Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
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.
To contact the reporter on this story: Michael Greene in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Yin Wilczek at email@example.com
The court's letter to counsel is available at http://src.bna.com/ikQ.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)