Originally Posted by PennyThePenguin
where's the 2004 question by the way?>
I've got 2001 and 2002, too. but these ones weren't particularly funny
I do, however, hope the question is more like this length
omg mtf stars out the word p r o x i e s
Corporation, Inc. is a Delaware corporation whose business is to buy old, struggling corporations, fix them up, and resell them for a profit. Until recently, Corporation had a six-member board, with all the directors up for reelection each year. Four of the directors were officers of the corporation, and the other two were independent. Corporation’s stock was traded on the New York Stock Exchange. Historically, Corporation had had no controlling shareholder; its largest shareholder had never owned more than 2% of the corporation.
Last year, an outside corporate governance consultant recommended that Corporation’s board increase its size to eleven directors, to include a greater range of expertise and talent on the board, and to allow for a majority of independent directors. Section 10.3 of the Certificate of Incorporation would have permitted the board to expand the number of directorships through a simple bylaw. The board did not immediately respond to the recommendation.
Two months ago, Raider, Inc., a California corporation, filed a Schedule 13D revealing that it had purchased 7% of Corporation’s stock. In its filing, Raider disclosed its intent to acquire an additional 8% of Corporation’s stock, and then solicit ******* for a shareholder resolution (“Raider’s Resolution”) expanding the size of the board to thirteen, filling the seven new slots with its own nominees. (Section 20.4 of Corporation’s Certificate of Incorporation authorized such a shareholder resolution if sponsored by a shareholder who owned 10% or more of Corporation’s stock.) If successful in gaining control of Corporation this way, Raider explained it planned to cause Corporation to issue high-yield unsecured bonds to finance a special cash dividend to all its shareholders in the amount of $50/share. Corporation had sufficient cash flow to fund such a bond offering, but the offering would have left Corporation without the capital it needed to improve the companies it owns or to buy new ones. Later that same week, Raider filed a second Schedule 13D indicating it had acquired a total of 15% of Corporation’s stock.
Shortly after Raider’s second filing, Corporation’s board passed a bylaw at a regularly scheduled board meeting. The bylaw expanded the size of the board to eleven, as recommended by the outside corporate governance consultant the year before (“Board Expansion Bylaw”). Corporation’s board filled the new seats with independent candidates selected by the CEO.
You are a partner in Student, Student, and Student, LLP. Raider’s CEO has asked you to draft a concise memo to her explaining (a) what kind of lawsuit Raider might launch, along with any procedural obstacles that might be faced, and (b) what substantive grounds Raider might have to claim Corporation’s directors violated their fiduciary duties in passing the Board Expansion Bylaw. (Hint: You might begin by discussing which state’s law applies.) You should throughout analyze Raider’s chances of success if it proceeds with such a suit. Since Raider’s CEO is not very smart, be sure to outline your answer before you start writing, to make sure your answer is clear and well-structured.