Advance Notice Bylaw Provisions
(Long Form)

Summary

These long form advance notice bylaws expand upon the concepts set forth in the short form (See Advance Notice Bylaw Provisions (Short Form)) by increasing the amount and scope of information that must be disclosed by a proposing stockholder and establishing conditions and requirements for valid director nominees to serve on the board. Many of the requirements set forth in the long form advance notice bylaws work to provide a company with more detailed and thorough information about the proposing stockholder, its ownership interest, the interests it represents and any arrangements it may have with other stockholders or potential director nominees. With this information, the corporation is better positioned to evaluate stockholder director nominees, respond to stockholder proposals and/or avoid proxy contests. For example, the long form advance notice provisions require the disclosure of additional and more detailed information about the proposing stockholder, its relationships and economic interests, the director nominees and the purpose of the stockholder's proposals. In addition, the long form provisions build upon concepts addressed in the short form and introduce and define additional concepts in great detail. The long form provisions also include eligibility requirements for any director nominee to be a candidate for election. Attorneys are advised that advance notice provisions are often subject to challenge, especially by activist shareholders seeking to nominate and elect an alternate slate of directors to the board. You should note that, under Delaware law, advance notice provisions will be generally upheld if the provision is valid (i.e., consistent with the certificate of incorporation, not prohibited by law, and addresses a proper subject matter) and the board's adoption, amendment, or application of the advance notice bylaws is equitable under the circumstances. Kellner, No. 3, 2024, 2024 Del. LEXIS 236, at *4-5 (July 11, 2024). With respect to validity, bylaws (including advance notice provisions) are presumed to be valid so long as they are authorized by the Delaware General Corporation Law, consistent with the corporation's certificate of incorporation, and not otherwise prohibited by Delaware law. Kellner, No. 3, 2024, 2024 Del. LEXIS 236, at *30 (July 11, 2024). An advance notice provision is "equitable" if it is reasonable in its application and does not unfairly interfere with stockholder voting, unless the provision is adopted, amended, or enforced during a proxy contest or in response to another challenge to the board's control, in which case a reviewing court must apply enhanced scrutiny and determine whether the board's actions were (1) in response to legitimate threat to an important corporate interest or the achievement of a significant corporate benefit, and (2) proportional to the threat posed and not preclusive or coercive. (Kellner, No. 3, 2024, 2024 Del. LEXIS 236, at *32-36 (July 11, 2024). Attorneys advising Delaware corporations must remain cognizant, in light of Kellner, of both the circumstances under which advance notice provisions are adopted, amended, and enforced and the overall reasonableness of the provision and the extent to which it might interfere with the franchise rights of the corporation's stockholders. For a broad collection of content related to hostile takeovers and shareholder activism, see Hostile Takeovers & Shareholder Activism Resource Kit.