Delaware practitioners and legal scholars are digesting the implications of SB 313 which adds a new Section 122(18) to the Delaware General Corporation. According to the bill's synopsis, this new provision:
Specifically authorizes a corporation to enter into contracts with one or more of its stockholders or beneficial owners of its stock, for such minimum consideration as approved by its board of directors, and provides a non-exclusive list of contract provisions by which a corporation may agree to:
a. restrict or prohibit future corporate actions specified in the contract;
b. require the approval or consent of one or more persons or bodies (including the board of directors or one or more current or future directors, stockholders or beneficial owners of stock) before the corporation may take actions specified in the contract; and
c. covenant that the corporation or one or more persons or bodies (including the board of directors or one or more current or future directors, stockholders or beneficial owners of stock) will take, or refrain from taking, future actions specified in the contract.
In a recent post, Professor Stephen Bainbridge poses the question of whether SB 313 eviscerates Omnicare, Inc. v. NCS Healthcare, Inc., 818 A.2d 914 (Del. 2003). That case basically required corporations to include a "fiduciary out" in merger lock-up agreements.
The California General Corporation Law does not include a provision similar to Delaware's new Section 122(18). Moreover, Section 122(18) does not apply to corporations incorporated in California. Even if California was to enact a similar statute, Professor Bainbridge's question would likely not be relevant to California corporations. The one California court to consider Omnicare in a reported decision rejected the Delaware Supreme Court's decision, holding that a board of directors may lawfully bind itself in a merger agreement to forbear from negotiating or accepting competing offers. Monty v. Leis, 193 Cal. App. 4th 1367, 123 Cal. Rptr. 3d 641 (2011), as modified on denial of reh'g (Apr. 27, 2011). See Court Of Appeal Rejects Omnicare In Favor Of Jewel Companies.
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