In Hill International v. Opportunity Partners, L.P. (Del. Jul. 2, 2015), the Delaware Supreme Court considered the deadline under Hill’s bylaws for notices of stockholder proposals or nominations to be considered at Hill’s 2015 annual meeting. Hill’s bylaws provided that the window for notices of stockholder proposals and nominations was generally between 60 and 90 days prior to the annual meeting but that if “less than seventy (70) days notice or prior public disclosure of the date of the annual meeting is given or made to stockholders,” the deadline for notices of stockholder proposals and nominations would be the tenth day following the date of public disclosure of the annual meeting date. The Supreme Court rejected the company’s argument that it had publicly disclosed the date of the 2015 annual meeting in its 2014 proxy statement, which stated that the company “anticipate[d]” holding its 2015 annual meeting “on or about June 10, 2015,” since it consisted of disclosure of an anticipated range of meeting dates, rather than disclosure of the actual meeting date. The Supreme Court then affirmed the Court of Chancery’s judgment in favor of the activist stockholder, holding that the activist’s notice of proposals and nominations was timely delivered (because it had been delivered within ten days following first public disclosure of the annual meeting date) and ordering a 21-day adjournment of the annual meeting to enable the stockholders to consider and vote upon the plaintiff’s proposals and board nominees.
The decision provides four important takeaways for the corporate bar, including board advisors:
- Deadlines in advance notice bylaw provisions should be keyed off of the actual meeting date or the anniversary of the date of the prior annual meeting, not the date of public announcement of the annual meeting date.
- Delaware courts will be vigilant to ensure that stockholders seeking to nominate a dissident slate of directors receive clear instructions, so it is important to draft advance notice bylaws with clarity.
- Delaware courts will resolve disputes over the meaning of advance notice bylaw language under ordinary contract interpretation principles. As the Supreme Court stated: “…if the bylaw’s language is ambiguous…the bylaw is construed as it is written, and the language, if simple and unambiguous, is given the force and effect required. If charter or bylaw provisions are unclear, we resolve any doubt in favor of the stockholder’s electoral rights.”
- Where the circumstances require, the Delaware courts will resolve disputes affecting the stockholder franchise on a highly expedited basis. In Hill, the Supreme Court issued its formal written opinion only seven weeks after the initial filing of the Court of Chancery action.