Frank Aquila, Krishna Veeraraghavan and Mimi Butler Publish Article on Proxy Put and Fiduciary Duties in The M&A Lawyer

September 9, 2013

An article by Messrs. Aquila and Veeraraghavan and Ms. Butler titled, “The Proxy Put and Fiduciary Duties: A Closer Look at Kallick v. SandRidge,” was published in the July/August 2013 issue of The M&A Lawyer. The article analyzes a March 2013 Delaware Chancery Court decision addressing the fiduciary duties of directors with respect to a type of provision found in many debt instruments (a “Proxy Put”) that allows a lender to require the repayment of the debt upon the election of a new board of directors without the incumbent board’s approval. The article notes that, as a result of the court’s decision, directors not only have an affirmative duty to “neutralize” such provisions unless a rival slate presents a “specific and substantial risk to the corporation or its creditors”, but they also have a duty to try to exclude such provisions in the first instance and to “accede to the Proxy Put after hard negotiation and only for clear economic advantage.”