Legal Alert - Delaware Supreme Court: No Duty to Buy Out Minority Shareholders in Closely Held Corporations


by John S. Delikanakis

The Delaware Supreme Court recently considered whether the directors of a closely held corporation had a duty under common law fiduciary principles to repurchase a minority shareholder’s shares. The court also considered whether the covenant of good faith and fair dealing created such a duty within a shareholder’s purchase agreement. The court found no such duties in either instance, re-affirmed Delaware precedent on the issue, and highlighted the importance of having an agreed upon exit strategy for minority shareholders or members of closely held entities.

[Read the full alert.]