Corporate Communicator - May 2008
In this issue we examine recent Delaware court rulings that limit the application of advance notice bylaw provisions. Advance notice provisions in a corporation's bylaws are designed to require stockholders intending to bring proposals or nominate director candidates at a stockholder meeting to provide the corporation with timely (i.e., advance) notice of such proposal. Drafted appropriately, advance notice provisions prevent a stockholder from showing up at a meeting and nominating a director or making a proposal without providing advance notice to the corporation. However, two recent decisions in the Delaware Chancery Court, JANA Master Fund, Ltd. v. CNET Networks, Inc. and Levitt Corp. v. Office Depot, Inc., cast a cloud over the intended effect of many common forms of advance notice provisions. Corporations (particularly those incorporated in Delaware) should review with their counsel the corporation's bylaws to ensure that any advance notice provisions could withstand a challenge based on the JANA and Levitt cases.