Delaware Business Litigation Report

Court Of Chancery Enjoins Board Reduction Plan Prior To Director-Election

Pell v. Kill, C.A. 12251-VCL (May 19, 2016)

This is an excellent review of the law governing when the Court will enjoin board action that affects the ability of stockholders to elect directors. Such interference must: (1) be for a proper motive, (2) not be preclusive, and (3) have a compelling justification in the method chosen. Downsizing the board just before an election in the face of a proxy contest over one class of directors does not pass this test, even if done for a proper, unselfish purpose. The bottom line is that incumbent directors cannot determine the outcome of an election contest for the stockholders.  

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