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Megasubsidiaries and Asset Sales under Section 271: Which Shareholders Must Approve Subsidiary Asset Sales
Corporate law statutes determine the nature of the relationship between shareholders, the principal owners of the corporation, and the board of directors, those w ho run and operate the corporation. Under the Delaware General Corporation Law ( DGCL ), many of the powers are delegated to the board of directors. More specifically, under section 141, the business and affairs of every corporation . . . [are] managed by or under the direction of a board of directors . . . . The Delaware courts have interpreted this provision by deferring to decisions by directors and their designated management under the business judgment rule, which presumes that in making a business decision, the directors acted on an informed basis with a good faith, an honest belief that the action taken was in the best interests of the company. As many have noted, [t] he effect of this presumption when applied by a court is that the court will not substitute its judgment for that of the board, unless it is shown by a preponderance of the evidence that the directors\u27 decision involved a breach of fiduciary duty