Augmenting the Duties of Directors to Protect Minority Shareholders in the Context of Going-Private Transactions: The Case for Obligating Directors to Express a Valuation Opinion in Unilateral Tender Offers After Siliconix, Aquila and Pure Resources

Abstract

This article addresses the threat posed by unilateral tender offers initiated by controlling shareholders. First, the article will examine why it is particularly compelling today for majority shareholders to acquire the remaining stock in the public companies they control. Second, the article will address the process for taking a company private and the various deal structures that can be employed. Third, the article will review the standard of conduct governing directors in various related-party transactions. Fourth, the article will discuss both recent Delaware judicial decisions making it easier for directors to sit on the sidelines while controlling shareholders use the inherently coercive tender offer process to force minority shareholders into accepting below-value offers for their shares, and recent Delaware case law rejecting this trend. Finally, the article concludes by proposing significant changes to the rules governing directorial duties to minority shareholders in the context of controlling-shareholder initiated unilateral tender offers.