Key Learnings Regarding the Protectiveness of the MFW Process for Controlling Stockholder Transactions
The Delaware Court of Chancery’s recent decision in City Pension Fund for Firefighters and Police Officers in the City of Miami v. The Trade Desk, Inc. et al., which granted the defendants’ motion to dismiss, demonstrates how protective the MFW process of both an independent special committee of the board and a majority of the minority stockholder vote can be in a transaction with a controlling stockholder. This post provides a reminder concerning the MFW process and highlights two key learnings from the Trade Desk decision, one concerning independence and the second concerning the minority vote.
ISS Provides Guidance on the Universal Proxy Card, Puts “Weakest” Directors on Notice
On August 23, 2022, Institutional Shareholder Services (ISS), the leading global proxy advisory firm, issued a special situations research note on the new, mandatory “universal proxy card” rules instituted by the U.S. Securities and Exchange Commission.
In its note, ISS declared the new rules the “superior” way for shareholders to exercise their voting franchise and observed that this system will make it “dramatically easier” and “cheap” for activist shareholders to launch proxy fights. ISS also offered perspectives on how the new system could help activists in their campaigns. Public companies should pay close regard to these perspectives in light of the weighty influence of ISS’s proxy voting recommendations on the outcomes of contested director elections. The most notable of ISS’s perspectives are that under the new framework, directors’ individual qualifications may come into greater focus relative to the merits of an overall slate and that a board’s “weakest” members may now become more vulnerable in a proxy contest.
Are Emails “Necessary and Essential” To Satisfy A Section 220 Demand? It Depends.
On April 20, 2022, the Delaware Supreme Court affirmed in part and reversed in part the Court of Chancery’s decision requiring production of certain informal records from NVIDIA’s officers and directors pursuant to a Section 220 of the Delaware General Corporation Law (“Section 220”). NVIDIA Corp. v. City of Westand Police & Fire Retirement System, et al., 2022 WL 2812718 (Del. Apr. 20, 2022).
To Bond Or Not To Bond: Enforceability Of Contractual Waivers Of Bond Requirements For Injunctive Relief
Parties to commercial agreements often include provisions that seek to remove or limit potential roadblocks to injunctive relief in the event of a breach. A recent decision from the Delaware Chancery Court shows that one such provision — the waiver of a bond requirement for a preliminary injunction — is not ironclad.
“Thick-As-Thieves” Narrative Persuades Court That Director Independence Is In Question in Carvana
The Delaware Court of Chancery recently denied a motion to dismiss stockholder derivative claims against Carvana Co. arising out of a stock offering Carvana announced in March 2020. The Court found that, based on the plaintiff’s allegations, it was reasonably conceivable that the stock offering had been orchestrated to take advantage of pandemic-related market volatility to benefit investors hand-selected by Carvana’s controlling stockholders. In doing so, the Court rejected the defendants’ arguments of demand futility and provided useful guidance regarding the types of allegations necessary to establish a director’s lack of independence.
