Restatement of Corporate Freezeouts (with V. Brudney), 87 Yale Law Journal 1354 (1978)
Apparently overruling earlier decisions, the Supreme Court of
Delaware has recently declared that a merger effected "for the sole
purpose of freezing out minority stockholders ...is an abuse of the
corporate process ...[and a] violation of a fiduciary duty for which
the Court may grant.. . relief." In Singer v. Magnavox Co. a parent
corporation had merged with its eighty-four-percent-owned subsidiary.
Minority stockholders of the subsidiary had received only cash for their
shares and thus had been eliminated from participation in the combined
enterprise. The court confirmed that the parent owed a fiduciary
duty to the minority by reason of its status as majority stockholder, but
then-in what is generally viewed as a new development in Delaware
law-the court held that this duty would not be met unless a corporate
purpose for the merger, other than mere elimination of the minorityheld
stock, were supported by the evidence.
Date of Authorship for this Version
Chirelstein, Marvin A. and Brudney, Victor, "Restatement of Corporate Freezeouts" (1978). Faculty Scholarship Series. Paper 4771.