The US State of Delaware Chancery Court authorizes class-action claims of breach of fiduciary duty to proceed against a SPAC’s controlling shareholder and directors (Churchill Capital Corp. III / MultiPlan)

In one of the first opinions addressing fiduciary duty claims in the context of a transaction involving a special purpose acquisition company (“SPAC”), the Delaware Court of Chancery determined that the SPAC shareholders’ right to redeem can be undermined by insufficient disclosures regarding the transaction and allowed class-action claims to continue against a SPAC’s controlling shareholder and directors [1]. This decision is important because it addresses some of the unique features of SPACs designed to mitigate inherent conflicts of interest in the SPAC structure, particularly the redemption feature. While this opinion leaves open that the redemption feature of SPACs may be an effective shield to fiduciary liability, as some have suggested, it will only be effective to the extent the

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Authors

  • Cleary Gottlieb Steen & Hamilton (New York)
  • Cleary Gottlieb Steen & Hamilton (New York)
  • Cleary Gottlieb Steen & Hamilton (New York)
  • Cleary Gottlieb Steen & Hamilton (New York)
  • Cleary Gottlieb Steen & Hamilton (New York)

Quotation

James E. Langston, John A. Kupiec, Roger A. Cooper, Mark E. McDonald, Pascale Bibi, The US State of Delaware Chancery Court authorizes class-action claims of breach of fiduciary duty to proceed against a SPAC’s controlling shareholder and directors (Churchill Capital Corp. III / MultiPlan), 3 January 2022, e-Competitions January 2022, Art. N° 104570

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