Showing 3 posts from March 2023.
Chancery Finds Payment Condition, Non-Compete, and Non-Solicit Provisions Unenforceable
Ainslie et al. v. Cantor Fitzgerald, L.P., C.A. No. 9436-VCZ (Del. Ch. Jan. 4, 2023)
Under Delaware law, restrictive covenants generally are enforceable unless overly broad in the circumstances, and Delaware courts closely scrutinize them. Similarly, contractual conditions precedent generally are enforceable unless they result in a penalty, and Delaware courts construe ambiguous conditions narrowly to avoid forfeitures. In this decision from the Court of Chancery, a provision in a limited liability partnership agreement intended to discourage competitive activities by former partners was held unenforceable both because it was overly broad and resulted in a forfeiture.
Chancery Denies Motion Seeking Appointment of a Receiver
Bighorn Ventures Nevada LLC v. Solis, C.A. No. 2022-1116-LWW (Del. Ch. Dec. 23, 2022)
The Court of Chancery has the discretion to appoint a custodian or receiver under Section 226(a)(2) of the DGCL when the board of directors is deadlocked, the business is suffering or is threatened with irreparable injury because of the deadlock, and the shareholders are unable to terminate the deadlock. Under Section 291, the Court has the discretion to appoint a receiver when the corporation is insolvent and special circumstances indicate some beneficial purpose will be served. More ›
Citing MFW, Court of Chancery Dismisses Merger Challenge
Smart Local Unions and Councils Pension Fund v. BridgeBio Pharma, Inc., C.A. No. 2021-1030-PAF (Del. Ch. Dec. 29, 2022)
Typically, the “entire fairness” standard of review applies to any transaction in which a controlling stockholder acquires the outstanding minority shares. But, under the MFW framework, the more lenient business judgment standard of review may apply if the controller can establish that, among other things, an independent, fully-empowered special committee met its duty of care to negotiate a fair price for the shares and also that an informed, uncoerced majority of the minority stockholders approved the transaction. More ›