Board Resolutions Forming Special Committee

Summary

This template board resolution forming a special committee is for use by a company's board of directors in establishing a special committee to negotiate an acquisition transaction. This template may be tailored to suit other types of transactions and includes practical guidance and drafting notes. A special committee may need to be formed if one or more directors have a conflict of interest. A special committee should be comprised of disinterested directors who have no affiliation with interested parties and are empowered to take the steps necessary to create an arm's-length negotiation process. A properly formed and well-functioning special committee that is established early in the transaction process can, in litigation based on a claim of a breach by directors of their fiduciary duties in connection with a transaction: (1) serve as proof of the procedural fairness of the transaction; (2) shift the burden of proof to the plaintiff to show that the transaction was not fair; and (3) when combined with a requirement that the transaction be approved by an informed vote of the majority of the unaffiliated minority stockholders, subject the review of the directors' actions to the business judgment rule rather than an entire fairness analysis (the entire fairness standard of review being the most burdensome fiduciary duties standard of review under Delaware law). See In re Match Grp., Inc. Derivative Litig., 2024 Del. LEXIS 115 (Apr. 4, 2024). For a full listing of related M&A provisions content, see M&A Provisions Resource Kit. For detailed guidance, see Fiduciary Duties and Procedural Safeguards in Going Private Transactions.