Entire Fairness Review of SPAC transactions

Lest´s explain the case particulars first (1): shareholders of Spac Churchill Capital Corp III presented a complaint against its directors, in the belief that the proxy statement prepared for them on the occasion of the Spac merger with Multiplan Inc. did not include material facts that finally affected the stock price of the combined company by a third. The material fact missed in the proxy was the possibility that a customer to 35% of its sales was thinking to stop its purchases and instead become a competitor to Multiplan in its market.

The Delaware court that analyzed the case first decided compensation if any would go direct to the stockholders, not to the company, their right to decide informed having been damaged directly; and accepted the case as a fiduciary duty´s case.

The court decided that the Business Judgement Rule should not be granted to directors, and based this decision on two main building blocks: