The Delaware Supreme Court issued a decision last week that further clarifies when MFW’s “dual protections” must be put in place in order to qualify the transaction for deferential business judgment review. See Olenik v. Lodzinski, No. 392, 2018 (Del. April 5, 2019).
Under MFW, business judgment review applies to a merger proposed by a controlling stockholder conditioned “ab initio” on two procedural protections: (1) the approval of an independent, adequately-empowered special committee that fulfills its duty of care; and (2) the uncoerced, informed vote of a majority of the minority stockholders. If the controlling stockholder does not commit to these dual protections ab initio, i.e., from the beginning of negotiations, then the traditional entire fairness standard applies instead.