The Del. Court of Chancery rules on a board's duty to monitor employees; the Legislature amends the state's business laws

Article Abstract:

The Delaware Legislature made a number of minor revisions to the corporation law in 1996, and the Delaware Court of Chancery heard a case that interpreted the 1963 Graham decision duty to monitor. In In re Caremark International Inc. Derivative Litigation, the Chancellor found that directors must ensure that adequate reporting and monitoring systems were in place to promote awareness of employee activities that could trigger liability. The Legislature is making duplicate record-keeping unnecessary, changing committee appointment procedures and requiring articles of incorporation amendment for forward and reverse stock split.

Interpretation and construction, Corporate directors, Corporation law, Fiduciary duties

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Courts rethink approaches to appraisal

Article Abstract:

The discounted cash flow (DCF) approach to appraisal was favored over the comparable-company approach or the Delaware block approach by the Delaware Court of Chancery in the case of In re Radiology Association Inc Litigation, decided in Nov 1991. Appraisal is a remedy designed to resolve disputes concerning the fair value of stock taken in mergers or other forced transactions. Prior to 1983 the Delaware block was the only method used, but most recent decisions have favored DCF analysis.

Cases, Corporations, Valuation

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Two important rulings from the Delaware Court of Chancery concern stock option plans and stock issuances to directors

Article Abstract:

Judicial review of interested directors was undertaken by the Delaware Court of Chancery. Insufficient notice for an annual meeting coupled with the inapplicability of the business judgement rules, together added up to enough evidence to allow the Delaware Court of Chancery to set aside an election at the shareholders' meeting. The importance of safeguarding the fairness at meetings wherein stock option plans and director compensation are discussed cannot be overemphasized.

Direct Property and Casualty Insurance Carriers, Pension, health, and welfare funds, Pension Funds, Surety insurance, Directors & Officers Liability Insur, Stock Ownership Plans, Options (Finance), Stock options, Directors' and officers' liability insurance, Employee stock ownership plans

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