In an apparent question of first impression, the Delaware Court of Chancery is considering whether stockholders in a Delaware corporation can relinquish their rights to object to the sale of the company and waive fiduciary duty claims through a stockholder agreement. Law360 reports here that Vice Chancellor Sam Glassock III has asked for supplemental motion-to-dismiss briefing on the role the implied covenant of good faith and fair dealing, as well as public policy arguments, should play in applying such provisions in stockholder agreements.
Several minority stockholders, including Manti Holdings LLC, sued the controlling stockholder Carlyle Group and the directors of the company, Authentix, claiming Authentix and its board accepted a “fire sale” price because Carlyle was seeking a quick exit from its majority interest in the company. Vice Chancellor Glasscock previously held that the stockholder agreement barred the minority investors’ statutory appraisal rights in a decision that has been appealed to the Delaware Supreme Court. It would appear that if the stockholder agreement’s bar against merger objections and waiver of fiduciary claims is upheld, the Authentix minority stockholders will be left with no remedies for the alleged “fire sale.”