Category Archives: Corporate Governance

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Applying a Legal Bandaid to Defective Acts: Delaware Law Creates New Procedures to Ratify Defective Corporate Acts

On June 30, 2013, the State of Delaware amended the Delaware General Corporations Law (the “DGCL”) to include two new sections, Section 204 and Section 205 (together, the “Ratification Provisions”). Set to take effect on April 1, 2014, the Ratification Provisions provide Delaware companies with two alternative processes to remedy defective corporate acts that may … Continue Reading

Second Circuit Holds Delaware Fiduciary Duty Law Preempted By Federal Interest In Fiscal Stability

In Starr International Co. v. Federal Reserve Bank of New York, No. 12-5022-cv, 2014 U.S. App. LEXIS 1770 (2d. Cir. Jan. 29, 2014), the United States Court of Appeals for the Second Circuit affirmed the dismissal of claims against the Federal Reserve Bank of New York (“FRBNY”) for alleged breaches of its fiduciary duties, holding … Continue Reading

Delaware Supreme Court Holds That a Minority Stockholder Has No Common Law Right to a Conflict-Free Board Decision Regarding the Repurchase of Shares

In Blaustein v. Lord Baltimore Capital Corp., No. 272, 2013, 2014 Del. LEXIS 30 (Del. Jan. 21, 2014), the Delaware Supreme Court held that a closely-held corporation’s directors owe no fiduciary duty to decide, free from conflicts of interest, whether a corporation will repurchase a minority stockholder’s shares in the corporation.  Additionally, the Supreme Court … Continue Reading

Delaware Supreme Court Holds Receiver is Required to Defend Lawsuits Brought After a Corporation is Wound-Up; Finds No Generally Applicable Statute of Limitation for Claims Against a Dissolved Corporation

In Anderson v Krafft-Murphy Co. Inc., 2013 Del. LEXIS 597 (Del. Nov. 26, 2013), the Delaware Supreme Court held that Sections 278 and 279 of the Delaware General Corporation Law, 8 Del. C. §§ 278-279, require a dissolved corporation to act through a court-appointed trustee or receiver to defend against third party lawsuits brought after the … Continue Reading

California Court of Appeal Holds That Challenges to Corporate Elections Under Corporations Code Section 709 May be Predicated Upon Breach of Fiduciary Duty and Conflict of Interest Allegations

In Morrical v. Rogers, No. A137011, 2013 Cal. App. LEXIS 811 (Cal. App. Oct. 10, 2013), the California Court of Appeal, First District, held that the summary procedures set forth in California Corporations Code § 709 may be used to contest corporate elections predicated upon complex and substantive allegations of corporate or directorial misconduct, such as … Continue Reading

Delaware Court of Chancery Upheld Enforceability of Bylaws with Forum Selection Clauses Unilaterally Adopted by Board of Directors

In Boilermakers Local 154 Retirement Fund v. Chevron Corp., C.A. No. 7220-CD, 2013 WL 3191981 (Del. Ch. June 25, 2013), the Delaware Court of Chancery dismissed facial challenges to the validity of corporate bylaws that restrict the forum where corporate governance litigation may be brought. The court rejected the argument that the bylaws were statutorily … Continue Reading

Delaware Chancery Court Establishes Procedural Framework for Obtaining Business Judgment Review for Going Private Transaction Sponsored By Majority Stockholders

In In re MFW Shareholder Litigation, C.A. No. 6566-CS, 2013 WL 2436341 (Del. Ch. May 29, 2013), the Delaware Court of Chancery analyzed one of the most important open questions of Delaware corporate law: whether it is possible for majority stockholders to structure a going private transaction to avoid “entire fairness” review by the Court … Continue Reading

California Supreme Court Resolves Court of Appeal Split, Holding that Section 2010 of the California Corporations Code — California’s “Survival Statute” — Does Not Apply to Foreign Corporations

In Greb v. Diamond Int’l Corp., 2013 WL 628328 (Cal. Feb. 21, 2013), the California Supreme Court unequivocally and unanimously laid to rest the assertion that dissolved foreign corporations may be sued in California after the time of the statute of limitations provided by the laws under which the foreign corporations were incorporated. In so … Continue Reading

California Court of Appeal Recognizes That Wide Discretion Granted to a Board of Directors Under the Business Judgment Rule May Be Tempered By a Corporation’s Private Contractual Obligations to Its Shareholders/Members

In Scheenstra v. California Dairies, Inc., No. F062768, ___ Cal. Rptr. 3d ___, 2013 WL 363148 (Cal. App. 5th Dist. Jan. 30, 2013), the California Court of Appeal, Fifth District, affirmed the judgment of the California Superior Court, Tulare County, that the board of directors of defendant California Dairies, Inc. (“Cal Dairies”), a milk marketing … Continue Reading

Technical Change by Broadridge May Impact Retail Voting at Upcoming Annual Meetings

Most public companies use Broadridge for shareholder voting tasks related to their annual meetings. Due to a new interpretive position being taken by the SEC, Broadridge recently informed its clients of a technical change in its online, mobile and telephonic voting platforms that may adversely affect obtaining favorable shareholder votes, particularly from retail investors.… Continue Reading

SEC Adopts New Rules Calling For Greater Independence Standards For Compensation Committees And Their Advisers

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) for adopting regulations required by section 952 of the Reform Act, the Securities and Exchange Commission (the “SEC”) on June 20, 2012 issued a press release and published final rules (Release No. 33-9330) (the “Final Rules”) for compensation committee and … Continue Reading

