November 22, 2023

Amending the DGCL to Authorize ConEd Clauses?

We’ve previously blogged about the DE Court of Chancery’s opinion in Crispo v. Musk (Del. Ch.; 10/23) stating that existing approaches to so-called ConEd language” — each of which attempts to give a target the right to seek expectancy damages on behalf of their stockholders — may not be enforceable. We’ve also covered some of the potential solutions that have been contemplated since the decision, all of which are rife with complications. This Hunton memo discusses even more issues with the various proposed alternatives, including:

– Whether a majority vote of stockholders can authorize the target to act as agent for all stockholders

– What would happen if the breach and termination occurred before the stockholder vote

– The fact that there wouldn’t be a stockholder vote in an acquisition structured as a tender offer

We promised to share other proposed solutions, and these Gibson Dunn and Hunton memos raise another possibility — that is, that a DGCL amendment could specifically allow targets to act as agents for their stockholders. Of course, this possibility presents a timing issue. When the DGCL is amended, it usually isn’t effective until the summer, so this still wouldn’t address the near-term problem confronting practitioners. But it is a welcome possibility nonetheless! 

Programming Note: This blog will be off tomorrow and Friday, returning next Monday. Happy Thanksgiving!

Meredith Ervine