Stay current on changes and developments in corporate law with a wide variety of resources and tools.
By Yin Wilczek
Feb. 4 — The Virginia House of Delegates has passed a bill—HB 1878—that would allow corporations to adopt bylaws designating Virginia or the jurisdiction in which they have their principal office as the sole forum for derivative and other actions.
The House passed the bill Jan. 28 with 98 votes, with no members voting against it or abstaining. It has been referred to the Senate Committee on Commerce and Labor.
Virginia is among several states that are considering the issue of corporate bylaws that limit shareholder lawsuits. Last year, Oklahoma became the first state to adopt a law mandating the shifting of fees in derivative actions.
Meanwhile, the Delaware General Assembly is expected by May or June to limit the scope of fee-shifting bylaws after the state Supreme Court concluded in ATP Tour Inc. v. Deutscher Tennis Bund that such bylaws may be valid and enforceable.
The Virginia bill—sponsored by Del. Terry Kilgore (R-Scott)—would allow companies to adopt forum selection bylaws with respect to:
• any derivative action brought on the company's behalf;
• any action alleging the breach of duties by current or former officers and directors; or
• any action against the company or former or current officers and directors arising under the Virginia Code relating to stock and nonstock corporations.
The bill also contains a multitude of other corporate governance revisions. It would establish procedural requirements for lawsuits on matters related to elections, voting and the appointment and removal of officers and directors, and address the qualifications for nomination to and membership on boards.
While the bill seems likely to pass the Senate, given the margin in the House, Stanford law professor Joseph Grundfest told Bloomberg BNA that the legislation is unlikely to constitute a major shift in the law for at least two reasons.
“First, its effect seems to be limited to corporations that are chartered and headquartered in Virginia,” which is not a huge slice of corporate market capitalization, Grundfest said. “Second, the courts appear to be reaching the conclusion that forum selection provisions are enforceable all on their own, without a need for express statutory recognition of that fact.”
Delaware courts, among others, have generally OK'd exclusive forum selection clauses.
To contact the reporter on this story: Yin Wilczek in Washington at email@example.com
To contact the editor responsible for this story: Ryan Tuck at firstname.lastname@example.org
The bill is available at http://lis.virginia.gov/cgi-bin/legp604.exe?151+ful+HB1878E+hil.
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 email@example.com.
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 firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)