3rd Circ. Says Board Observers Not Same As Directors

Law360 (July 23, 2019, 10:08 PM EDT) -- The Third Circuit threw out on Tuesday investors' last remaining claim against two men allegedly liable for misrepresentations about a company's financial well-being ahead of its public debut, finding that board observers, who don't have voting rights, are distinct from directors.

In a precedential opinion, two members of a three-judge panel cleared L. McCarthy Downs III and Hayden Zou of wrongdoing related to the holding company Tibet Pharmaceuticals Inc.'s initial public offering in 2011. The duo was among a number of defendants accused of hiding material information ahead of the IPO, including the company's need to repay a loan that it...

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