The Establishment, Composition, and Functioning of a Special Committee of a Board of Directors

Abstract

Recommendations and reporting of an ad hoc special committee (special committee), to a board of directors, for review and approval, may be successfully contested by a counter-party because of a special committee that (i) lacks independent and disinterested members and an advisor(s); (ii) allows undue influence upon one or more members or an advisor of a special committee, by an interested party (to be defined herein); or (iii) does not engage in a proper process. The author has advised, served as a member of, and testified as an expert witness in respect of, special committees. This article sets out best practices for the establishment, composition, and functioning of a special committee, paying particular attention to the role of company directors, various counsels, and interested parties.