Walter Davis and Marjorie Duffy are Partners, and Randi Lesnick is a Co-Chair of the Corporate Practice at Jones Day. This post is based on a Jones Day memorandum by Mr. Davis, Ms. Duffy, Ms. Lesnick, Joel May, and Jennifer Lewis, and is part of the Delaware law series; links to other posts in the series are available here.
In Short
The Situation: A stockholder sought a judgment declaring that certain provisions of a stockholders agreement were facially invalid and unenforceable under 8 Del. C. § 141(a). The Court of Chancery found that the plaintiff’s claims were timely and that the stockholders agreement violated Delaware law.
The Result: The Delaware Supreme Court held that the challenged provisions, to the extent they conflict with the managerial authority of the board conferred by § 141(a), were voidable (not void) and that the plaintiff unreasonably delayed in asserting its challenge to those provisions.
Looking Ahead: The Court of Chancery’s decision was the catalyst for the 2024 amendments to § 122(18), which resolved market uncertainty in the wake of that decision. The Delaware Supreme Court’s decision provides another measure of certainty by making clear that a plaintiff’s facial challenges to voidable acts must be timely brought.
