Brief Fact Summary
Maremont, an active corporate financier inquired about merging the Holland Furnace Company into one of his companies. Maremont began actively purchasing Holland stock. Because of Maremont's reputation for liquidating companies, the field sales force was considering leaving in large numbers. Maremont suggested that either a family holding company that held 18.5% either sell their shares to him or that Holland buy his shares. The board decided to buy Maremont's shares at $14.40 a share, a price higher than the market price. Plaintiff, holder of 60 shares, filed a derivative suit, requiring directors to account for damages. The trial court held for plaintiffs, as they found that Maremont posed no threat and that the true impetus behind the acquisition of shares was to perpetuate control.

Rule of Law and Holding
The Bennett rule: When a corporation purchases its own stock to thwart a hostile offer, the DEFENDANT has the burden of proving reasonable grounds to believe a danger to corporate policy and effectiveness existed. In this case, the court found that the board did have reasonable grounds to believe that Maremont posed a threat to corporate policy and therefore reversed the judgment of the trial court.

Topics
Fundamental Change Transactions

Subtopics
Hostile Offers