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.`
A joint resolution of the Delaware State Senate and House of Representatives, with the approval of Governor Markell, has shelved a bill to ban Delaware stock corporations from adopting bylaw provisions to shift attorneys’ fees and expenses in corporate litigation to unsuccessful plaintiffs.
The bill was drafted and approved by the Delaware State Bar Association and presented to the General Assembly following the May 8, 2014, en banc response of the Delaware Supreme Court to certified questions of law from the U.S. District Court for the District of Delaware in ATP Tour, Inc. v. Deutscher Tennis Bund (German Tennis Federation), et al., No. 534, 2013 (Del. May 8, 2014). The Supreme Court stated in ATP that a “fee shifting” bylaw provision in a non-stock corporation’s bylaws “can be valid and enforceable under Delaware law.” The bylaw at issue would shift the company’s defense fees and costs to a member who had sued the company (or any other member) and was unsuccessful in “substantially achiev[ing], in substance and amount, the full remedy sought” in the litigation.