The sale of a company can be a complex and challenging process and it requires the careful consideration of many factors. It is the responsibility of the company’s directors to ensure that the best interests of the company are met and the sale process is carried out in a manner that is both ethical and legal. This means understanding and abiding by the fiduciary duties of directors when selling a company. Fiduciary duty refers to the legal obligation of a director to act in the best interests of the company and its equityholders. Directors have fiduciary duties of both loyalty and care to the company and its equityholders.

• Duty of Loyalty: Directors must act in the best interests of the company and its equityholders. This means directors must not use their positions to benefit themselves or any third parties at the expense of the company or its equityholders.

• Duty of Care: Directors must act in a manner that is reasonable and prudent and make decisions based on due diligence and the good faith belief that their decisions are in the best interests of the company and its equityholders.

In the sale of a company, the company’s directors should keep the following in mind to make certain they are satisfying their fiduciary duties:

• Directors must ensure that the sale of the company is on the best terms possible. In doing so, directors should take into account the current market value of the company’s assets and liabilities, market conditions, and the company’s financials and operations, and consider the terms of the sale, the financial and legal risks, and any alternative offers.

• It is important directors remain impartial and unbiased during the sale process. This means avoiding any potential conflicts of interest. To the extent there are conflicts of interest, directors must ensure that these conflicts are properly managed and disclosed to the equityholders.

• Directors must ensure that the sale process is fair and transparent and all relevant information is disclosed to potential buyers.

• Directors must be meticulous in their research and due diligence when considering potential buyers and ensure that all potential buyers are treated fairly and equitably.

• Directors must ensure that any potential buyers can meet their obligations under the sale agreement, including having the financial resources to complete the transaction when it involves cash consideration (e.g., obtaining proof of funds from a potential buyer).

• Directors should consider the potential impact of the transaction on the company’s employees, creditors, and other stakeholders.

• Directors must provide full, accurate, and timely disclosure to the company’s equityholders about the sale process and its terms.

There are many steps involved in a sale process and numerous decision points along the way that are required by directors. Failure to comply with fiduciary duties can subject a director to personal liability.