Delaware Chancery Court Potentially Opens Door to Limit Activist Stockholder Rights

The Delaware Chancery Court may have opened the door to allow companies to raise the stakes when activist investors attempt to nominate members of a company’s board of directors.  In the case of TravelCenters of America LLC v. Brog et al. (Del. Ch. Dec. 5, 2008), TravelCenters argued that by failing correctly to follow the detailed notice requirements in the company’s limited liability agreement when nominating a director for election, the Investors were liable to the company for all of its costs incurred in defending against the invalid nomination.  In a guest article on the TravelCenters case, Joseph J. Basile and Joseph F. Bernardi, Jr., partner and associate, respectively, at Weil, Gotshal & Manges LLP, discuss how the Delaware Chancery Court may have created the potential for a limited liability agreement or bylaws of a company to be drafted in such a manner that a procedurally improper attempt to elect a director could subject a member or stockholder to personal liability.

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