December 23, 2020
More Lessons From The Stream TV Networks Decision
Last week, I blogged about Vice Chancellor Laster’s decision in Stream TV Networks v. SeeCubic, (Del. Ch.; 12/20). My blog focused on the DGCL Section 271 issue addressed in the case, but I noted that the decision addressed a number of other arcane corporate law topics. In fact, one member even said to me that the case was “a compendium of corporate law.”
Fortunately, this Locke Lord blog picks up where mine left off, and discusses those other issues. These include the mechanics of expanding the board & filling vacancies, the authority of de facto directors, the proper interpretation of a charter provision calling for a shareholder class vote to approve an asset sale, limits on director qualifications, and the application of the business judgment rule. This excerpt addresses the topic of director qualifications:
Although the resolution designated the outside directors as “Interim Directors“ and required certain conditions to be met for their service to begin, the Court ruled that Delaware law does not contemplate such a position and conditions on the ability to become and remain a director would be a qualification provision that under §141(b) of the DGCL can only be imposed by the certificate of incorporation or bylaws. In addition, a director qualification must be reasonable, and the Court found that those being asserted were not reasonable.
Maybe the most remarkable thing about this decision is that VC Laster covered all this ground in an opinion that was just a little over 50 pages in length. That’s practically a text message by the Chancery Court’s standards!
– John Jenkins