C.A No. 4340-VCP (Del. Ch. Apr. 14, 2009)
Opportunity Partners, LP (“Petitioner”) filed a motion to compel an annual stockholder meeting of TransTech Service Partners, Inc. (the “Company”) pursuant to Section 211 of the DGCL. As a “blank-check vehicle” or SPAC, the Company’s certificate of incorporation provided that the net proceeds from its IPO were to be held in trust and distributed back to its stockholders if a “qualified business combination” did not occur either (i) within 18 months of the IPO’s consummation or (ii) within 24 months of the IPO’s consummation if an agreement to complete a business combination was executed but was not consummated within such 18-month period (such later date, the “Termination Date”). After an initial deal fell through, the Company announced its entry into a binding commitment letter with Global Hi-Tech Industries Limited (“GHIL”) and scheduled a special meeting of stockholders to vote on the proposed business combination and other matters (not including the election of directors) to be held May 23, 2009, or earlier, a date that was prior to the Termination Date.
The Court acknowledged that Petitioner had established a prima facie case under Section 211 (i.e. Petitioner was a stockholder and the Company had not held an annual meeting for the election of directors for at least thirteen months) and stated that while the statute does not obligate the Court to order a meeting, the Supreme Court has found a stockholder’s right to a meeting to elect directors is “virtually absolute” and that “prompt” relief under Section 211 is essential. In its defense, the Company asserted that despite the establishment of a prima facie case, this was one of the rare instances in which relief should be denied under Section 211 and that, even if the Court were to compel a meeting, it should be delayed until late June or at least until after the special meeting to avoid logistical problems and interference with the stockholders ability to vote on the proposed business combination. After considering the Company’s arguments for delaying the annual meeting until the end of June, the Court found that such arguments could not overcome the strong presumption in favor of a prompt annual meeting and noted that the Company’s time constraints were of its own making.
In terms of the timing of the annual meeting, the Court found that ordering a meeting within less than 60 days is rare and that Petitioner had not shown “grave jeopardy” if the meeting were delayed until shortly after the Termination Date. While the Court conceded that it would be difficult for the Company to prepare the necessary proxy materials to have the annual meeting before May 23, the Court saw no reason that the proxy materials could not be prepared in sufficient time to hold the annual meeting within 60 days. In support of its determination the Court noted that the Company had at least two months’ notice of Petitioner’s Section 211 action and had filed its preliminary proxy with respect to the proposed business combination less than two weeks after signing the GHIL letter of intent. In addition, the Court found that adding a proposal for the election of directors to the special meeting could cause delays in the proxy approval process that could jeopardize the GHIL transaction. Thus, the Court ordered that the annual meeting be held by June 8, 2009, an intermediate date within 60 days of its ruling.
The full opinion is available here.