Tag: Delaware General Corporation Law

Delaware Supreme Court considers advance notice bylaws

In this recent case, Kellner v. AIM ImmunoTech, the Delaware Supreme Court articulated a two-part framework for judicial consideration of advance notice bylaws in the event of a challenge to their adoption, amendment or enforcement. If the bylaws are contested, they must be “twice-tested—first for legal authorization, and second by equity”: first, a court must evaluate “whether the advance notice bylaws are valid as consistent with the certificate of incorporation, not prohibited by law, and address a proper subject matter”; second, a court must evaluate “whether the board’s adoption, amendment, or application of the advance notice bylaws were equitable under the circumstances of the case.” Also, it’s a good idea to make the bylaws “intelligible.”  In this case, the Court held that “(1) one ‘unintelligible’ bylaw is invalid; (2) the remaining amended advance notice bylaws subject to this appeal are valid because they are consistent with the certificate of incorporation, not prohibited by law, and address a proper subject matter; and (3) the AIM board acted inequitably when it adopted the amended bylaws for the primary purpose of interfering with, and ultimately rejecting, Kellner’s nominations.  Thus, the remaining bylaws challenged on appeal are unenforceable.” Nevertheless, Kellner’s deceptive conduct meant that his nominations notice would not stand.