Special Committee
An ad hoc board subcommittee of independent directors formed to evaluate conflict-of-interest transactions.
What is Special Committee?
A special committee is an ad hoc subcommittee of independent board directors created to evaluate, negotiate, and oversee specific transactions or matters in which the full board may have conflicts of interest. Special committees are most commonly formed for mergers and acquisitions involving a controlling shareholder, management-led buyouts (MBOs), going-private transactions, and significant related-party transactions. The use of a special committee of independent directors with its own legal and financial advisors is considered a key procedural safeguard. Delaware courts scrutinize whether special committees were properly constituted and whether they negotiated with full information and authority when evaluating whether a board fulfilled its fiduciary duties.
Example
When Michael Dell and Silver Lake Partners proposed a $24.4 billion leveraged buyout of Dell Technologies in 2013, the board formed a special committee of independent directors separate from CEO Michael Dell to evaluate and negotiate the transaction on behalf of minority shareholders. The committee retained independent legal counsel (Debevoise & Plimpton) and a financial advisor (Evercore) to provide an independent fairness opinion.