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Court Of Chancery Permits Creeping Takeover

Posted In Fiduciary Duty

In re Sirius XM Shareholder Litigation, C.A. 7800-CS (September 27, 2013)

This is an interesting decision because it discusses the duties, or lack thereof, a large stockholder who is buying more stock on the open market to take control.  Here the stockholder had a contract that it entered into when it loaned a lot of money to the company that limited the company's ability to adopt a poison pill or otherwise prevent such stock purchases.  Yet even absent that contract, the court indicated that there is no fiduciary duty to offer a "fair" price when buying stock on the open market and no duty of a board to act to prevent those purchases.