Court Of Chancery Explains The Gentile Doctrine
Posted In Derivative Claims
In re Nine Systems Corporation Shareholders Litigation, C.A. 3940-VCN (February 28, 2013)
When is a claim that stockholders were wrongly diluted by the issuance of stock a derivative claim and not a direct claim? Under the Gentile rule, such a claim is derivative unless the dilution was done to benefit a controlling stockholder of a control group. Determining when several stockholders constitute a "group" for this purpose is not easy. Just acting together is not enough. This decision explains what else is required, such as acting to carry out a preconceived goal.
Tags: Derivative Claims
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