Delaware court confirms requirement for no more than a majority vote to remove director from Delaware corporation

On January 24, 2017, Vice Chancellor Glassock ruled that Section 141(k) of the Delaware General Corporation Law (“DGCL”) prohibits company bylaws from requiring more than a majority vote to remove directors from a Delaware corporation’s board. See Frechter v. Zier, C.A. No. 12038-VCG, 2017 WL 345142 (Del. Ch. Jan. 24, 2017).

In Frechter, a bylaw provision stated: the stockholders may remove directors, but only upon the vote of “not less than 66 and two-thirds percent . . . of the voting power of all outstanding shares” of company stock.

In other words, the Company tried to enact a bylaw requiring a super-majority vote of at least two-thirds of the voting power of all outstanding shares in order to remove directors.

Section 141(k) of the DGCL, however, provides that “[a]ny director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors” subject to two exceptions not relevant to Frechter. The Vice Chancellor enforced Section 141(k), finding that Delaware corporation’s bylaws may not impose requirements or implement procedures that conflict with 8 Del. C. § 141(k).

Section 141(k) unambiguously confers on a majority the power to remove directors, and the contrary provision in the Company bylaws is unlawful.

What’s the key takeaway from this case?

Ensure the charter and the bylaws comply with Delaware law.

Richard Gora has advised corporations on corporate governance, charter and bylaw issues. Gora LLC is a full-service firm with offices in Stamford, Connecticut, Albany, and New York, and provides counsel to clients all over the world ranging from startups to public companies on securities, business, litigation, IP, employment and energy.



Author: Rich Gora
Rich Gora is the founder of Gora LLC, and he has experience in billion dollar litigations and on corporate deals valued in the billions.