The rise of hedge funds and their buying up of public companies has led to several situations where management of a public company has initiated the sale of the company to a hedge fund without telling the board of directors and, indirectly, the stockholders. Some recent examples includes Kinder Morgan and Harrah's. While management gets a very good deal from the hedge fund buyer, no one knows whether the stockholders are getting the best deal they can. By the time the deal is made known to the board it may have attained such a momentum that it can't be stopped.
The Delaware courts are currently looking at such a case. The CEO of SS&C Technologies hired financial advisers to explore the company's sale and signed non-disclosure agreements - all without board knowledge. Now the court is trying to answer the question as to whether the CEO misused company information to feather his own nest and whether he usurped his authority.
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