In Hill International, Inc. v. Opportunity Partners L.P., No. 305, 2015 (Del. July 2, 2015), the Delaware Supreme Court affirmed the Court of Chancery’s grant of mandatory injunctive relief enjoining Hill International, Inc. (“Hill”) from conducting any business at its 2015 annual meeting, other than convening the meeting for the sole purpose of adjourning it for a minimum time period, in order to permit Opportunity Partners (“Opportunity”), the stockholder-plaintiff, to present certain items of business and director nominations at Hill’s 2015 annual meeting.
The key issue in the case was whether Opportunity had complied with Hill’s advance notice bylaw in submitting its proposed business and nominations. On April 30, 2014, Hill publicly disclosed in its 2014 definitive proxy statement that it anticipated that its 2015 annual meeting would be “on or about June 10, 2015” and that stockholders who wished to submit a proposal for the 2015 annual meeting must submit their proposal no later than April 15, 2015. The following year, on April 13, 2015, Opportunity delivered to Hill a notice of its intent to propose business and nominate two directors at Hill’s 2015 annual meeting. On April 30, 2015, Hill filed its definitive proxy statement for its 2015 annual meeting and announced that its 2015 annual meeting would be held on June 9, 2015. Subsequently, on May 5, 2015, Hill asserted that Opportunity’s April 13 notice was defective because it failed to include information about the director nominees required by the bylaws. On May 7, Opportunity delivered another notice to Hill of its intent to present at the 2015 annual meeting two different proposals than had been included in its April 13 notice as well as nominations for election to Hill’s board of the same two nominees as had been named in the April 13 letter. On May 11, Hill notified Opportunity that its notice was untimely under Hill’s advance notice bylaw and that its proposals and nominations would not be presented at the 2015 annual meeting. Opportunity brought suit in the Court of Chancery claiming its notice was timely under Hill’s bylaws.
Unlike many advance notice bylaws where stockholder notice of intent to make nominations or propose business is required to be delivered some number of days prior to the anniversary of the prior year’s meeting or the mailing of the prior year’s proxy statement, Hill’s advance notice bylaw provides:
To be timely, a stockholders’ notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) nor more than ninety (90) days prior to the meeting; provided, however, that in the event that less than seventy (70) days’ notice or prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by a stockholder, to be timely, must be received no later than the close of business on the tenth (10th) day following the day on which such notice of the date of annual meeting was mailed or such public disclosure was made, whichever first occurs.
In support of its contention that Opportunity’s notice was untimely, Hill argued that the disclosure in its 2014 definitive proxy statement that the annual meeting would be “on or around June 10, 2015” constituted prior public disclosure of the date of the meeting such that Opportunity was required to notify Hill of its intent to propose business and nominations not less than 60 days prior to the meeting. In response, Opportunity claimed that the first notice of the date of the meeting – June 9, 2015 – was not given until April 30, less than 70 days prior to the date of the annual meeting, such that its May 7 notice was timely.
The Court of Chancery agreed with Opportunity, explaining that, although Hill could have triggered the requirement for at least 60 days’ advance notice of proposals and nominations by announcing the specific date of the meeting prior to the filing of its definitive proxy statement, because it did not, Opportunity had 10 days from the date of the filing to submit its notice to Hill. Therefore, because the May 7 notice was timely, the Court of Chancery held that Hill was violating the plain language of its bylaws and that, because Opportunity would suffer irreparable harm absent injunctive relief and the balance of hardships favored Opportunity, Opportunity was entitled to mandatory injunctive relief.
Reviewing the bylaws de novo, the Delaware Supreme Court held that Hill’s “clear and unambiguous” advance notice bylaw required Hill to provide notice of the specific day – and not a range of possible days – on which the annual meeting was to occur in order to trigger the time periods under the advance notice bylaw. In particular, the Court explained:
The plain meaning of “the date” means a specific day – not a range of possible days. The 2014 Proxy Statement’s reference to “on or about June 10, 2015” does not refer to “the date” of Hill’s 2015 Annual Meeting. Rather, “on or about” refers to an approximate, anticipated, or targeted time frame that is intended to encompass more than one “date” – i.e., June 10 – apparently in order to give Hill some flexibility in scheduling. Thus, the 2014 Proxy Statement did not provide “prior public disclosure of the date” of Hill’s 2015 Annual Meeting.
As such, because Hill did not provide notice of the specific date of its annual meeting until it filed its proxy statement for the 2015 annual meeting on April 30, 2015 announcing the June 9 date, the Court held that Opportunity’s May 7 notice was timely.
In affirming the Court of Chancery’s grant of mandatory injunctive relief, the Delaware Supreme Court provided additional guidance to practitioners in drafting advance notice bylaws. Notably, the Court suggested that corporations could avoid the situation in which Hill found itself by either pegging the notice period for timely stockholder proposals and director nominees to the anniversary date of the corporation’s prior annual meeting or by publicly announcing the specific date of its annual meeting prior to the sending of notice of such annual meeting in the manner required by Section 222 of the Delaware General Corporation Law, which requires, among other things, that such notice be sent not more than 60 days prior to the annual meeting. The Court noted that the Hill board had fixed the June 9, 2015 date of the 2015 meeting on March 12, 2015, but made no announcement when it did so.
Corporations with advance notice bylaws that key the notice period for stockholder proposals and nominations off the current year’s meeting date rather than the anniversary of the prior year’s annual meeting or the mailing of the prior year’s proxy statement should not rely on the statement of anticipated meeting date in the prior year’s proxy statement as announcing the meeting date and should make public announcement of the specific meeting date once it has been fixed. Alternatively, to avoid having the window for business proposals and nominations opened after they have filed their proxy materials, corporations may want to consider amending their advance notice bylaws to key the notice period from the anniversary of the prior year’s annual meeting or the date of mailing of the prior year’s proxy statement.