To obtain business judgment deference, controllers must insist on MFW’s minority protections before engaging in any substantive economic or valuation discussions.

The Delaware Supreme Court’s 2014 decision in Kahn v. M&F Worldwide Corp.1 (MFW) altered the landscape for suits challenging controlling stockholder take-private transactions. The decision provided that if a controller conditions the deal on specific minority stockholder protections from the beginning, then the transaction may be subject to the same deferential “business judgment” review that applies to arm’s-length, third-party transactions under Delaware General Corporation Law § 251 (8 Del. C. § 251), rather than the more stringent “entire fairness” standard.2 Questions that have arisen since MFW include: when exactly is the “beginning” of a transaction and when does the beginning end? Deal discussions often begin informally or proceed in an on-again, off-again manner, and prior case law was unclear about the precise point in the process when the controller needed to insist upon MFW’s minority protections in order for the transaction to obtain business judgment deference.