Showing 28 posts in Stockholders' Meetings.
Court of Chancery Enjoins Vote
David P. Simonetti Rollover IRA v. Margolis, C.A. 3694-VCN (Del. Ch. June 27, 2008)
What must be disclosed to stockholders in a proxy for a merger vote is now well established. This decision again repeats that the interest of the investment firm giving a fairness opinion must be disclosed. Moreover, that does not just include its fees but also any gain it expects to make on the deal through its ownership of stock or other securities in the target.
ShareCourt 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.
ShareCourt of Chancery Explains Bylaw on Proxy Solicitation
JANA Master Fund, Inc.v. CNET Networks, Inc., C.A. 3447-CC (Del. Ch. March 13, 2008)
This is a useful decision on the proper interpretation of a bylaw that governs stockholder proxy proposals in light of SEC Rule 14a-8. The Court held that the bylaw only applied to stockholder requests to have a proposal included in the company's proxy materials under rule 14a-8. In that way the Court again emphasized that Delaware interprets bylaws so as to increase the ability of stockholders to vote.
ShareCourt of Chancery Defines Illegal Vote Buying
Portnoy v. Cryo-Cell International Inc., C.A. No. 3142-VCS (January 15, 2008).
This is the definitive decision on when arrangements to secure a stockholder's vote are invalid. "Vote buying" has long been criticized without much thought. After all, the Delaware General Corporation Code specifically authorizes arrangements to lock up a stockholder's vote. However, paying for that vote seems somehow wrong, perhaps because of political reasons. Here, the court carefully sets out the policy considerations and decides when paying for a vote is invalid.
In general, when a stockholder's agreement to cast his vote for management pursuant to a contract with the corporation is publicly announced, then it will be valid. If the other stockholders do not like it, then they can vote the other way. The exceptions to this are when corporate assets are used to buy the vote and then it becomes more troublesome. The arrangement will be struck down when it is not in furtherance of a proper corporate purpose and is unreasonable.
This decision also comments on how to conduct a stockholder meeting. Postponing votes by lying about why there is a delay is frowned upon, to say the least.
ShareCourt of Chancery Orders Meeting For Bankrupt
Fogel v U.S. Energy Systems, Inc., C.A. No. 3271-CC (January 15, 2008).
This is another in a line of decisions holding that the Court of Chancery may order the holding of a stockholders' meeting even if the company is in a bankruptcy proceeding. The automatic stay does not apply.
ShareCourt of Chancery Adopts New Standard of Review
Mercier v. Inter-Tel (Delaware) Incorporated, C.A. No. 2226-VCS (August 14, 2007).
In a precedent setting opinion, the Court of Chancery has recast the standard of review that applies when determining if a board has acted to affect a stockholder vote. Under the previous Blasius standard, the board had to prove a "compelling justification" before taking any action, such as postponing a stockholder meeting, that affected the stockholders' right to vote.
This opinion recasts the standard closer to the familiar Unocal test where director action that affected a proposed takeover had to be a reasonable response to a perceived threat to corporate policy or interests. Now, in the case of board action that may affect the stockholders' vote, the board must show its actions were: (1) designed to achieve a legitimate corporate objective; (2) taken for a proper motive in good faith; and (3) were reasonable means to their proper objective. This test should be substantially easier to meet than the "compelling justification" standard.
ShareCourt of Chancery Extends Date For Meeting
Louisiana Municipal Police Employees Retirement System v. Crawford, C.A. No. 2635-N (Del. Ch. February 13, 2007).
The question sometimes comes up of whether a stockholder meeting should be postponed to permit supplemental proxy materials to be sent and read by the stockholders. Here, the Court did extend the meeting based on the facts presented to it. Hence, this decision provides guidance on this issue.
ShareCourt of Chancery Upholds Special Committee Action
Stay In Voting Case Denied By Court of Chancery
B.F. Rich Co., Inc. v. Gray, C.A. No. 1896-N (Del. Ch. December 15, 2006).
After losing a case involving the right to vote shares that were a controlling block, the loser sought a stay to permit an appeal to the Delaware Supreme Court. The Court of Chancery denied the stay after applying the usual standards for such stays. The decision is interesting because the Court was faced with a change in control of the Delaware entity as a result of its decision and the obvious impact that might have on corporate affairs was carefully considered by the Court. More ›
ShareCourt of Chancery Resolves Conflict With SEC Rule
Esopus Creek Value LP v. Hauf, C.A. No. 2487-N (Del. Ch. November 29, 2006).
Delaware law requires an annual stockholder meeting. The SEC rules prohibit calling a stockholder meeting when the company is delinquent in its SEC filings. In this case and in its decision in Newcastle Partners LP v. Vesta Insurance Group, Inc., 887 A.2d 975 (Del. Ch. 2005), aff'd., 906 A.2d 807 (Del. Ch. 2005) the Delaware Court of Chancery has resolved this apparent conflict. Here, the Court held that a stockholder meeting should go forward with adequate disclosures to the stockholders entitled to vote on the proposed sale of substantially all of the company's assets. The Court ordered the company to apply to the SEC for an exemption from the rules prohibiting the calling of a meeting. More ›
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