Reining in the “Liquidity Conflict” under Delaware Law
Jeff Wolters, Morris Nichols Corporate Law Counseling Group partner, authored Reining in the “Liquidity Conflict” under Delaware Law appearing in the Delaware Insider section of the December 2012 issue of the ABA’s Business Law Today.
The article reviews decisions in Delaware that have revived interest, particularly among plaintiffs’ attorneys, in the so-called “liquidity conflict” – that is, a potential conflict of interest faced by a large stockholder due to a need to liquidate its stock. If simply selling into the market isn’t feasible, the theory goes, then the large holder might advocate a sale of the entire company, even on sub-optimal terms. Further, the large holder’s desire for immediate liquidity might motivate it to push for a quick sale to a first bidder rather than a market check to seek out higher offers. Variations of this theory have had some success in recent Delaware cases.
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Jeffrey R. Wolters, “Delaware Insider: Reining in the ‘Liquidity Conflict’ under Delaware Law,” ABA’s Business Law Today (December 2012).