In one of the first opinions addressing fiduciary duty claims in the context of a transaction involving a special purpose acquisition company (“SPAC”), the Delaware Court of Chancery determined that the SPAC shareholders’ right to redeem can be undermined by insufficient disclosures regarding the transaction and allowed class-action claims to continue against a SPAC’s controlling shareholder and directors. This decision is important because it addresses some of the unique features of SPACs designed to mitigate inherent conflicts of interest in the SPAC structure, particularly the redemption feature. While this opinion leaves open that the redemption feature of SPACs may be an effective shield to fiduciary liability, as some have suggested, it will only be effective to the extent the stockholders are informed of all material information when deciding whether to redeem. In short, full disclosure in the de-SPAC context (just like in the traditional merger context) is critically important.
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