Portfolio 79-1st: Special Committees of Independent Directors

I. Introduction

II. `Disinterestedness' and `Independence' of Committee Members

III. The Special Negotiating Committee
A. Why Have a Special Negotiating Committee?
B. Transactions in Which to Use the Special Negotiating Committee and Its Effect
1. Majority stockholder squeezeout
2. Other transactions involving a majority stockholder
3. Transactions involving directors or in which directors have an interest
4. Management buyout proposals and other transactions in which management has an interest
C. Simulating Arm’s-Length Negotiations
D. Committee Powers
1. In general
2. Limitations
E. Committee Membership and Procedures
1. Number of committee members
2. Compensation of committee members
3. Indemnification and director liability protections
4. Chairing the committee
5. Committee advisors
6. Committee meetings
7. Committee recordkeeping
8. Notetaking by committee members
9. Materials distributed to the committee

IV. Special Committees in the Litigation Context
. Introductory Material
A. Stockholder Standing
B. The Demand Requirement
1. Distinguishing between derivative and direct claims
2. Universal demand states
a. The Model Business Corporation Act
b. The Principles of Corporate Governance
3. Delaware
a. Demand excused
b. Demand wrongfully refused
C. The Demand Investigation Committee
1. Determining if there has been a demand
2. Forming the demand investigation committee
a. Committee membership
b. Scope of authority
c. The retention of counsel
3. The investigation process
a. Issues of timing
b. The collection and review of documents
c. The interview process
d. Recordkeeping
4. Judicial review of the committee’s recommendation
D. The Special Litigation Committee
1. Governing law and federal policy
2. Forming the special litigation committee
a. Committee membership
b. Scope of authority
c. The retention of counsel
3. The investigation process
a. Stay of discovery during the investigation
b. The mechanics of the investigation
c. The range of alternatives
d. Discovery after the SLC completes its report
4. Judicial review of an SLC’s determination
a. The New York model
b. The Delaware model
c. Iowa
d. Statutory provisions