I was talking with Cooley partner Brad Goldberg about how he has been helping quite a few companies revisit their bylaws in response to the Delaware Supreme Court’s recent Kellner decision.
Here are five lessons learned from Brad (with a hat tip to Morris Nichols’ Kyle Pinder):
- While the Kellner decision means that bylaws are “presumed to be valid,” companies should review their bylaws for any provisions that may be “unintelligible” and therefore per se invalid.
- Even a bylaw that is facially valid when adopted will be subject to enhanced scrutiny when enforced.
- Bylaws should be reviewed in full and not piecemeal, as sometimes combinations of provisions wind up being a sticking point – even though each provision on its own seems fine on its face.
- Annual reviews of the bylaws are important as the bylaws themselves, as the plaintiffs’ bar continues to challenge various provisions – not to mention regular tweaks to state laws and litigation trends changing the playing field – and this could be something to do right now if a company has yet to make any bylaw changes to address the universal proxy rules.
- Right now, the plaintiffs’ bar seemingly is shifting away from targeting advance notice information requirements – and director resignation requirements could become more of a target.
Authored by
Broc Romanek