Well, given that I just spent several hours constructing a somewhat lengthy post that I apparently lost (aargh!), I will keep this relatively short.

This summer, I am working on a benefit corporation project for the Annual Adolf A. Berle Symposium on Corporation, Law and Society (Berle VIII) to be held in Seattle next month.  In that connection, I have been thinking about litigation risk in public benefit corporations, which has led me to consider the specific litigation risks incident to mergers and acquisitions (“M&A”).  I find myself wondering whether anyone has yet done a benefit corporation M&A transaction and, if so, whether a checklist might have been created for the transaction that I could look at.  I am especially interested in understanding the board decision-making aspects of a benefit corporation M&A transaction. (Haskell, maybe you know of something on this . . . ?)

Preliminarily, I note that fairness opinions should not carry as much weight in the benefit corporation M&A approval context, since they only speak about fairness “from a financial point of view.” Benefit corporation boards of directors must consider not only the pecuniary interests of shareholders in managing the firm, but also the firm’s articulated public benefit or benefits (which is/are set forth in its charter).  Will legal counsel pick up the slack and render an opinion that the board’s consideration of the public benefit(s) complies with law?  What diligence would be required to give that opinion?  I assume in the absence of interpretive decisional law, any opinion of that kind would have to be qualified.  I also assume that legal counsel will not readily volunteer to give this kind of opinion.

However, even in the absence of an opinion, legal counsel will have to offer advice on the matter, since the board of a benefit corporation has the legal obligation to manage the firm consistent with its public benefit(s) in any case.  Moreover, M&A agreements typically include representations (on transactional consents, approvals, and governance/legal compliance) affirming that the requisite consents and approvals for the transaction have been obtained and that the agreement and consummation of the transactions contemplated by it do not violate the firm’s charter or applicable law.  Legal counsel will be responsible for counseling the client on these contractual provisions.

At first blush, the embedded issues strike me as somewhat complex and fact-dependent.  Important facts in this context include the precise language of the applicable statutory requirements, the nature of the firm’s public benefit or benefits, the type of M&A transaction at issue and the structure of the transaction (including which entity survives in a merger), and the identity of the other party or parties to the transaction (especially whether, e.g., a merger partner is organized as a public benefit corporation or another form of entity).  As I continue to ponder these and related matters in the benefit corporation M&A setting, I invite your comments on any of this–or on broader aspects of litigation risk in the public benefit corporation environment.