Portfolio 19-3rd: The Sale of Corporate Control

I. Introduction: When Has "Control" Been Sold?

II. Limitations on the Transfer of Control
. Introductory Material
A. "Premiums"
B. Prohibition of the Sale of Corporate Offices
C. Management Entrenchment and Greenmail: The Two-Edged Sword

III. Factors Affecting the Sale of Control
A. "Equal Opportunity"
B. Governmental Approval
C. Special Shareholders' Meetings
D. Tender Offers
1. Paramount I
2. Paramount II
a. When does a change in control arise?
b. Applicability of Revlon duties
3. Lyondell Chemical Co. v. Ryan
4. Go-shop provisions
5. Officers' fiduciary duties
6. Specific defense tactics
7. Other constituency laws
E. Duty of Inquiry
F. Minority Duties
G. The Role of Corporate Counsel
H. The Role of the SEC
I. State Control-Share and Business Combination Statutes

IV. Aftereffects of the Transfer of Control
. Introductory Material
A. Looting
1. The new control group
2. The former management
B. Exercise of “Due Care”
1. Harman v. Willbern
2. Swinney v. Keebler
3. DeBaun v. First Western Bank and Trust Co.
C. Subversion of Corporate Assets
D. The Entire Fairness Doctrine and the Duty of Candor

V. Theories of Liability
A. Common Law
B. SEC Rule 10b-5
1. Burdens of pleading and proof
2. The influence of judicial decisions
3. Closely held corporations
C. RICO

VI. Post-Transfer Requirements
. Introductory Material
A. State Laws
B. SEC Filings

VII. Conclusions and Practical Applications
. Introductory Material
A. Example I
1. Is there a sale of “control"?
2. Is a premium being offered?
3. If a premium is being shared, is it necessary to investigate the purchaser?
4. Purchase of offices
5. Investigation of the purchaser's plans
6. Financial investigation of the purchaser
7. Seller's purchase of other shares
8. Disclosure of the agreement to sell
B. Example II
C. Example III