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Court Of Chancery Applies Demand Analysis To Changed Board

Sandys v. Pincus, C.A. 9512-CB (February 29, 2016)

This is an interesting decision because it applies the demand rules in a derivative case to an odd situation — when some but not all of the board members have changed between when the challenged conduct occurred and when the complaint was filed. The Court held that the demand rules need to be applied to the board in place when the complaint was filed. The changes in the board’s composition made it necessary for the analysis to consider the relationships of new to old board members, particularly as to the independence of the new members. The decision also is a good source for the facts that determine independence. Such facts as common board memberships or how the stock exchange rules apply do not show a lack of independence in themselves.

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