Corporate Law Developments
The Delaware Court of Chancery Concludes Directors' Action To Reschedule A Stockholder Vote Satisfies Blasius' Compelling Justification Standard
(August 22, 2007)
In his August 14, 2007 opinion in Mercier v. Inter-Tel (Delaware), Incorporated, Vice Chancellor Strine held that the special committee of the board of directors of Inter-Tel had a “compelling justification” for rescheduling a special meeting of stockholders to vote on a proposed merger with Mitel Networks Corporation, and denied the plaintiff stockholders’ motion to preliminarily enjoin the closing of the merger. The court held that the compelling justification standard of Blasius Indus., Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988), is satisfied “[w]hen directors act for the purpose of preserving what the directors believe in good faith to be a value-maximizing offer. . . .” In so doing, the court noted that “no decision has, before today, found [the compelling justification standard] satisfied.” Op. at 44.
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Clear Signal Beacons and Brightly Lined Channel Markers For Directors of Financially Troubled Delaware Corporations
(May 25, 2007)
The Delaware Supreme Court recently held, in a case of first impression for that court, that creditors of insolvent and nearly-insolvent Delaware corporations may not assert direct claims against directors for breaches of fiduciary duties. North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, No. 521, 2006 slip op. ( Del. May 18, 2007). The Delaware Supreme Court also made clear that creditors of insolvent corporations may, under certain circumstances, have standing to assert derivative claims for injury caused to the corporation.
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Delaware Supreme Court Recognizes Expanded Scope of Direct Shareholder Claims
(April 20, 2007)
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Delaware Court of Chancery Disapproves Class Action Settlement Based on Concerns Over Timing of Presentation and Investigation of Claims
(December 20, 2006)
In SS&C Technologies, Inc. S’holders Litig., C.A. No. 1525-N (Del. Ch. Nov. 29, 2006), the Delaware Court of Chancery disapproved a class action settlement for two independent reasons. First, the Court concluded that the “parties were dilatory in presenting [the settlement] for approval.” Second, the Court stated that it could not “conclude from the record presented that the potential claims belonging to the class were adequately or diligently investigated or pursued.” This Opinion provides important guidance to practitioners who negotiate and present class action settlements in Delaware Courts.
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Delaware Court of Chancery Prohibits a Financially Healthy Company From Agreeing to Sell Substantially All Of Its Assets Through a Bankruptcy Filing Without Approval of the Company's Common Stockholders Under 8 Del. C. § 271(a)
(December 12, 2006)
In Esopus Creek Value LP v. Hauf, No. 2487-N (Del. Ch. Nov. 29, 2006), the Delaware Court of Chancery prohibited a financially healthy corporation, which had not yet filed for bankruptcy protection, from proceeding with an agreement to sell substantially all of its assets under Section 363 of Chapter 11 of Title 11 of the United States Code the “Bankruptcy Code”) without first obtaining approval of the corporation’s common stockholders pursuant to Section 271(a) of the Delaware General Corporation Law (“DGCL”).
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Delaware Supreme Court Addresses Director Oversight Liability, Clarifies the Obligation to Act in Good Faith
(November 13, 2006)
The Delaware Supreme Court recently approved the Caremark standard for director oversight liability, and brought some clarity to whether there is a stand-alone fiduciary duty of "good faith." Stone v. Ritter, C.A. No. 1570-N, 2006 WL 3169168 (Del. Nov. 6, 2006).
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The Nuts and Bolts of Majority Voting
(Revised December 2006)
Over the past year, a significant number of public corporations have adopted some form of majority voting structure for director elections, largely through governance policies. In order to satisfy the demands of governance activists, many corporations are now considering the adoption of majority voting bylaws (in contrast to policies).
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Amendments Adopted to the Delaware Corporation Law
Bureau of National Affairs, Inc. (July 26, 2006)
Several amendments to the Delaware General Corporation Law (the ‘‘DGCL’’) were recently adopted. Amendments relating to (i) reserving a corporate name, (ii) allowing a foreign corporation to use its name to do business in Delaware, (iii) director resignations, (iv) stockholderadopted bylaws establishing the stockholder vote for director elections, and (v) classified boards of directors will become effective on August 1, 2006.
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Delaware Court of Chancery Certifies Defendant Noteholder Class and Appoints Hedge Fund as Class Representative
(April 12, 2006)
In Regal Entertainment Group v. Amaranth LLC, the Delaware Court of Chancery certified a defendant class of all holders of a series of convertible notes issued by Regal. In early 2005, Amaranth, a hedge fund and one of Regal’s largest Noteholders, publicly contested the manner in which Regal was calculating adjustments to the Conversion Price of the Notes pursuant to a formula in the Indenture (the “Dividend Reduction Formula”) in connection with dividends Regal paid on its common stock. Regal disputed Amaranth’s interpretation and further asserted that any ambiguity in the Dividend Reduction Formula was the result of a “scrivener’s error.”
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