Delaware Chancery Court Clarifies Application of Entire Fairness Standard

Entire fairness review does not apply to transactions even when a company has a controlling shareholder if that shareholder didn’t engage in the conflicted transaction, the Delaware Chancery Court ruled Oct. 24 (In re Crimson Exploration Inc. Stockholder Litig., 2014 BL 300486, Del. Ch., 8541-VCP, 10/24/14).

Vice Chancellor Donald F. Parsons, Jr. said that “a large blockholder will not be considered a controlling stockholder unless they actually control the board’s decisions about the challenged transaction.”

The court also addressed when a stockholder owning less than 50 percent of the company could be considered a controlling stockholder and when ...