Amy Simmerman, Craig Sherman, and Todd Carpenter are partners at Wilson Sonsini Goodrich & Rosati. This post is based on a WSGR publication by Ms. Simmerman, Mr. Sherman, and Mr. Carpenter, and is part of the Delaware law series; links to other posts in the series are available here.
The Delaware Court of Chancery recently issued two important decisions addressing the interpretation and effects of stockholders’ agreements. In Schroeder v. Buhannic, [1] the Court of Chancery refused to interpret a stockholders’ agreement in a manner that would allow a corporation’s common stockholders to remove the chief executive officer. In Southpaw Credit Opportunity Master Fund, L.P. v. Roma Restaurant Holdings, Inc., [2] the Court of Chancery held that a corporation’s purported restricted stock issuances were invalid, where the corporation failed to comply with provisions governing stock issuances in a stockholders’ agreement to which the corporation was a party.
These two decisions are noteworthy statements of both the potential limitations and potency of stockholders’ agreements. As often occurs, these decisions also both arose in the context of disputes between factions of stockholders over control of the company—an important reminder about the implications of these issues.
