GUIDELINES AND ISSUES: Use of a Special Committee to the Board of Directors

Sponsored By Houlihan Smith & Company, Inc.

Topics:

Accounting

Banking & Capital Markets

Finance & Risk Management

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Abstract:

Any corporate transaction involving an existing or potential conflict of interest may become the subject of litigation initiated by minority shareholders. In such case, directors may be called upon to prove that all aspects of the transaction were fair to the corporation and its shareholders. Directors may, however, be able to shift this burden of proof away from themselves and to the minority shareholders/plaintiffs if they have taken certain steps to ensure the fairness of the transaction. One important step is the establishment and use of a properly functioning Special Committee comprised of independent and disinterested Board members empowered to negotiate the transaction.

DETAILS

Sponsored by: Houlihan Smith & Company, Inc.

Released: June 30, 2009

Length: 16 pages

Format: PDF (459 kb)

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