Corporate Governance

Airgas, Inc. v. Air Products: Staggered Boards Staggered (A Drafting Tutorial by the Chancery Court)(Part 3)

By J Robert Brown Jr.

We are discussing Airgas, Inc. v. Air Products, a recent decision out of the Delaware Chancery that validated a bylaw shortening the time between annual meetings to three months. 

In responding to the argument that its holding would 'destabilize the staggered boards of Delaware companies,' the Chancery Court made clear that the problem was inartful drafting.  See Id. ("If corporate charters and bylaws have been written in a non-specific, open-ended fashion, it is not for this Court to twist their plain words to achieve a purported intent of the drafters.  The solution is for drafters to employ clear and simple language to provide clarity and avoid ambiguity.").   

But more than criticize, the Chancery Court engaged in a writing tutorial.  The opinion included the precise language for any bylaw/article provision that would prevent advancements in the meeting date for staggered board provisions. 

• This could easily be accomplished by corporate planners and draftsmen through such simple language as:  "The annual shareholder meeting shall be held as closely as practicable in the same month of each year so as to ensure that the terms of office of directors shall approximate a complete year in length."  In short, this is not the end of the world of staggered boards; it is an easy fix if it needs fixing.

It was a clear and cost effective approach.  The opinion probably shaved off an hour of billing time for every transactional lawyer considering the drafting issues raised by this opinion. 

Full post as published by The Race to the Bottom on November 22, 2010 (boomark / email).