Devoted to Corporate Attorneys, Corporate Lawyers, and Corporate Counsel

On June 15, 2007, in In re Lear Corporation Shareholder Litigation, the Delaware Chancery Court issued an injunction requiring additional proxy disclosure in a case that upheld a go-shop provision involving a private equity buyout. When an insider has interests that differ from shareholders, facts that show how those interests impact a transaction must be disclosed. There is no requirement that a board engage in a public auction so long as it fulfills its duty of care.

The Chancery Court held that because the Lear CEO was the negotiator with Icahn, the proxy should have disclosed the CEO's negotiations about his retirement benefits. From the Chancery Court:  a reasonable stockholder would want to know an economic motivation of the negotiator employed by a board to obtain the best price for the stockholders, when that motivation could rationally lead the negotiator to favor a deal at a less than optimal price, because the procession of a deal was more important to him, given his overall economic interest, than only doing a deal at the right price.