Kahn v. M & F Worldwide Corp. states that a controlling shareholder transaction receives the business judgment rule when what conditions are met?

• A. It is approved by an independent committee and a majority of the minority stockholders.
• B. It is approved by the board alone.
• C. It is approved by the majority of all stockholders regardless.
• D. It has no independent review.

Answer: (A)

In controlling-shareholder transactions, the business judgment rule only applies if there are two key protections in place: an independent committee reviews and negotiates the deal, and a majority of the minority stockholders approves it. This two-pronged requirement exists because when one party controls the company, there’s a real risk of self-dealing or coercive terms. Having an independent committee provides an objective, arm’s-length assessment of the deal, while majority approval by non-controlling shareholders ensures those without control have a genuine voice in the decision. If either protection is missing, the transaction isn’t entitled to the business judgment rule and will be scrutinized more rigorously for fairness of price and process. That’s why the best answer is the option describing independent-committee approval plus majority approval by the minority stockholders.