As a result of key cases decided in recent years by the Delaware Chancery Court, the Delaware legislature adopted new statutes, which were signed into law by the Governor of Delaware.
A Foley & Lardner article in its corporate governance blog details the adoption and considerations related to the cases and the new law.
Summary of Cases and Statutes in Delaware
Clyde Tinnen, Columbia 2006, is a partner in the Milwaukee office of Foley & Lardner LLP. He focuses his practice on corporate law matters, including finance and securities law, banking, private equity, and investment management.
The key cases and new statutes are briefly summarized below:
In West Palm Beach Firefighters’ Pension Fund v. Moelis & Co,1 the Delaware Court of Chancery held certain provisions of a stockholder agreement invalid and unenforceable, where they imposed a stockholder pre-approval requirement prior to permitting certain company board action and imposed various other obligations and restrictions on the board.
New Delaware General Corporation Law (DGCL) section 122(18) authorizes stockholder agreements, as long as the agreement does not violate the company’s charter and would not violate Delaware law if included in the charter.
In Sjunde AP-Fonden v. Activision Blizzard, Inc.,2 the validity of merger documents were called into question due to changes made to the final form of agreement, including schedules and exhibits.
New DGCL section 147 permits boards to approve an agreement or other document that may not contain all of the material terms as long as those terms have been presented to, or are known by, the board.
DGCL section 268(b) provides that, unless provided otherwise in the merger agreement, disclosure schedules and similar documents are not deemed part of the merger agreement for purposes of the DGCL and therefore do not need to be delivered to the board or stockholders.
In Crispo v. Musk,3 the court rejected a shareholder claim to recover lost merger premium related to the originally proposed Twitter acquisition.
New paragraph (a)(1) to DGCL section 261 allows parties to a merger or consolidation agreement to provide for penalties or consequences of a failure to perform prior to the effective time of the transaction, or a failure to consummate the transaction, including “the loss of any premium or other economic entitlement.”
New DGCL section 261(a)(2) expressly endorses the market practice of appointing stockholder representatives in mergers and consolidations.
Conclusion: What About Wisconsin?
To date, I am not aware of similar proposals to adopt similar provisions under Wisconsin law.
However, absent contrary precedent in Wisconsin state courts or special facts and circumstances, it is likely that a Wisconsin state court will give some weight to the rationale behind the new statutes when interpreting similar matters under Wisconsin law.
This article was originally published on the State Bar of Wisconsin’s Business Law Blog. Visit the State Bar sections or the Business Law Section webpages to learn more about the benefits of section membership.
Endnotes
1 West Palm Beach Firefighters’ Pension Fund v. Moelis & Co, 2024 WL 747180 (Del. Ch. Feb. 23, 2024).
2 Sjunde AP-Fonden v. Activision Blizzard, Inc., 2024 WL 863290 (Del. Ch. Feb. 29, 2024).
3 Crispo v. Musk, 304 A.2d 567 (Del. Ch. Oct. 31, 2023).
