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Control Premium May Violate Charter Prohibition on Disparate Merger Consideration in Dual Class Stock Context
Practices
March 9, 2012
In the recent In re Delphi Financial Group decision, the Delaware Chancery court found that there was a reasonable likelihood that Delphi's controlling stockholder, CEO and Chairman of the Board, Robert Rosenkranz, may have violated either or both his fiduciary duties to the other stockholders and contractual obligations under Delphi's charter when he negotiated a control premium for himself alone in the sale of Delphi to Tokio Marine Holdings, Inc. Although the court declined to grant a preliminary injunction, the decision nevertheless provides insight into the Delaware courts' view of the proper interaction between controlling and other stockholders.