Going Private Transaction: Procedure

Procedural safeguards

For a going private transaction, Delaware Supreme Court held that a proposed going private transaction need the approval of a special comittee consisting of independent, disinterested directors and the vote of the majority of the minority stockholders with all relevant information for the proposal.

If a challenging stockholder file a complaint questioning a going private transaction by a controlling stockholder, a Delaware court will apply the stringent entire fairness standard of review, rather than the deferential business judgement standard which apply to broad actions.

When both two processes are accomplished, however, The burden of proving the procedural and substantive fairness of a proposed controlling stockholder transaction can be shifted to the stockholder plaintiffs