Court of Chancery Upholds Right To Nominate Directors
Levitt Corp. v. Office Depot, Inc., C.A. No. 3622-VCN (Del. Ch. April 14, 2008)
This is a case of bylaws gone bad. While the obvious intent of the company's advance notice bylaw was to obtain notice of what directors a dissident slate might want to nominate, the language of the bylaws was fatally deficient. Thus, this decision gives a good drafting lesson .
The bylaw required advanced notice of an intent to bring a matter before the annual meeting. However, the bylaw made an exception for any matter the company itself had noticed for the meeting. When the company, as always, noticed the meeting would include the election of directors, the court held that included the nomination of directors as part of the matters to be considered. Thus, the court held that the intent to nominate a dissident slate need not be noticed again by the dissidents in accordance with the advance notice bylaw provisions.
The way to avoid this mistake is to make it clear in the bylaws that the intent to nominate a slate different than that proposed by the company is subject to a reasonable advance notice provision in the bylaws. In short, state the rules of the game clearly.Share