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Restatement of Corporate Freezeouts

By Marvin A. Chirelstein

Abstract

Apparently overruling earlier decisions, the Supreme Court ofDelaware has recently declared that a merger effected \u22for the solepurpose of freezing out minority stockholders ...is an abuse of thecorporate process ...[and a] violation of a fiduciary duty for whichthe Court may grant.. . relief.\u22\u27 In Singer v. Magnavox Co.,2 a parentcorporation had merged with its eighty-four-percent-owned subsidiary.Minority stockholders of the subsidiary had received only cash for theirshares and thus had been eliminated from participation in the combinedenterprise. The court confirmed that the parent owed a fiduciaryduty to the minority by reason of its status as majority stockholder, butthen-in what is generally viewed as a new development in Delawarelaw-the court held that this duty would not be met unless a corporatepurpose for the merger, other than mere elimination of the minority heldstock, were supported by the evidence

Topics: merger, corporation, freezeout, minority shareholder, Banking and Finance Law, Business Organizations Law, Law, Legal Writing and Research
Publisher: Yale Law School Legal Scholarship Repository
Year: 1978
OAI identifier: oai:digitalcommons.law.yale.edu:fss_papers-5561
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