Did Delaware Really Kill Corporate Law? Shareholder Protection in a Post-Corwin World
16 N.Y.U. J. L. & Bus. 345 (2020)
74 Pages Posted: 13 Jul 2020
Date Written: September 6, 2019
Corwin v. KKR, one of many recent cases aiming to mitigate the “deal tax” in M&A represented by baseless litigation, is considered one of the most important corporate law decisions of the 2000s. Corwin shields directors from the enhanced scrutiny of Revlon in favor of the business judgment rule whenever a transaction “is approved by a fully informed, unco-erced vote of the disinterested stockholders.” Many legal commentators see Corwin as the poster child of an ongoing process that has been emphatically labeled with expressions such as “Delaware’s retreat,” “the fall of Delaware standards,” and even “the death of corporate law;” in fact, the mainstream view among scholars is that Corwin is a setback in shareholder protection. This Article challenges such view and argues that shareholder protections in Revlon M&A deals have not suddenly vanished. First, Corwin applies only in the presence of certain preconditions: plaintiffs’ efforts have simply been re-channeled around them. Corwin has in fact expanded the breadth of litigation challenging lack of “full information.” Also, the requirement that shareholder approval be unco-erced is bound to pose a limit on certain director abuses in the sale process and in the adoption of deal protection devices. This Article reports of original empirical data on transactions post Corwin suggesting that not much has changed in deal-making: in other words, the decision has not opened the floodgates to bad process, possibly because deal planners anticipate the possibility that rival bids will arise, possibly because the preconditions to Corwin are taken very seriously (especially if coercion constrains ability to offer outrageous deal protection devices), and possibly because corporate planners adhere to norms and best practices and in the worst cases deal lawyers rein in their clients’ impulses.
Keywords: Corporations, M&A, Mergers, Corporate Governance, Shareholder Litigation, Fiduciary Duties, Revlon, Corwin, Shareholder Approval, Business Judgment Rule, Coercion, Disinterest, Full Information
JEL Classification: G30, G32, G34, G38, K22
Suggested Citation: Suggested Citation