3rd Circ. Decision Limits Liability Of Board Observers

Law360 (August 9, 2019, 3:17 PM EDT) -- In Obasi Investment Ltd. v. Tibet Pharmaceuticals Inc.[1], the U.S. Court of Appeals for the Third Circuit evaluated potential liability of two board observers for material omissions of negative financial information about Tibet Pharmaceuticals in connection with the corporation’s initial public offering.

Investors in early- and growth-stage companies often require, as a condition to their investment, the right to designate at least one member of the board of directors or the right to appoint a board observer who will receive information provided to the board and attend meetings of the board in a nonvoting capacity — or in some cases, both....

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