Sunday, November 24, 2013

Benihana of Tokyo, Inc. v. Benihana, Inc. case brief

Benihana of Tokyo, Inc. v. Benihana, Inc. case brief summary
906 A.2d 114 (Del. 2006)


CASE SYNOPSIS
Plaintiff company appealed a judgment by the Court of Chancery of the State of Delaware in and for New Castle County that found defendant subsidiary's board of directors acted properly in approving the issuance of $ 20 million in preferred stock.

CASE FACTS
Due to financial problems and a change of corporate control, three of the members of the subsidiary's board of directors considered the issuance of convertible stock and its sale to defendant potential buyer. Ultimately, the entire board approved resolutions ratifying the execution of a stock purchase agreement with the buyer and authorizing the stock issuance. Thereafter, the company filed an action against all but one of the subsidiary's directors, alleging breaches of fiduciary duties.

DISCUSSION

  • The state supreme court found that the subsidiary's certificate of incorporation did not prohibit the issuance of preferred stock with preemptive rights. 
  • The record clearly established that the board possessed all of the material information when it approved the transaction. 
  • Consequently, the trial court properly concluded that the board's approval of the transaction was a valid exercise of its business judgment, for a proper corporate purpose, under Del. Code Ann. title 8, §§ 144(a)(1), 102(b)(3).

CONCLUSION
The judgment was affirmed.

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