Motions were submitted for approval of a derivative action due to a board of directors resolution to approve the controlling shareholder to make future distributions of dividends to allow the controlling shareholder to finance the transaction for the taking over of the Company. The argument was that this is an extraordinary transaction with a controlling shareholder contrary to the Company’s interests.
The Supreme Court held that reliance of the controlling shareholder on future distributions of dividends in order to finance the transaction for the purchase of the company is not unacceptable by itself and does not meet the definition of "extraordinary transaction with a controlling shareholder." Thus, the transaction does not require special procedures under law. A decision to change the Company's capital structure while making a transaction of acquiring the company should be reviewed under strict scrutiny due to the apprehension of decision making in order to promote the best interests of the controlling shareholder over the best interests of the company.
In this case, the decision was taken in a reasonable business manner under the circumstances and thus, the Court rejected to motion for a derivative claim.