Effective August 1, the Delaware General Corporation Law will permit a Delaware corporation to adopt a by-law requiring any proxy solicitation materials circulated by the corporation regarding the election of directors to include nominees submitted by stockholders, in addition to those submitted by the corporation. Any such by-law may include minimum ownership requirements as well as a list of other qualifications that a stockholder must comply with in order to nominate a director.
As reported in the March 20, 2009, edition of Corporate and Financial Weekly Digest, the Securities and Exchange Commission’s current rules permit issuers to exclude stockholder proposals relating to director nominations from their proxy materials. However, SEC Chairman Mary Schapiro has directed the SEC’s staff to draft proposals permitting broader stockholder access to issuers’ proxy statements for director nominees. It remains to be seen whether the SEC will attempt to preempt state law provisions such as Delaware’s.
Other new amendments to Delaware’s corporate law (a) permit a Delaware corporation to adopt a by-law requiring corporations to reimburse stockholders for proxy solicitation expenses in connection with director nominations, (b) generally prohibit amendments to a corporation’s charter or by-laws that eliminate rights to indemnification or advancement of expenses following an act or occurrence that gives rise to claims for indemnification or advancement, (c) permit Delaware corporations to separate the record date for determining the stockholders entitled to notice of a stockholders’ meeting from the record date for determining the stockholders entitled to vote at such meeting, which amendment, at least theoretically, would allow a Delaware corporation to ensure that the economics of ownership of its stock are more closely aligned with voting rights, and (d) allow, in limited circumstances, the judicial removal of a corporation’s directors.