The Delaware Court of Chancery this week upheld a board’s use of an advance notice bylaw to reject a dissident slate from running a proxy fight. Rosenbaum v. CytoDyn Inc., C.A. No. 2021-0728-JRS (Del. Ch. Oct. 13, 2021).
The case concerns a battle for control of the board of CytoDyn, a pharmaceutical company. Years ago, CytoDyn adopted a customary advance notice bylaw that required any stockholder seeking to nominate directors to provide information about its nominees at least 90 days before the stockholder meeting. As is typical, the bylaw required disclosure of, among other things, the nominees’ backers and whether the nominees had financial interests in any potential transactions involving the company. One day before this year’s nomination deadline, a group of CytoDyn stockholders submitted nomination materials for a rival slate. A month later, CytoDyn rejected the nominations as deficient for failure to disclose others who were supporting the nominees behind the scenes and to disclose that at least one of the nominees might seek to facilitate a self-interested merger if elected. The dissident stockholders commenced expedited litigation in Delaware, arguing that the board was improperly interfering with the election process.