Clifford Chance

Delaware Chancery Court Enjoins 'Don't Ask, Don't Waive' Standstill Provision

14 December 2012

"Don't Ask, Don't Waive" provisions have become common in standstill agreements used in M&A transactions. They prohibit a potential bidder from publicly or privately requesting that the target company waive the terms of the standstill agreement. In In re Complete Genomics, Inc. Shareholder Litigation, the Delaware Court of Chancery held that prohibiting a potential bidder from privately requesting a waiver of a standstill provision in a confidentiality agreement "impermissibly limited [the board's] ongoing and statutory and fiduciary obligations to properly evaluate a competing offer, disclose material information, and make a meaningful recommendation to its stockholders." Put another way, according to the Court, a "Don't Ask, Don't Waive" provision "represents a promise by a fiduciary to violate its fiduciary duty, or represents a promise by a fiduciary that tends to induce such a violation."

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