Exploring the Standard of Review of Transactions With Controlling Shareholders After In Re MFW Shareholders Litigation

In re MFW Shareholders Litigation established a standard for the examination of transactions where a controlling shareholder offers to purchase the rest of the company’s shares in a going-private merger. According to the court’s opinion, under certain conditions this transaction would be examined through the lens of the business judgment rule (BJR) as opposed to the entire fairness review, which normally applies to such transactions. This judgment reflects a more lenient approach by the court towards going-private mergers with a controlling shareholder. As such, it is worth a closer examination. This Article will begin with a review of the MFW case, followed by a review of the judicial history prior to this decision. Then it will try to analyze, albeit partially, some of the reasons for why this judgment is timely and reasonable considering changes that occurred in the last decades. It will also address some of the courts’ reasoning and its persuasiveness.