Sullivan & Cromwell discusses Delaware Legislation Saying No to “Loser-Pays” Fee-Shifting Bylaws But Yes to Forum-Selection Bylaws for Stock Corporations

On May 12 and June 11, 2015, the Delaware Senate and House of Representatives, respectively, passed a bill (the “Bill”)[1] that would amend Title 8 of the Delaware General Corporation Law (“DGCL”) to prohibit Delaware stock corporations from including in their charters or bylaws so-called “loser-pays” fee-shifting provisions in connection with “internal corporate claims” brought by stockholders. Following the Delaware Supreme Court’s May 2014 decision in ATP Tour, Inc. v. Deutscher Tennis Bund, in which the Court held that “fee-shifting provisions in a non-stock corporation’s bylaws can be valid and enforceable,”[2] it was unclear to some practitioners … Read more

Investigating Shareholder Derivative Claims: The Importance of Independent Counsel

A shareholder typically brings a derivative suit on behalf of a corporation against the company’s current or former officers or directors in one of two contexts:  either after the shareholder has demanded that the board cause the company to bring suit on its own and the board refuses, or when the shareholder brings the suit directly on the basis that demand on the board would have been futile because a majority of the board is not sufficiently disinterested to make the decision as to whether to sue.  In either case, the company’s board (or board committee, such as a special … Read more

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Editor's Tweet: S&C's Bill Monahan and Adam Magid discuss the importance of independent counsel in investigating shareholder derivative claims