> the rights offering is purely within the discretion of the BOD. It can be rescinded
> or modified by the BOD at any time, but there's no vote by the shareholders
> if someone makes a tender offer.
> the decision to accept or reject a tender offer and/or rescind a rights offering
> isn't put to a shareholder vote unless the BOD chooses to do so.
Counselor,
You've created a stew containing dissimilar ingredients.
Forget the rights offering -- that's irrelevant here. The question is what would/should happen if the BOD gets a bona fide offer for the corporate assets at a substantial premium to market value.
In general, under Delaware General Corporation Law, BOD is protected by the "business judgement rule." The court is not going to substitute its judgement for theirs, PROVIDED that the BOD (1) acts in good faith, (2) acts in the best interests of the corporation, (3) acts not in self-interest (the dual-loyalty issue), (4) is not wasteful, and (5) acts on an informed basis. Grobow v. Perot, 539 A.2d 180 (Del. 1988)
Please focus on that last item. The BOD must be INFORMED in order to assert this defense. Therefore, the BOD must seek professional help to determine the value of the company in order to judge whether or not it would be in the best interest of the shareholders to accept the offer.
What happens next arises from the best advice that the BOD's money can buy. If they can procure a legitimate opinion that the tender offer is inadequate, they can reject it with confidence. On the other hand, if the offer is greater than the value that their experts assign to the company, the BOD has a well known fiduciary duty to accept the offer. Indeed, once it becomes clear that sale of the company is inevitable, the BOD must enter "Revlon mode." At that point, their sole responsibility is to sell the company to the highest bidder. Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986) |
