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When a Pro Rata Dividend Triggers Entire Fairness

In IRA Trust FBO Bobbie Ahmed v. Crane, Consol. C.A. No. 12742-CB, the Court of Chancery dismissed a stockholder challenge to a reclassification implemented through a pro rata dividend to all stockholders.  In addressing the motion to dismiss, the Court saw three key questions: (1) does the entire fairness doctrine apply even though the reclassification involved a pro rata distribution of shares; (2) if entire fairness does apply, does the analytical framework articulated by the Delaware Supreme Court in Kahn v. M&F Worldwide, Corp. (“MFW”) apply to the reclassification; and (3) if MFW applies, have the defendants satisfied its requirements on the face of the pleadings.  My colleague, Ed McNally, blogged the other day about the Court’s holding that MFW applied to the challenged reclassification.  This blog post focuses on the first question in the Court’s analysis: does the entire fairness doctrine apply to a reclassification implemented by a pro rata distribution of shares.  More ›

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