In Frechter v. Zier, C.A. No. 12038-VCG, 2017 WL 345142 (Del. Ch. Jan. 24, 2017) (Glasscock, V.C.), the Delaware Court of Chancery granted plaintiff’s motion for summary judgment on a declaratory relief claim and held that 8 Del. C. § 141(k) prohibits company bylaws from requiring more than a majority vote to remove directors from a company’s board. The Frechter decision confirms that company bylaws may not impose requirements or implement procedures that conflict with 8 Del. C. § 141(k).

In this expedited appeal from a post-trial decision of the Court of Chancery, the Delaware Supreme Court affirmed the Court of Chancery’s holding that, under 8 Del. C. § 141(b), directors may resign by verbal statements, thereby affirming the Court’s determinations that one of the Biolase director’s resignations was valid and one of the contested directors was properly appointed to the board. The Delaware Supreme Court also affirmed the summary denial of Oracle’s claim for attorneys’ fees.Oracle is an investment firm focused exclusively on the healthcare industry.

Biolase v. Oracle Partners, L.P., C.A. No. 9438 (Del. June 12, 2014)June 12, 2014In this expedited appeal from a post-trial decision of the Court of Chancery, the Delaware Supreme Court affirmed the Court of Chancery’s holding that, under 8 Del. C. § 141(b), directors may resign by verbal statements, thereby affirming the Court’s determinations that one of the Biolase director’s resignations was valid and one of the contested directors was properly appointed to the board. The Delaware Supreme Court also affirmed the summary denial of Oracle’s claim for attorneys’ fees.Oracle is an investment firm focused exclusively on the healthcare industry.

[2] Mem. Op.at 2–3 (quoting Compl. ¶ 25).[3] 8 Del. C. § 141(k).[4] 8 Del. C.§ 216.[5] Mem. Op.at 6 (quoting Defs’ Opening Br. 17, 19).

On May 7, 2014, the Court held a one-day trial on the Section 225 claim.As a preliminary matter, the Court noted that the plaintiff did not challenge the provision in the Fund’s bylaws permitting directors to remove other directors. The Court noted that, although only the members of a nonstock corporation are vested with the right to remove directors pursuant to 8 Del. C. § 141(k), the Fund specifically opted out of 8 Del. C. § 141(k) in its certificate of incorporation, as is permitted for nonstock corporations by 8 Del. C. § 141(j).The Court then proceeded to address Bishop Gassis’s claim that his removal violated Sections 3.06 and 3.04 of the Fund’s bylaws.

As a preliminary matter, the Court noted that the plaintiff did not challenge the provision in the Fund’s bylaws permitting directors to remove other directors. The Court noted that, although only the members of a nonstock corporation are vested with the right to remove directors pursuant to 8 Del. C. § 141(k), the Fund specifically opted out of 8 Del. C. § 141(k) in its certificate of incorporation, as is permitted for nonstock corporations by 8 Del. C. § 141(j).The Court then proceeded to address Bishop Gassis’s claim that his removal violated Sections 3.06 and 3.04 of the Fund’s bylaws.

are law “must” a corporation’s board approve?As a director, you are responsible for managing and directing the business and affairs of the corporation. While the board can delegate management of the day-to-day affairs of the corporation to officers, fundamental corporate changes and most material transactions must be approved by the board. This includes amending the charter or bylaws, granting equity, adopting or amending employee equity or benefit plans, making material expenditures outside of the budget, and entering into mergers and acquisitions.There is no hard and fast rule about which actions must be approved by the board, and the above list is not exhaustive; always check with your legal counsel to determine if your proposed action requires board and/or stockholder approval. FIDUCIARY, Black’s Law Dictionary (11th ed. 2019).Guth v. Loft. Inc., 5 A.2d 503, 510 (Del. 1939).Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984).Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971). 8 Del. C. § 141(e).Smith v. Van Gorkom, 488 A.2d 858, 875 (Del. 1985).Id. at 872–4.Guth, 5 A.2d at 510. 8 Del. C. § 144. 8 Del. C. § 141(a).[View source.]

r duty of loyalty.”The parties cross-moved for summary judgment. The defendants’ motion presented two questions: (i) what standard governed the defendants’ conduct; and (ii) what standard governs the Court’s review of that conduct. Defendants sought summary judgment under the (i) gross negligence standard of conduct, and (ii) the business judgment standard of review. But the Court found that “those standards are reserved for directors; derivative stockholder plaintiffs as agents are held to a simple negligence standard, and do not enjoy the protections of the business judgment rule.” The Court concluded that the company “need not establish gross negligence, or rebut the business judgment rule, to succeed on its breach of care claim.” The business judgment rule “does not protect just anyone’s ‘business’ decisions.” Instead, the business judgment rule is a “judicial creation” designed to, under certain circumstances, “reinforce and preserve the directors’ unique plenary authority” under 8 Del. C. §141. Hence, when a derivative stockholder plaintiff makes decisions about a company asset, even where these are decisions that the board might otherwise make, the stockholder is “not doing so with the authority granted by Section 141.”The Court granted summary judgement in favor of the company and against the defendant stockholders on liability for breach of the fiduciary duty of care.

As such, the court held that the plaintiffs failed to establish a credible basis from which the court could “infer that the board utterly failed to implement a reporting system or ignored red flags.” The court also found that an obvious defense to the purported claim — the board’s reliance on an audit firm for a complicated accounting issue — existed, and thus it denied inspection pursuant to the protections provided to directors under 8 Del. C. § 141(e). In making this conclusion, the court relied on Southeastern Pennsylvania Transportation Authority v. AbbVie, Inc., C.A. No. 10408-VCG (Del. Ch. Apr. 15, 2015), aff’d, 132 A.3d 1 (Del. 2016) (TABLE).

At the same time, Oracle initiated an action pursuant to 8 Del. C § 225 seeking a declaration that the resignations of Arrow and Low and appointment of Clark and Nugent were valid and effective.Biolase’s bylaw governing resignations had wording similar to 8 Del. C. § 141(b). The bylaw stated, in relevant part, “Any director . . . may resign at any time upon written notice to the Board, the Chairman of the Board, the Executive Vice Chairman of the Board, the CEO or the President.