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Chancellor Allen's reasoning in Blasius v. Atlas suggests that this decision should not be left to the board (i.e. no BJR), but should instead be decided by the courts:
"[T]he ordinary considerations to which the business judgment rule originally responded are simply not present in the shareholder voting context.That is, a decision by the board to act for the primary purpose of preventing the effectiveness of a shareholder vote inevitably involves the question who, as between the principal and the agent, has authority with respect to a matter of internal corporate governance.... A board's decision to act to prevent the shareholders from creating a majority of new board positions and filling them does not involve the exercise of the corporation's power over its property, or with respect to its rights or obligations; rather, it involves allocation, between shareholders as a class and the board, of effective power with respect to governance of the corporation.... Action designed principally to interfere with the effectiveness of a vote inevitably involves a conflict between the board and a shareholder majority. Judicial review of such action involves a determination of the legal and equitable obligations of an agent towards his principal. This is not, in my opinion, a question that a court may leave to the agent finally to decide so long as he does so honestly and competently; that is, it may not be left to the agent's business judgment."
The Professor is Stumped: Today's Corporate Law Question
When an incumbent board of directors claims that a potential proxy insurgent has failed to comply with an advance notice bylaw, who decides whether the bylaw has been satisfied? The board (subject to judicial review and, if so, under what standard) or does the court make an independent determina...
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May 23, 2016
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