Court of Chancery Holds Controlling Stockholders May Owe Fiduciary Duties When Voting to Change Status Quo or Selling Their Shares
On January 24, 2024, the Delaware Court of Chancery held in re Sears Hometown and Outlet Stores, Inc. Stockholder Litigation that when a controller affirmatively sells stock or exercises its voting power to alter a corporation’s status quo, it may owe fiduciary duties of good faith and care to not intentionally, or through grossly negligent action, harm the corporation or its minority stockholders. Additionally, the court held that when analyzing whether a controller complied with this standard of conduct, it would apply the enhanced scrutiny standard of review, which requires that a controller establish it acted in good faith for a legitimate purpose, had a reasonable basis for believing that action was necessary, and pursued reasonable means to achieve its legitimate purpose.
