The core work of the SLC's investigation.

AuthorNewman, C.
PositionLIABILITY AND LITIGATION - Special litigation committee

There are two key aspects of the SLC's investigation: structuring an investigation plan that is appropriate in scope and scale, and conducting a comprehensive and independent review.

  1. Initial Steps--Determining the Appropriate Scope of the Investigation: Among the first--and most important---steps in the SLC's work is determining the scope and breadth of its investigation. This is best accomplished after a careful review and analysis of the specific allegations made by the demand shareholder.

    Getting the scope of the investigation right is critical. Mistakes and miscalculations could jeopardize the reliability and credibility of the SLC's ultimate end product--the SLC's investigative report in which its factual findings and conclusions are set forth. If, for example, the SLC designs an investigation plan that is too narrow in scope, counsel for demand-shareholders would likely criticize the report as failing to cover key issues. An investigation plan that is overly broad in scope, on the other hand, also presents different but equally troubling concerns. An unfocused and unnecessarily expansive investigation plan could result in a failure to address pivotal issues and, as important, could be a waste of time and energy devoted to investigating allegations not germane to the demand-shareholders' contentions.

  2. Conducting a Comprehensive and Efficient Investigation: After the SLC determines the appropriate scope of the investigation plan, it is readyto begin the main phase of its work conducting a detailed and thorough investigation. The SLC mustfollow a careful process to ensure that it has preserved, collected and reviewed the company's relevant documents, and interviewed relevant personnel.

    * Document Preservation: As an initial matter, the SLC should take steps to preserve the company's relevant materials. This should be accomplished through the distribution of a written document retention notice, which informs the recipients that they have an obligation to maintain all documents pertinent to the issues raised in the demand letter. An initial list of relevant employees can be obtained by identifying key people who work in the business units that would most likely have had involvement in the claims raised by the shareholders. The document retention notice should also be circulated to the company's IT department so that documents are not deleted inadvertently--for example, by failing to deactivate an automatic deletion system.

    * Document...

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