Supreme Court Clarifies Standing Rule In Double Derivative Actions
This decision sets out the standing requirement for a double derivative suit following a merger. In a stock-for stock merger, stockholders of the acquired company lose their stock in that company in return for stock in the new parent company who, in turn, becomes the sole stockholder of the company acquired in the deal. A derivative suit by the former stockholder of the acquired company is then a "double derivative" suit because it really is on behalf of the new parent company for damages done to its subsidiary. May the stockholder bring such a suit considering he is no longer a stockholder of the subsidiary?
The Delaware Supreme Court says he may do so long as he continues to hold stock in the parent company.