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Sept. 6 — The Delaware Chancery Court said it will hear oral argument Sept. 26 in a shareholder challenge of a Nutrisystem Inc. bylaw that requires a supermajority of stockholder votes to remove directors ( Frechter v. Zier, Del. Ch., No. 12038-VCG, letter to counsel confirming oral argument filed 8/31/16 ).
Earlier this year, shareholder Harold Frechter filed a lawsuit alleging that the company's bylaw—which requires a two-thirds stockholders' vote to remove board members—violates Delaware General Corporation Law Section 141(k) (37 CARE, 2/25/16). The section states that any “directors or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.”
The litigation serves as a test case for whether supermajority director removal bylaws are valid.
Nutrisystem has defended the bylaw, arguing that Delaware law expressly authorizes companies to adopt provisions that specify the percentage of votes necessary to remove directors (125 CARE, 6/29/16).
The company also argued that Section 141(k) is only intended to establish the circumstance under which stockholders can remove directors without cause.
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The court's letter to counsel is available at http://src.bna.com/ikQ.
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