Delaware Business Litigation Report

Court Of Chancery Explains Effect Of Notice Bylaw Violation

Rainbow Mountain Inc. v. Begeman, C.A. No. 10221-VCMR (March 23, 2017)

This is an interesting decision even if only because it is so well written and deals with an unusual family corporation.  Its legal significance is that it explains that a vote taken in violation of a bylaw requiring notice is void, rather than voidable, where equitable defenses could apply.  The distinction between a void and voidable failure to give proper notice has not always been clear, but Vice Chancellor Laster attempted to reconcile prior cases in the Klaassen decision, and Vice Chancellor Montgomery-Reeves signs onto his approach in this case.

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