(L-R)Philip D. Amoa and Travis J. Ferguson of McCarter & English. Courtesy photos Chancery Reinforces Del. Law's 'Twice-Tested' Review When Invalidating Board Action Designed to Disenfranchise Stockholders
Unless specifically authorized by Delaware's General Corporate Law (DGCL), the contents of a corporation's charter do not displace directors' fiduciary obligations or override the court's "enhanced scrutiny" review for transactions implicating shareholders' sacrosanct voting rights.
October 05, 2022 at 09:00 AM
6 minute read
Commentary
In Totta v. CCSB Financial, C.A. No. 2021-0173-KSJM (Del. Ch. May 31, 2022) (McCormick, C.), the Delaware Court of Chancery held that a board of directors improperly applied a voting aggregation provision in the company's charter that disenfranchised several stockholders. In so holding, Chancellor Kathaleen McCormick reinforced that Delaware twice-tests corporate conduct—first for legal validity, then second for equity. The chancellor also emphasized that, unless specifically authorized by Delaware's General Corporate Law (DGCL), the contents of a corporation's charter do not displace directors' fiduciary obligations or override the court's "enhanced scrutiny" review for transactions implicating shareholders' sacrosanct voting rights.
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