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aka "Duty of Candor"
Summary
Developments
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Shamrock Holdings v Iger
Del Ch 2005
- Former directors Disney and Gold sought to
void Disney's 2005 annual meeting
- Claiming they would have have run a proxy contest
but for false assurances that company would conduct a CEO search that gave full
consideration to external candidates
- Claiming that CEO search was
a sham
and that
they were misled
- Court held that complaint adequately stated claims for
disclosure violations and for equitable fraud
- Court denies defendant's motion to dismiss
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Notable Cases
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In
re Pure Resources Del Ch 2002
- Opinion
V C Strine
- Target corporation must disclose financial analyses underlying fairness
opinion
- As a matter of state corporate law,
even
when not required by federal securities laws
- Involved a tender offer by a controlling
stockholder
(Unocal Corp)
Skeen v Jo-Ann Stores
Del Ch 2000
SEC_CODE_REF_0090001192884
- Duty of disclosure standard is no
different in context of cash-out merger and minority shareholders' decision to
seek appraisal than in other contexts
- Affirms Chancery Court's dismissal of plaintiff's
complaint
- Discussion
of duty of disclosure
Malone
v Brincat
Del 1998
- See paragraph 23 generally
- Duty of disclosure applies in at least
three contexts:
- public statements made to the market,
including
shareholders
- statements informing shareholders about the
affairs of the corporation, without a request for shareholder action
- statements to shareholders in conjunction with a
request for shareholder action
- see paragraph 35
- Case involved false statements made by Mercury
Finance about its financial condition
- Mercury subsequently failed
- Affirms Chancery Court's dismissal of complaint
but holds that plaintiffs should be allowed to file an amended complaint
- Facts could support a claim for breach of
duty of disclosure
- Reaffirmed the
fiduciary duty of disclosure (candor)
- "Obligates directors to provide the
stockholders with accurate and complete
information material to a transaction or other corporate event that is being
presented to them
for action." at p.10
Arnold v Society for Savings Bancorp
Del 1994
- Summarizes
development in Delaware of disclosure obligations
- At p.1276
(§IV)
Stroud v Grace
Del 1992
- Favors use of term duty of disclosure
rather than the sometimes used duty of candor

- Directors have a duty to disclose all material
facts in connection with a contemplated shareholder action

Lynch v Vickers Energy
Del 1978
- Seminal case on
disclosure obligations
- Involved a self-tender
- Held that a majority stockholder "owed a
fiduciary duty ... which required 'complete candor' in disclosing fully 'all
the facts and circumstances surrounding the' tender offer."
- At p.279
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Commentary
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Law
firms
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Related Topics
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