Monday, May 19, 2014

Benihana TOK, Inc. v. Benihana, Inc. case brief summary

Benihana TOK, Inc. v. Benihana, Inc.
o    BOT is parent company. BOT Owner owns 50.9% of Benihana Inc. in Delaware. 
o    Owner marries and changes will. Wants to leave wife in control of Benihana Inc. Kids freak out. 
o    There are two things happening here: Power struggle and Renovation plans.
o    One is the possible plan to issue additional shares such as to trigger a provision to allow voting change. (Power struggle)
o    Two is the company needs financing for renovations of chain facilities. (Renovation)
o    The question is…the issuing of shares in the financing scheme, and the voting rights associated, will dilute the “owners” voting rights, similar to the first plan. Thus renovation plan will have same affect as power struggle plan.
o    Joseph is independent finance advisor. Abdo is VP on board for Benihana AND a director for BFC(Finance company).
o    These two work out terms.  Conflict of interest claim by BOT owner.
o    Owner asked for board to abandon transaction and seek alternate financing. 
o    This transaction would reduce his voting rights from 50.9% to 42.5% and eventually 36%.
o    In short, this will ALSO remove his authority to appoint his new wife as control of the company.
o    §144(a)(1) Delaware: Freshening the atmosphere by disclosed or known material facts and vote by uninterested director vote. Safe harbor.
o    Owner claims not disclosed to board that Abdo negotiated for BFC. He played both sides of the transaction.
o    And Abdo had the inside numbers from Benihana during the negotiation.
o    Court said: Abdo made the presentation to the board. Thus they knew
o    Also they got the terms that were important to Benihana and no record he used inside info against them.
o    Entrenchment: The SOLE purpose here was not entrenchment. (Power struggle) It was for financing as well if not primarily.

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