The legal standard that will be used to determine whether Clestra’s board of directors has acted properly when approving Clestra’s acquisition of Ballmax Inc is the business judgment rule. Which requires that managers must make an informed decision, have no conflict of interest and have a rational basis for believing that the decision is in the best interests of the corporation.
KRNP consulting can help insure the board made a reasonable investigation or reasonably rely on someoe who has, such as consulting firm. In this case, KRNP consulting. KRNP consultin can also complile a list of questions and quiz the board members, KRNP consulting can help determine wehther any member has a financial or other improper interest. In addition, KRNP consulting…show more content… Suppose Clestra's CEO is concerned that Clestra may be a target for a takeover by one of the larger consumer goods companies. If Clestra wants to remain an independent company, what should Clestra's board of directors do now to increase the chances that it may fend off a hostile takeover? What legal standard will judge whether Clestra's board has acted properly in adopting defenses against a hostile takeover? What should Clestra's board do now to increase the likelihood that the board will comply with that legal standard when it opposes a hostile takeover?
The legal standard that will be used to judge whether Clestra’s board has acted properly in adoting defenses against a hostile takeover is the Unocal test which requires that board of directors must show that: It had reasonable grounds to believe that a danger to corporate policy and effectiveness was posed by the takeover attempt. It acted primarily to protect the corporation and its shaeeholders from that danger, and the defense tactic was reasonale in relation to the threat posed to the corporation. This case is similar to the Paramount Communications, Inc v. Time, Inc case on page 1089-1090. Where the supreme court of Delaware found that board may oppose a hostile takeover provided that the board had a prexisitng, deliberately conceived corporate plan justifying its oppsotin. Clestra should take similar steps to increase the chances that it may fend off a hostile takeover, because the existence of such a plan
