Controlling Shareholder May Have Breached Duty By Exploiting Control Over Other Shareholders For Its Benefit
Williamson v. Cox Communications, Inc., ( read opinion online here ).This Chancery Court case addressed whether or not two cable companies should be considered “controlling shareholders” for purposes of a transaction and if so, whether that transaction was unfair to minority shareholders and should be governed by the entire fairness standard. The court discussed the different factors that determine whether a shareholder is controlling, which can be the case even if less than 50% ownership is held. Only when the shareholder is deemed “controlling” or part of a “controlling group” will it trigger that duty to other shareholders. The court found that the complaint asserted a nexus of facts to suggest that the companies were in a controlling position over the transaction at issue and that they exploited that control for their own benefit. Thus, the Motion to Dismiss was denied.