Delaware Chancery Court Clarifies When Corporate Officers and Directors are Entitled to Mandatory Indemnification Under DGCL § 145

In Hermelin v. K-V Pharmaceutical Co., C.A. No. 6936-VCG, 2012 WL 395826 (Del. Ch. Feb. 7, 2012), the Delaware Court of Chancery considered whether the former chief executive officer (“CEO”) of a pharmaceutical company, against whom several regulatory and criminal actions had been brought, had been successful “on the merits or otherwise” such that he … Continue Reading

The March Towards Meaningful Reform for Small and Emerging Growth Companies Moves Forward – House Passes Measures to Open Private Capital Raising and Facilitate an On-Ramp of New IPOs

Building on months of momentum in Congress, on March 8, 2012, the U.S. House of Representatives passed the Jumpstart Our Business Startups (JOBS) Act by a bi-partisan vote of 390-23. A similar bill, S. 1933, has been introduced in the Senate and may be voted on this month. The JOBS Act is intended to address … Continue Reading

California’s New Entities: Benefit Corporations and Flexible Purpose Corporations

By William Manierre As of January 1, 2012, two new subtypes of traditional business corporations may be organized under the California Corporations Code – benefit corporations (§§14600-14631) and flexible purpose corporations (§§2500-3503). Both free their directors from having to manage strictly for the economic benefit of shareholders, enabling them to address social objectives such as … Continue Reading

Public Company Control Alert: NYSE Acts to Further Limit Broker Votes on Specified Corporate Governance Proposals

On January 25, 2012, the New York Stock Exchange issued an Information Memo to its member organizations stating that effective immediately, brokers may not vote on corporate governance proposals supported by company management without instructions from their clients. NYSE’s rules affect the voting of all shares held in “street name” by NYSE member organizations, regardless … Continue Reading

Delaware Supreme Court Clarifies Scope of Relief A Shareholder Is Entitled For Inspection Of Corporate Books And Records Pursuant To A Section 220 Demand

In Espinoza v. Hewlett-Packard Co., No. 208, 2011 WL 5838882 (Del. Nov. 21, 2011), the Delaware Supreme Court held that shareholders seeking inspection of corporate books and records under Section 220 of the Delaware General Corporation Law, 8 Del. C. § 220 (“Section 220”), must demonstrate that the records sought are “essential” to the “articulated purpose … Continue Reading

SEC Fee Rate Adjustment for Section 6(B), Section 13(E) and Section 14(G) To Be Effective October 1, 2011

Public companies and companies registering to go public should be aware of fee rate adjustments made by the Securities and Exchange Commission that will be effective as of October 1, 2011. We originally reported on this increase on September 6, 2011. The following fee rates will be affected by the adjustment:… Continue Reading

Amendments to SEC Rule 14a-8 Allowing Shareholder Proposals for Proxy Access Regimes to Come into Effect

On September 6, 2011, the Securities and Exchange Commission confirmed that it would not seek rehearing or Supreme Court review of the decision by the U.S. Court of Appeals in Washington, D.C. partially vacating the SEC’s proxy access rules. (Click here for our blog reporting on the D.C. Circuit’s decision.) Chairman Mary L. Schapiro issued a … Continue Reading

California Corporations Code Amended to Simplify Restrictions on Distributions and Permit Waivers of Application of Section 500 to Preferences of Preferred Stock

On September 1, 2011, California governor Jerry Brown signed Assembly Bill No. 571, which simplifies restrictions on dividends, repurchases and redemptions of shares. The restrictions are set forth in Sections 500 to 509 of the California Corporations Code, and are commonly referred to collectively as “Section 500.[1]” These provisions are designed to protect the interests of creditors … Continue Reading

Delaware Chancery Court Considers Scope of Section 220 Books and Records Demand Made Where Sole Purpose Is to Investigate a Potential Derivative Suit

In Graulich v. Dell, Inc., 2011 WL 1843813 (Del. Ch. May 16, 2011), the Delaware Court of Chancery rejected a stockholder’s demand under Section 220 of the Delaware General Corporation Law (“Section 220”). Section 220 provides that a stockholder in a Delaware corporation may, under certain conditions, request that that corporation make available certain books and … Continue Reading

Ninth Circuit Holds that SOX Whistleblower Provisions Do Not Protect Leaks to the Media

In Tides v. The Boeing Co., No. 10-35238, 2011 WL 1651245 (9th Cir. May 3, 2011), the United States Court of Appeals for the Ninth Circuit held that the whistleblower provisions of the Sarbanes-Oxley Act of 2002 ("SOX"), 18 U.S.C. § 1514A(a)(1), do not protect employees of publicly traded companies who disclose information to the … Continue Reading

The Benefits And Challenges Of Forum Selection Bylaws

In the past year, a number of companies have amended their bylaws to require that shareholder derivative lawsuits are resolved in the Delaware Chancery Court. This recent spike in the use of company-friendly forum selection clauses comes at a time when lawsuits challenging mergers are rampant. According to Reuters, such lawsuits have tripled from 107 in 2007 … Continue Reading

SMRH ALERT: NASDAQ Moves Toward Mandatory Electronic Filing

In July 2010, NASDAQ OMX began permitting companies applying for listing in US markets to submit Listing Applications via its online Listing Center, moving toward its stated goal of migrating all paper-based forms to its electronic platform. Currently the Listing Center supports the electronic submission of Listing Applications and Listing of Additional Shares Notifications. The Listing … Continue Reading
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