Скачать или смотреть In re Trados Inc. Shareholder Litigation Case Brief Summary | Law Case Explained

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In re Trados Inc. Shareholder Litigation | 73 A.3d 17 (2013)

The directors of a particular company have fiduciary duties to pursue the best interests of the company and its common stockholders. The Delaware Court of Chancery considered whether directors breached their fiduciary duties by approving a sale that netted the common stockholders nothing in the case In re Trados Incorporated Shareholder Litigation.

Trados developed desktop software for translating documents. Starting in two thousand, Trados obtained several rounds of venture capitalist funding to spur growth that could lead to an initial public offering. The venture capitalists received preferred stock and control of the Trados board of directors in exchange. In the years that followed, Trados slowly increased revenue but failed to satisfy its venture capitalist backers. In two thousand four, the venture capitalists started looking for an exit. To that end, the board adopted a management incentive plan, or M I P. The M I P reserved an escalating percentage of the proceeds from the eventual sale of Trados for senior management depending on the valuation achieved.

In July of two thousand five, the board voted to sell Trados for sixty million dollars in cash and stock. The first thirteen percent of the sale proceeds, seven point eight million dollars, went to senior management under the M I P. The remaining fifty-two point two million dollars, minus an indemnity holdback, went to the preferred stockholders. This amount was less than the preferred stockholders’ total liquidation preference of fifty-seven point nine million dollars but more than their initial investment. The common stockholders received nothing. Without the M I P in place, the common stockholders would’ve received two point one million dollars.

Common stockholder Mark Christen filed a lawsuit in the Delaware Court of Chancery, alleging that the directors breached their fiduciary duties by approving the sale. After the directors unsuccessfully moved for summary judgment, the case went to a bench trial.

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