Stockholders Lack Derivative Standing to Challenge Transactions Whose Terms Were Set Before They Became Stockholders
By EsqSocial Corporation 23/06/21
In re SmileDirectClub, Inc., 2021 WL 2182827 (Del. Ch. May 28, 2021) - Under the “contemporaneous ownership rule,” to have standing to bring derivative claims, stockholders in a Delaware corporation must own stock at the time of a challenged transaction. The general rule is that the time of the transaction is when the terms were established, but there are narrow exceptions, such as where the terms were modified and not disclosed, in which case a court may look to when the transaction was...
By: Morris James LLP