Corporate Compliance and Governance Blog

Xu Hong Bin, et al. v. Heckmann Corp., et al., C.A. No. 4637-CC, Chandler, C. (Del. Ch. Oct. 26, 2009). The Court granted the plaintiffs’ motion to dismiss defendants’ counter-claims based on breach of contract and conversion as failing to state a claim, but denied the dismissal of defendant’s breach of fiduciary duty counter-claim. The Court found that there were disputed issues of fact as to whether a contract between the parties which plaintiff claimed contained a release of the fiduciary duty claim, was enforceable.

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Olson v. Halvorsen, et al., C.A. No. 1884-VCL, Lamb, V.C. (Del. Ch. May 13, 2009).
Plaintiff was the founder of a successful hedge fund and claimed he was entitled to payment for his equity interest upon having his association with the fund terminated. During trial, it was established that the parties had entered into an oral agreement providing that a departing member would only be entitled to accrued compensation and the balance of his capital account. The Court of Chancery held that the oral agreement was never superseded by another agreement and any subsequent writings only refined the agreement. As such, the Plaintiff was not entitled to any further payment beyond accrued compensation and his capital account.

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Lyondell Chemical Company, et al. v. Ryan, No. 401, 2008, Berger, J. (Del. March 25, 2009). This shareholder derivative action challenged a merger transaction where the directors negotiated the deal in less than a week, only met for seven hours to discuss the transaction, did not press the buyer for a better price and did not conduct even a limited market check. The Court of Chancery “decided that ‘unexplained inaction’ permit[ted] a reasonable inference that the directors may have consciously disregarded their fiduciary duties.” The Supreme Court held otherwise and reversed and remanded, noting that, although there was a triable issue as to whether the directors exercised due care, the corporate charter exculpated the directors from duty of care violations. The relevant inquiry should have been directed at the director’s duty of loyalty and, although a director could violate its duty of loyalty by intentionally disregarding that duty, the record mandated a decision on summary judgment in the directors’ favor because they did not knowingly and completely fail to undertake their responsibilities.

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Banet, et al. v. Fonds de Régulation et de Controle Café Cacao, et al., C.A. No.3742-CC, Chandler, C. (Del. Ch. Feb. 18, 2009).

Plaintiffs moved for summary judgment on their request for appointment of a receiver for the New York Chocolate and Confections Company, Inc. (NYCCC). The Court of Chancery denied the motion, holding that the Plaintiffs failed to prove that NYCCC was insolvent because NYCCC maintained a positive assets-to-liabilities ratio and was backed by an Ivory Coast government agency that practically guaranteed forthcoming financial support. As such, appointment of a receiver was denied because NYCCC did not face an “imminent threat of great loss”.

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CSC can help you E-File your Delaware Annual Franchise Tax Report online.

Delaware corporations must file their 2008 annual reports electronically on or before March 1, 2009.

Delaware LPs and LLCs must file by June 1, 2009.

CSC® offers an enhanced Delaware E-Filing system to help you:
• Access status and other information about all your Delaware entities
• File reports and pay taxes for all entities, regardless of Registered Agent designation
• Prepare and file multiple annual reports simultaneously
• Pay using any one of our 4 easy payment options – electronic check (ACH), credit card, check, or wire transfer
• Obtain instant e-mail confirmation of your payments
• Utilize robust reporting functionality with the ability to allocate fees to your cost centers or matter numbers
• Archive report data and filing history year-over-year for CSC-managed entities
To learn more about how CSC can take the risk and administrative burden out of filing your Delaware annual reports, email us or call us at 1-888-690-2468.

CSC will prepare all annual report filings necessary to maintain the good standing of your entities with Secretary of State Offices throughout the country. An initial audit is conducted with a detailed report on all findings, which is then updated into our comprehensive entity management system. CSC will then prepare, file and advance fees in all jurisdictions that accept electronic and conformed signatures. In jurisdictions where an officer’s signature is required, we will prepare and send those documents to you. Once we have received them back, we will file the documents and advance the fees. CSC can help you do your annual report filings in Delaware and all other states.

Contact us at 800.927.9801 Ext. 6827 or email us to start today.

Marie Raymond Revocable Trust v. MAT Five LLC, et al., C.A. No. 3843-VCL, Lamb, V.C. (Del. Ch. Dec. 19, 2008).

Plaintiffs had brought an action for breaches of fiduciary duty and violations of the Securities Exchange Act of 1933 stemming from alleged mismanagement of MAT Five LLC. MAT Five then commenced a tender offer for its own shares, which plaintiffs challenged for inadequate disclosure. A subsequent settlement between the parties provided MAT Five investors the option to tender and receive additional consideration, retain all MAT Five shares, elect to receive the consideration offered in the original tender offer, or opt out of the settlement. The Court of Chancery approved the proposed settlement, finding it fair and reasonable because it significantly improved the disclosures, increased the available monetary value of the tender offer and provided an expansive range of options for the harmed investors. The Court supported its fairness determination by noting that 80% of MAT Five investors chose to participate in the settlement and an opt out clause protected those that did not.

