Delaware Business Litigation Report

Court Of Chancery Explains When A Dilution Claim Is Direct

Caspian Select Credit Master Fund Ltd. v. Gohl, C.A. 10244-VCN (September 28, 2015)

It is often said that when a majority stockholder issues more stock to himself at an unfair price that is a direct claim and not derivative. But as this decision points out, that is a little too simplistic.

The key to deciding if the claim is direct is whether the minority stockholders’ voting rights are diluted. If they are not, as was the case here, when it is debt that the majority stockholders received, then the claim is a derivative one for the harm to the entity.

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