Exceptions Are Made For Nonstock Corporations And For Shareholder Agreements.
In our March 31 and June 12, 2014 posts, we discussed ATP Tour, Inc. v. Deutscher Tennis Bund, 91 A.3d 554 (Del. 2014), where the Delaware Supreme Court upheld as facially valid a bylaw imposing liability for certain legal fees of the nonstock corporation on certain members who participated in the litigation.
This raised a real fracas about whether shareholders in Delaware stock corporations could also be visited with potential fee exposure in derivative or other corporate governance suits.
We can now report that the Delaware Legislature passed S.B. 75, which was signed into law by Delaware Governor Jack Markell on June 24, 2015, with the certain amendments to Delaware General Corporation law becoming effective August 1, 2015. Here is a synopsis of S.B. 75 from the Delaware legislative website:
“In combination with the amendments to Sections 109(b) and 114(b)(2), new subsection (f) does not disturb that ruling [ATP Tour] in relation to nonstock corporations. In order to preserve the efficacy of the enforcement of fiduciary duties in stock corporations, however, new subsection (f) would invalidate a provision in the certificate of incorporation of a stock corporation that purports to impose liability upon a stockholder for the attorneys’ fees or expenses of the corporation or any other party in connection with an internal corporate claim, as defined in new Section 115. New subsection (f) is not intended, however, to prevent the application of such provisions pursuant to a stockholders agreement or other writing signed by the stockholder against whom the provision is to be enforced.
“Like the concurrent amendment to Section 102, the new last sentence of subsection (b) would invalidate a provision in the bylaws of a stock corporation that purports to impose liability upon a stockholder for the attorneys’ fees or expenses of the corporation or any other party in connection with an internal corporate claim, as defined in new Section 115. The new last sentence of subsection (b) is not intended, however, to prevent the application of any provision in a stockholders agreement or other writing signed by the stockholder against whom the provision is to be enforced.
“The amendment to Section 114 has the effect of avoiding the application to nonstock corporations of new Section 102(f) and the new last sentence of Section 109(b).”
Comments