In the recent one-page order entered by the Delaware Supreme Court in Swomley v. Schlecht, et al., No. 180, 2015 (Del. Nov. 19, 2015), the High Court affirmed a Delaware Court of Chancery decision that provided the first application of the Delaware Supreme Court’s prior decision of Kahn v. M & F Worldwide Corp., No. 334, 2013 (Del. Mar. 14, 2014).
The Supreme Court in Kahn v. M & F Worldwide held that, in a landmark decision, freezeout mergers structured with various inherent protections should be reviewed under the highly deferential business judgment standard:
To summarize our holding, in controller buyouts, the business judgment standard of review will be applied if and only if: (i) the controller conditions the procession of the transaction on the approval of both a Special Committee and a majority of the minority stockholders; (ii) the Special Committee is independent; (iii) the Special Committee is empowered to freely select its own advisors and to say no definitively; (iv) the Special Committee meets its duty of care in negotiating a fair price; (v) the vote of the minority is informed; and (vi) there is no coercion of the minority.
A very thorough analysis of the Kahn v. M & F Worldwide decision can be found in an article here, published by the Harvard Law Review.