Ha2016 liquidating trust v
For companies with certain types of illiquid but valuable intellectual property, the liquidating trust’s simplicity and lower cost can make it superior to other alternatives.For example, for a small biotech with drug development programs out licensed to third parties, the liquidating trust can be a cost effective way to collect milestones and royalties for a period of time while open issues are resolved and a transaction can be closed to monetize the licensor interest.Our services do not replace lawyers, investment bankers or accountants, but our involvement can make their work more cost effective.The mechanics of transitioning to a liquidating trust are straightforward, but are not standard fare for these high priced professionals. In return, Magnacca allegedly guided Radio Shack into an ill-fated recapitalization transaction with Standard General and away from other alternatives that would have brought more value to the company.
A liquidating trust may be appropriate for a biotech or drug development company if: • Continuing research and development activities is not financeable or otherwise not in the stockholders’ best interests; • The company is solvent on both balance sheet and liquidity bases: with sufficient liquidity to settle contracts, real estate leases and severance; and • The Board and management begin the wind down process early enough to assure an orderly process and maximize the opportunity to realize value for stockholders.
It is possible that the directors may have breached their duty of care. While I acknowledge that Revlon scrutiny can apply to mergers, I consider it lazy jurisprudence to focus on the mere possibility that a merger might have occurred and permit that to be the tail that wags the dog when it comes to applying Revlon scrutiny. Indeed, there is no suggestion as to why any disinterested director was motivated to elevate Magnacca’s self-interest over the best interest of the company.
I find no cognizable claim that any of the directors of Radio Shack, including Magnacca, breached his or her duty of loyalty. First, there is no allegation that any director other than Magnacca was acting in his or her own interest.
Count two states a claim for breach of the duty of care against Magnacca in his capacity as CEO. (Id.) On February 5, 2015, Radio Shack filed for voluntary relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Woodbury are former members of Radio Shack’s board. This articulation of the Revlon duty presents two initial problems for the Trust, the first of which is easily disposed of. So, if Revlon applies, it is of no moment that no recovery may reach stockholders. Even Though the Transaction Contemplated the Possibility of a Merger, Revlon Scrutiny Is Not Automatically Mandated The second hurdle presented by Lyondell’s articulation of Revlon’s “one” duty is not so easily surpassed. that will result in a change of control.” Lyondell, 970 A.2d at 242 . (Radio Shack Form 8-K, October 3, 2014 at 5 (“Under the Recapitalization Agreement, the Company is obligated to enter into a merger agreement with a newly formed, wholly owned subsidiary of the company and seek stockholder approval of the merger promptly after the consummation of the Rights Offering.”))  So, does the fact that the Transaction contemplated the possibility of a merger between Radio Shack and a newly-formed, wholly-owned subsidiary automatically require me to apply Revlon scrutiny? “It is too often forgotten that Revlon, and later cases like QVC, primarily involved board resistance to a competing bid after the board had agreed to a change of control, which threatened to impede the emergence of another higher-priced deal.” C & J Energy, 107 A.3d at 1053 . (AC ¶ 4) By doing so, Standard General “could capture the potential turnaround value for itself through a foreclosure in bankruptcy at a fire sale price.” (Id.) The notion that capturing control of a corporation via foreclosure constitutes a change of control under Revlon is novel. But, more troubling than any lack of precedent is the fact that the right to foreclose in the event of default is a right that exists in every secured transaction.
But, Delaware law provides no exculpation for claims against officers. (AC ¶ 23) Based in Fort Worth, Texas, it operated more than 4,100 stores throughout the United States. Ryan , the Delaware Supreme Court held that there is only one Revlon duty — “to `[get] the best price for the stockholders at a sale of the company.'” 970 A.2d at 242 quoting Revlon, 506 A.2d at 182 . The Trust alleges that Radio Shack was insolvent at all relevant times. Here, the Transaction did at least contemplate the possibility of a merger. According to the Trust, the “cornerstone” of Standard General’s scheme was acquiring control of Radio Shack’s senior debt.