Written Consents – A Powerful Tool in Hostile Battles for Corporate Control
1989
Publication| Bankruptcy & Corporate Restructuring
A seemingly innocent provision of the Delaware General Corporation Law has generated increased attention recently. Section 228 provides that written consents, executed by stockholders, may be used to effect any action that could be taken by stockholders at a meeting, without actually having a meeting. This provision may be utilized by stockholders to adopt bylaw amendments, elect directors, remove directors, and approve mergers and other transactions. The implications are clear: in the hands of a skilled tactician, the written consent provides an attractive option for effecting a change in corporate control.
This note will discuss several important aspects of the Delaware written consent mechanism. First, a foundation will be set by discussing the statutory language and legislative history of section 228, along with the interplay of the written consent with the other voting mechanisms provided by the Delaware General Corporation Law. Secon, the case law that has developed around section 228 will be analyzed with an emphasis on the Delaware Supreme Court decisions in Datapoint Corp. v. Plaza Securities Co. and Allen v. Prime Computer, Inc. Finally, this note will evaluate an important issue on the horizon, specifically, whether the written consetn procedure can be utlilized to avoid the rigorous requirements of Delaware’s newly-enacted Business Combination Statute.