Delaware Companies with Non-Classified Boards
The Harvard Law School Forum on Corporate Governance and Financial Regulation 2016-02-23
Philip Richter is a partner and Co-Head of the Mergers & Acquisitions Practice at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank publication by Mr. Richter, Brian Mangino, Robert C. Schwenkel, and Gail Weinstein. This post is part of the Delaware law series; links to other posts in the series are available here.
The Delaware Court of Chancery, in a transcript ruling in In re Vaalco Energy Shareholder Litigation (Dec.21, 2015), held that directors of companies without a classified board (i.e., boards that are elected annually) can be removed without cause, irrespective of provisions in the charter or bylaws purporting to permit removal of directors only for cause. Vice Chancellor Laster held that providing for removal of non-classified directors only for cause conflicts with a “plain reading” of Section 141(k) of the Delaware General Corporation Law (which provides that, unless the board is classified or the company has cumulative voting for directors, directors may be removed with or without cause).