursue a fair process in negotiating a deal that provides shareholders with a fair value for their investments.
What can shareholders seek in Corporate Takeover LitigationWhen corporate fiduciaries fail to maximize shareholder value in negotiating corporate transactions, shareholders can bring a direct class action to demand, among other things: additional consideration or a higher price; more favorable deal terms; statutory appraisal rights; the chance for other bidders to present superior offers; the disclosure of material information to allow shareholders to make an informed decision on whether to vote in favor of the deal.
Corporate Governance AllegationsShareholders may also assert corporate governance claims. Typical corporate governance allegations in corporate transactions include failure by a target company*s board to organize a competitive sales process and set up necessary committees; insufficient disclosures or misrepresentations in merger filings; and conflicts of interest related to executive noncompete agreements, change-of-control pay, and retention by the acquirer.
Why Is a Majority of Corporate Takeover Litigation in Delaware?Over a million businesses, including more than 50 percent of publicly traded companies in the U.S. and more than 60 percent of Fortune 500 companies, are incorporated in Delaware. However, while incorporated in Delaware, the vast majority of these businesses have headquarters elsewhere. Thus, plaintiffs have the option of bring corporate takeover litigation in Delaware or the state where the company is headquartered.
However, in 2010, after a favorable opinion in a Delaware court, companies began to adopt forum selection clauses in their bylaws requiring that cases be litigated in Delaware instead of a company's home state. After these clauses were upheld by the Delaware courts in 2012, they became commonplace with more than 1,000 companies having adopted these clauses.
As a result, with a majority of U.S. companies incorporated in Delaware and the adoption of forum selection clauses requiring cases against those companies to be litigated in Delaware, it has become the home to the majority of corporate takeover litigation.