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Smith v. Van Gorkom (the Trans Union case) is now well-established as one of the most important-and mystifying-corporate law cases of the decade. The Delaware Supreme Court stunned and dismayed the corporate bar by holding that a board of directors violated its duty of care to shareholders by failing to exercise sufficient deliberation before approving a cash-out merger at a fifty percent premium over the market price. The case seemed to augur broad new liability for corporate directors. It immediately received widespread attention, both because it carried important implications for corporate counseling and because it suggested that the Delaware courts might be prepared to increase the rights of shareholders as against incumbent boards under the Business Judgment Rule.

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