Farewell to Fairness: Towards Retiring Delaware's Entire Fairness Review

Abstract

This Article entertains the idea that Delaware’s corporate law is set on a trajectory that would eventually lead to reforming its doctrine of entire fairness as we now know it by retiring the doctrine’s substantive fairness review prong and insisting on fully-informed consent as the only way for validating tainted transactions. A growing array of cases, in which the centerpiece is Kahn v. M&F Worldwide Corp. (MFW), creates a legal sphere within which traditional entire fairness analysis has no application. Within this sphere, things rise or fall depending solely on the existence or absence of an uncoerced fully-informed ratification, in line with fundamental principles of fiduciary law in Delaware and in other common law jurisdictions. The critical move, which may take time to materialize, will take place when the courts abolish substantive fairness review entirely. Treating this development as highly desirable in principle, this Article discusses practical and normative issues that call for attention in order to ensure its successful functionality. As this trend is premised on fully-informed consent, its principal challenge will be to ensure the integrity of shareholder voting by securing the supply of full information throughout the process and minimizing the impact of potential conflicts.

Keywords: corporate governance, entire fairness, fiduciary duties

JEL Classification: K22