Exploring the Buried-Facts Doctrine: Legal Insights and Implications
Definition & Meaning
The buried-facts doctrine is a legal principle that holds that the disclosure of information in proxy statements is inadequate if a reasonable shareholder cannot easily understand the risks due to important facts being hidden or obscured. This doctrine is invoked when material information is presented in a way that makes it difficult for shareholders to grasp the overall significance, such as when key details are buried in footnotes or appendices of lengthy documents.
Legal Use & context
The buried-facts doctrine is primarily used in securities law, particularly in cases involving proxy statements, which are documents sent to shareholders that provide information about matters to be voted on at shareholder meetings. This doctrine helps ensure transparency and protects shareholders by requiring clear and accessible disclosures. Users can manage related legal processes by utilizing templates and forms available through US Legal Forms, which are drafted by qualified attorneys.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A company releases a proxy statement regarding an upcoming merger but includes critical financial risks only in a lengthy appendix. Shareholders may overlook these risks, leading to claims of inadequate disclosure under the buried-facts doctrine.
Example 2: A proxy statement mentions a potential lawsuit against the company but places the details in a footnote, making it difficult for shareholders to assess the associated risks. This could trigger legal scrutiny based on the buried-facts doctrine.