Continue reading "Recent Corporate and Alternative Entity Decisions from the Delaware Courts " »

E-file your Delaware Annual Franchise Tax Report online.

Delaware corporations must file their 2008 annual reports electronically on or before March 1, 2009. CSC® offers an enhanced Delaware E-Filing system to help you:
• Access status and other information about all your Delaware corporations
• File reports and pay taxes for all corporations, regardless of Registered Agent designation
• Prepare and file multiple annual reports simultaneously
• Pay using any one of our 4 easy payment options – electronic check (ACH), credit card, check, or wire transfer
• Obtain instant e-mail confirmation of your payments
• Utilize robust reporting functionality with the ability to allocate fees to your cost centers or matter numbers
• Archive report data and filing history year-over-year for CSC-managed corporations
To learn more about how CSC can take the risk and administrative burden out of filing your Delaware annual reports, email us or call us at 1-888-690-2468.

Olson v. Halvorsen, et al., C.A. No. 1884-VCL, Lamb, V.C. (Del. Ch. Oct. 22, 2008). The Chancery Court, in granting summary judgment to the defendant partners of a hedge fund, held that the Statute of Frauds applies to LLC operating agreements, an issue that had never before been addressed by the Court. The Court stated that (1) an oral LLC agreement provision or multiple provisions that cannot possibly be performed within one year are unenforceable, and (2) provisions of an oral LLC agreement that could possibly be performed within one year will remain enforceable. Here, the plaintiff argued that an “earnout” provision could be performed within a year, but the Court found it unenforceable because it called for payments of the LLC income over multiple years, as well as other requirements of the LLC partners that the Court believed could not be performed within one year.

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In re TD Banknorth Shareholders Litigation, C.A. No. 2557-VCL, Lamb, V.C. (Del. Ch. July 29, 2008).

The Court granted the plaintiffs’ motion for certification as class representatives in a class action brought by former investors who claim that the defendants improperly initiated a transaction in violation of a stockholders agreement. The Court reasoned that the plaintiffs satisfied the adequacy requirement of Court of Chancery Rule 23(a)(4) because both plaintiffs had sufficient knowledge of, and participation in the litigation, and there was no evidence of improper conduct of counsel.

E.I. DuPont de Nemours & Co. v. Bayer CropScience L.P., C.A. No. 3741-VCL, Lamb, V. C. (Del. Ch. July 29, 2008).
The Court denied preliminary injunctive relief to the plaintiff, DuPont, in a breach of contract case dealing with a supply and license agreement between the two chemical companies. The Court reasoned that DuPont, which sought specific performance of a supply agreement, could not establish by “clear and convincing evidence” its entitlement to the relief sought and that the balance of hardships did not warrant preliminary injunctive relief.

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Every industry has its bible. And just like doctors depend on Gray’s Anatomy, attorneys around the country and the world rely on Delaware Laws Governing Business Entities. Very simply, this two-volume set, updated twice a year, has all the rules, statutes, annotations, opinions, analyses and time-saving features that attorneys need to effectively counsel their Delaware clients.

Andrea Unterberger, Director of CSC® Publishing, which produces the book in collaboration with legal publishing giant LexisNexis, tells us that the publication is available online. You can log on to the publication from any computer and search, download or email contents of the Delaware law.

We havent seen any other Delaware law handbook that match it. The Most Current and Complete Delaware Law Resource, in Print and Online Delaware Laws Governing Business Entities.

Here is an online demo of the Delaware publication

One of the questions we're always asked about is "which state should I set up my company?" CSC recently engaged two of Delaware's legal experts, Robert L. Symonds, Jr. and Matthew O'Toole with this exact question. They drafted an article which we thought was very informative and provides clear examples on why Delaware Inc's and LLC's are so popular. Here's an excerpt of the article.

"The state of Delaware provides a unique and favored gateway to the U.S. marketplace. More than 500,000 corporations, limited liability companies, statutory trusts, and partnerships have been formed in Delaware. The number, however, is only part of the story. Delaware is the corporate home state for many of the largest, most successful and best known U.S. companies. Nearly 60% of the Fortune 500 companies are organized under Delaware law. Delaware companies also constitute more than 50% of all U.S. publicly-traded companies".

They cover topics such as:
Delaware Chancery Court
Stockholder flexibility
Ownership flexibility
Management flexibility

To get the full article click here.

Robert L. Symonds, Jr. and Matthew O'Toole are shareholders in the Wilmington, Delaware firm of Stevens and Lee.