Directors of closely held corporations are not required by law to repurchase a minority stockholder’s shares in the company, the Delaware Supreme Court has ruled. The high court’s opinion affirmed the Delaware Court of Chancery’s decision that the board of a real estate development company was not bound by the implied covenant of good faith and fair dealing to repurchase a minority stockholder’s shares.
“Under common law, the directors of a closely held corporation have no general fiduciary duty to repurchase the stock of a minority stockholder,” said Justice Carolyn Berger in Blaustein v. Lord Baltimore Capital. “An investor must rely on contractual protections if liquidity is a matter of concern.”
