July 27, 2017
Delaware courts have recently made a series of decisions which is resulting in a slowing down of the incredibly high rate of deal litigation in the U.S., in turn aligning U.S. and Canadian approaches to such cases.
Deal Lawyers utilized the article “Informed Shareholders Take the Steam out of Deal Litigation” from the latest Torys Quarterly to illustrate the somewhat surprising convergence following what some are perceiving as a crackdown on M&A litigation. Below is an excerpt from Deal Lawyers’ article discussing how increasing weight placed upon the decisions of directors backed by informed shareholders will continue to deflate previously staggering deal litigation numbers.
Delaware rightly prides itself as being at the cutting edge of US corporate law – so it may come as a surprise to learn that its M&A jurisprudence seems to be evolving toward positions that Canadian courts arrived at some time ago. Here’s an excerpt from this Torys memo that explains how the Delaware & Canadian approaches to deal litigation are converging:
From a Canadian perspective, Corwin essentially brings the Delaware approach in line with how Canadian courts review M&A transactions in similar cases. A Canadian target board’s decision in a change-of-control transaction is subject to deference under the business judgment rule.
As in Corwin, Canadian courts afford significant weight to the affirmative vote of shareholders in support of an M&A transaction. Arrangement transactions, which are the most frequently used structure for implementing a friendly deal in Canada, involve shareholder approval and an application to the court to determine that the transaction is fair and reasonable, a determination that relies to a large extent on the shareholder vote.
For more on the diverse range of approaches shareholders are taking to grow their influence in the boardroom, click here.
To read the full Deal Lawyers article, click here.