In re C-T of Virginia, Inc.
United States Court of Appeals for the Fourth Circuit
958 F.2d 606 (1992)
- Written by Eric Miller, JD
Facts
HH Holdings, Inc., formed HH Acquisition, Inc., for the purpose of acquiring C-T of Virginia, Inc. (C-T), a shoe company, in a leveraged buyout structured as a reverse triangular merger. The merger was approved by the board of directors and the shareholders of C-T. All outstanding shares of C-T common stock were canceled, after which the former holders had the right to $20 per share in exchange for their canceled certificates. HH Holdings obtained the bulk of its financing from bank loans, which were secured by C-T assets. Under new postmerger management, C-T struggled financially and eventually filed for Chapter 11 bankruptcy. The official committee of unsecured creditors of C-T (the creditors) (plaintiff) brought an action in federal district court, alleging that C-T’s directors (defendants) caused the insolvency by approving a distribution of stock in violation of a Virginia statute. The directors moved for summary judgment, which was granted. The creditors appealed. The United States Court of Appeals for the Fourth Circuit granted certiorari.
Rule of Law
Issue
Holding and Reasoning (Wilkinson, J.)
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