Posts tagged Corporate Charters

Liquidation Preference in Certificate of Incorporation Found to Not Apply to Merger Proceeds

Matthews v. Groove Networks, Inc., C.A. No. 1213-N, 2005 WL 3529317 (Del. Ch. Dec. 8, 2005). Subsequent to merger between corporate Defendant and Microsoft, common stockholder objected to payment of liquidation preference in favor of the corporation's preferred stockholders. The certificate of incorporation stated that, in the event of a merger, the preferred stockholders would be paid from the corporation's "Distributable Assets," "whether from capital, surplus or earnings." The certificate clarified that in the event of a sale of a majority of the corporation's assets, the Distributable Assets would be the net proceeds of such sale. But the certificate did not contain a corollary statement clarifying what would constitute Distributable Assets in the event of a merger. The common stockholder sued, arguing that the merger consideration was not intended to be part of the assets of the corporation. More › Share

Court Rejects Stockholder's Challenge to Issuance of Preferred Stock

Benihana of Tokyo, Inc. v. Benihana, Inc., C.A. No. 550-N, 2005 WL 3753046 (Del. Ch. Dec. 8, 2005). Stockholder sought rescission of an agreement to issue $20 million of preferred stock to a third-party holding company. Plaintiff alleged that the transaction violated 8 Del. C. - 151 and corporation's certificate of incorporation by granting the holding company shares with preemptive rights and was therefore void as ultra vires. Plaintiff also alleged that a majority of the corporation's directors breached their fiduciary duties in approving the transaction and that the transaction had an improper primary purpose to dilute Plaintiff's interest in the corporation and entrench certain director defendants. Plaintiff further alleged that the acquirer aided and abetted the director defendants in their actions. More ›

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Court of Chancery Declares Stock Transfer Restrictions are Valid if they are a Reasonable Means to Achieving a Legitimate Corporate Purpose

The Capital Group Companies, Inc. v. Armour, 2005 WL 678564 (Del. Ch. Mar. 15, 2005). A Delaware corporation brought suit against the two trustees of a trust, who are husband and wife, seeking a declaration that certain contractual stock transfer restrictions alleged to apply to shares of its common stock owned by the trust were valid and enforceable. The two defendants were parties to a divorce proceeding and, in connection with that proceeding, the wife claimed an interest in the stock owned by the trust. The issue was whether the stock transfer restrictions could reasonably operate to prevent the transfer to, or disposition in favor of, the wife of any legal or beneficial interest in the stock. More › Share