Private Law Theory

ABSTRACT
This Article analyzes the reverse Morris trust (RMT) transaction and shows that RMTs present a unique case of corporate governance. In an RMT the shareholders are positioned on both sides of the transaction while management is not, thus creating a misalignment of interests, which can be detrimental to the shareholders and potentially lead to inefficient transactions. This Article shows that the common use of a split-off as part of the RMT transaction can benefit informed shareholders at the expense of unsophisticated shareholders. To address these concerns, this Article puts forward a proposed amendment to the tender offer rules – a default contingent tender rule.

Ganor, Mira, The Curious Case of Reverse Morris Trusts (October 1, 2023).