USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Kristina Trauger, Pierre-Emmanuel Perais, Clara Pang, Gregory Gewirtz and Vinita Sithapathy, Linklaters
March 2025 codified the “safe harbour” regime, as further described below. For conflicted director transactions, the safe harbour is available if either: • a majority of the disinterested directors serving on the board or board committee authorises the transaction in good faith and without gross negli - gence; or • a majority of the disinterested stockholders approve or ratify the transaction (“Disinterested Stockholder Approval”). Safe harbour conditions with respect to conflicted controlling stockholder transactions would depend on the type of transaction. Generally, for such transac - tions (other than going-private transactions) the safe harbour is available if either: • a majority of the disinterested directors serving on the relevant board committee approves the trans - action in good faith and without gross negligence (“Board Committee Approval”); or • such transaction is conditioned on obtaining Disin - terested Stockholder Approval, and such approval is then obtained. For a controlling stockholder transaction constitut - ing a going-private transaction, the safe harbour is available if both the Board Committee Approval and the Disinterested Stockholder Approval are received. Otherwise, the transaction may still be upheld if the interested director or controlling stockholder can demonstrate that the transaction satisfies the more demanding standard of “entire fairness” (ie, “fair deal - ing” and a “fair price”). 8.4 Independent Outside Advice A target company board will generally engage exter - nal legal and financial advisers, and may also engage external accountants and consultants in consideration of a potential business transaction. A director can rely on such outside advisers, and consideration of robust advice from such advisers is important to demonstrat - ing satisfaction of the director’s fiduciary duties. Target company boards generally also request a “fairness opinion” from the financial advisers on whether, from
a financial standpoint, the proposed consideration is fair. 8.5 Conflicts of Interest Judicial scrutiny of conflicts of interest between prin - cipals and their advisers is a point of focus, in particu - lar when the target’s financial adviser also seeks to provide acquisition financing to the acquirer or when they may potentially favour one acquirer over another. The board of directors should educate itself on areas of potential and perceived conflicts of interest and carefully supervise and manage selection and con - duct of its outside advisers. Even though hostile tender offers are permitted in the United States, they are significantly less common than negotiated or “friendly” tender offers. Because the board is able to deploy various anti-takeover defences (see 9.3 Common Defensive Measures ), even an ini- tially unsolicited bidder may find it necessary or more advantageous to negotiate with the target company’s management to increase the likelihood of completing the transaction. Additionally, negotiated transactions are usually completed more quickly and provide for lower transaction risk for the hostile bidder, including the ability to have access to non-public due diligence materials. 9.2 Directors’ Use of Defensive Measures 9. Defensive Measures 9.1 Hostile Tender Offers Available defensive mechanisms generally encourage acquirers to negotiate with management and discour - age certain hostile activities, subject to the board of directors’ fiduciary duties. Ultimately, the target com - pany’s board of directors may remove most obstacles to an acquisition, and they may be required to do so if they believe their fiduciary duties to the target com - pany and its shareholders so require; see 8. Duties of Directors . 9.3 Common Defensive Measures Statutory Anti-Takeover Defences State law may include certain anti-takeover provisions authorising the board to adopt certain measures that
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