Executive Liability in U.S. M&A Transactions: Understanding the Legal Standards

9/3/2024

In the complex landscape of mergers and acquisitions (M&A) in the United States, understanding the legal liabilities that executives and board members face is crucial. The article linked below, authored by Kirkland & Ellis attorneys Matthew Solum and Stefan Atkinson, provides an overview of the standards of liability that courts apply when determining whether these individuals may be held accountable to shareholders in connection with M&A transactions. The standards discussed include the business judgment rule, enhanced scrutiny, and the entire fairness standard—each offering varying degrees of protection and burden of proof depending on the nature of the transaction and the potential conflicts of interest involved.

The article also explores how these standards can shift based on specific circumstances, such as the type of transaction, consideration, or the involvement of controlling shareholders. For instance, transactions involving a sale for cash might trigger Revlon duties, necessitating boards to prioritize maximizing shareholder value, while those with potential conflicts of interest or controlling shareholders might be scrutinized under the more stringent entire fairness standard. Understanding these nuances is essential for executives and board members to navigate the potential legal pitfalls in M&A activities effectively.

To read the full article in-depth, click here.

To read how CASTAYBERT PLLC can assist you with M&A Transactions, click here.