Emerging Legal Trends
The former and current Chief Justices of the Delaware State Supreme Court wrapped up Monday’s sessions with an overview of the emerging legal trends in corporate law. Former Chief Justice Norman Veasey opened the session by explaining some of the history and significance of the Delaware courts on the country’s jurisprudence, explaining that Delaware has had the privilege of shaping the corporate legal issues for most of the country.
Veasey then turned the session over to the current Chief Justice Myron Steele, who used three recent cases to highlight two emerging trends in the courts. He first pointed out that much of the court’s litigation develops out of M&A transactions. Specifically, the litigation centers on the role of directors in an acquisition scenario.
The first legal trend dealt with the board’s use of special committees in a transaction and the independence of its members. Steele stressed the need for an independent and disinterested group of directors to find the best deal for shareholders. Boards should be very involved with scrutinizing the individuals serving on a special committee and ensuring that they are not interested parties to the transaction, he said.
Secondly, Steele focused on the investment bankers and advisors to M&A transactions. In several recent cases, boards have run afoul with shareholders because of potential conflicts of interest with the investment bankers or advisors. The cases highlight the need for directors to also examine every advisor relationship for financial interests that may color their advice.
Veasey quickly followed up with a question about how directors and boards should go about investigating these investment bankers or advisors. Steele suggested carefully questioning the bankers about what types of internal checks exist to determine who is on the team and whether the banking institution has any conflicts. He also recommended finding out how the check would work in a company’s particular situation. Steele concluded by saying that any conflicts held by the advisor may not be fatal to any relationship or deal, but should be disclosed to the shareholders.