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Delaware Law Update: The Meaning of “Control” in “Controlling Stockholder” (Part I)

| Apr 14, 2016 | Business Management, Delaware Law Update, Disagreement, Minority Shareholders, Uncategorized

We write frequently about minority shareholder rights here.  We started with Ritchie v. Rupe, a Texas Supreme Court case that completely changed the lay of the land by making it harder for minority shareholders to bring lawsuits based on oppressive conduct by majority shareholders (see here).  We discussed Bontempo v. Lare (available here), a Maryland case on remedies for shareholder oppression, which, in addition to dissolution, recognized equitable remedies such as accounting for allegedly misappropriated funds, appointment of a receiver for the purposes of continued operation of the corporation, issuance of an injunction to prohibit oppressive conduct, and damages to minority shareholders as compensation for oppressive conduct, to name just a few.  In a blog post discussing Sneed v. Webre (available here), another Texas case, we discussed whether the business judgment rule would prevent minority shareholders from bringing a lawsuit on behalf of the corporation over the board’s objection.  And finally, in a blog series discussing shareholder inspection rights (available here), we looked at state law mechanisms by which shareholders can examine corporate books and records in Maryland, Delaware, New York, and Texas.

In Calesa Associates, L.P. v. American Capital, Ltd., the latest Delaware case involving minority stockholders, the Court of Chancery looked at the criteria for determining “control” in the context of a business transaction that was allegedly designed to “squeeze out” minority stockholders.[1]  The case involved a stockholder and its affiliates that collectively owned about 26% of the company and exercised substantial control over the company’s board of directors.

This post was part of a two-part series on the meaning of “control” in “controlling stockholder.”  You can find the other post by searching our blogs at  In our next post, we will discuss what the Delaware Court of Chancery had to stay about control.

This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances.  This article should not be treated as legal advice to any person or entity.

Steps have been taken to verify the contents of this article prior to publication.  However, readers should not, and may not, rely on this article.  Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.

[1] See generally Calesa Assocs., L.P. v. Am. Capital, Ltd., No. 10557-VCG (Del. Ch. Feb. 29, 2016).  Unless otherwise noted, all references to the case are from this citation.