By Oderah C. Nwaeze
Across the United States, the Coronavirus has caused widespread devastation, marking its arrival with debilitating symptoms and tens of thousands of deaths. The virus also is responsible for significant economic destruction, rendering 30 million Americans jobless requiring $660 billion in payroll loans, and necessitating a $2.2 trillion in stimulus package. History likely will reveal that poorly run companies are repeat victims of the financial hardships precipitated by COVID-19. Even without a pandemic, a company likely will fail (or suffer significant harm) if its directors and officers do not adequately oversee the company’s management. But, there is another reason to avoid oversight failures. As the Delaware Court of Chancery’s April 27, 2020 decision in Hughes v. Xiaming Hu et al. reinforces, directors and officers who neglect their oversight responsibilities may be personally liable for resulting harm to the company and its stockholders.
Continue reading “BETTER OVERSIGHT THAN HINDSIGHT: Hughes v. Xiaming Hu demonstrates that directors and officers who fail to adequately oversee their company’s management expose themselves to personal liability”
Under the Bankruptcy Code, a debtor in possession operates its business “as usual” during the pendency of a case. Likewise, in most cases, prepetition corporate governance practices and procedures should continue post-petition. In fact, as Judge Sontchi recently held in In re SS Body Armor I, Inc., Case No. 10-1125(CSS) (Bankr. D. Del. April 1, 2015), the right of a shareholder to compel a shareholders’ meeting for the purpose of electing a new board of directors continues during bankruptcy. Absent “clear abuse,” the automatic stay of 11 U.S.C. § 362 is inapplicable.`
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Drafting minutes of meetings—particularly for meetings of boards of directors or special committees of boards—is an art rather than a science, and while there are certainly many ways to accurately record the proceedings, understanding the ways minutes might be used later is very important.
In the world of Delaware corporate law, minutes of board meetings often play a pivotal role in shareholder litigation challenging the acts of the directors. Indeed, in a recent high-profile decision in which the Court of Chancery refused to enjoin the annual meeting for Sotheby’s in the face of a vigorous proxy fight, the Vice Chancellor’s opinion remarks upon the contents of board minutes on several occasions, and in a manner that provides some practical tips for consideration when drafting minutes. See, Third Point LLC v. Ruprecht, et al., C.A. Nos. 9469-VCP; 9497-VCP, Mem. Op. (Del. Ch. May 2, 2014).
Continue reading “A Minute About Minutes”