Sean W. Brownridge and Patrick Gibbs are Partners and Polina A. Demina is a Special Counsel at Cooley LLP. This post is based on their Cooley memorandum and is part of the Delaware law series; links to other posts in the series are available here.
As most public companies prepare for their director nomination window to open between December and February, the Delaware courts have delivered a timely reminder: Advance notice bylaws are important tools for boards facing shareholder activism, but only when their requirements are clear and their enforcement is grounded in the bylaws’ text.
In ATG Capital Opportunities Fund LP v. Empery Digital, Inc., the Delaware Court of Chancery held that a board’s rejection of an activist nomination notice was both contractually improper where the alleged deficiencies were not required by the company’s bylaws and inequitable.
The decision offers practical guidance: Companies should draft advance notice bylaws carefully, apply them fairly and avoid using them to import disclosure obligations the bylaws do not clearly contain.
