## Facts

- TransPerfect Global, Inc. was a profitable Delaware corporation co-founded and co-managed by Philip Shawe and Elizabeth Elting.
- Ownership and control were split among three stockholders: Elting (50%), Shawe (49%), and Shawe’s mother, Shirley Shawe (1%).
- Shawe and Elting were the only directors and co-CEOs, and their relationship deteriorated into persistent, severe governance and management deadlock.
- The stockholders stipulated they were unable to elect successor directors and had no prospect of doing so.
- The Court of Chancery found complete dysfunction and irretrievable deadlocks over significant matters, causing and threatening irreparable injury to the business despite its profitability.
- Mediation and other court-assisted efforts, including the involvement of a special master, failed to resolve the impasse.
- The Court of Chancery appointed a custodian under 8 Del. C. § 226 with authority to sell the company as a going concern and maximize value for stockholders.

## Issues

1. Whether 8 Del. C. § 226 authorizes the Court of Chancery to appoint a custodian empowered to sell a solvent, profitable corporation to remedy director/stockholder deadlock.
2. Whether the Court of Chancery abused its discretion by ordering a custodial sale rather than selecting less drastic alternatives.

## Decision

- The Delaware Supreme Court affirmed the Court of Chancery’s order appointing a § 226 custodian and authorizing a sale process.
- The Court held that § 226’s remedial authority can include a custodial sale when the statutory prerequisites are met and a sale is necessary to address deadlock and prevent harm.
- The Court held the trial court did not abuse its discretion because it developed a detailed factual record, considered alternatives, and reasonably determined that a sale was required to protect the enterprise and stockholder value.

## Legal Principles

- When the conditions of 8 Del. C. § 226(a) are satisfied—including inability to elect successor directors and managerial deadlock threatening irreparable injury—the Court of Chancery may appoint a custodian.
- A § 226 custodian’s powers may be tailored to include running a sale process, including for a profitable company, where lesser measures are inadequate to remedy intractable deadlock.
- The selection of an equitable remedy under § 226 is reviewed for abuse of discretion, and appellate review affords substantial deference to the Court of Chancery’s fact-finding and remedial choices when supported by the record.
- In a custodial sale ordered to address deadlock, the remedy may be structured to preserve the business as a going concern and maximize value for stockholders.

## Conclusion

The Delaware Supreme Court upheld the appointment of a custodian under 8 Del. C. § 226 with authority to sell a profitable corporation, ruling that persistent deadlock and threatened irreparable harm justified a sale as a properly tailored, discretionary remedy after lesser alternatives failed.


Shawe v. Elting, 157 A.3d 152 (Del. 2017)