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Court Of Chancery Clarifies Majority Shareholder Coercion

Posted In Fiduciary Duty

In Re John Q. Hammons Hotels Inc. Shareholder Litigation, C.A. 758-CC (January 14, 2011)

When a controlling shareholder  has the power to veto any proposed transaction, it is sometimes claimed that his support for a particular deal has forced the other shareholders to accept that deal or get nothing.  This decision rejects such a claim and holds that the controlling shareholder's veto power in itself is not coercion that the other shareholders may complain about later.

This opinion is also an excellent summary of the exceptions to the entire fairness rule of the Kahn case and is worth reading for that reason  as well.

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