The Delaware Court of Chancery in Brown v. Kellar, C.A. No. 2018-0687-MTZ, 2018 WL 6721263 (Del. Ch. Dec. 21, 2018) recently issued a decision clarifying the scope of actions under 8 Del. C. Section 225, which provides a procedure to determine issues that pertain to actions to elect or remove a director or officer. Vice Chancellor Morgan T. Zurn acknowledged that such actions are “narrow, summary proceedings,” but nevertheless held that allegations of inequitable conduct committed by the party seeking to change board composition must be considered in the context of a Section 225 action. The Brown decision provides stockholders, boards and practitioners with important guidance regarding the nature of allegations that can be pursued during a 225 action.

  • Board Argues that Inequitable Conduct by Majority Stockholders Rendered Consents Ineffective.

In Brown, the plaintiff (Robert G. Brown) and another stockholder, who together owned a majority of the outstanding stock of SPAR Group, Inc. (SGRP), executed written consents to remove and replace a director.