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Hon. Lawrence K. Marks

In the Matter of Kenneth Cole Productions, Inc., Shareholder Litigation(Court of Appeals, affirming 1st Dept. & NY County J. Marks -5/15/16)
NY Court of Appeals Adopts Delaware’s Standard of Review for “Going-Private” Mergers
The New York Court of Appeals endorsed the Delaware Supreme Court’s hybrid standard of review for going-private mergers. When faced with shareholder challenges to these types of mergers, the Court held that the business judgment rule is properly applied when six shareholder-conscious conditions are met: “(i) the controller conditions the procession of the transaction on the approval of both a Special Committee and a majority of the minority stockholders; (ii) the Special Committee is independent; (iii) the Special Committee is empowered to freely select its own advisors and to say no definitively; (iv) the Special Committee meets its duty of care in negotiating a fair price; (v) the vote of the minority is informed; and (vi) there is no coercion of the minority”. In the absence of these protections, however, the entire fairness standard should be applied.
-In re Kenneth Cole Productions, Inc., Shareholder Litig., 2016 NY Slip Op 03545 (2016)
-Key Terms: Merger, Business Judgment Rule, Entire Fairness Standard, Shareholder

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