In a recent decision, Bay Capital Finance v. Barnes and Noble Education, C.A. No. 2019-0539-KSJM (Del. Ch. Aug. 14, 2019) (transcript), the Delaware Court of Chancery interpreted and analyzed the effect of stockholder noncompliance with the express requirements of an advance notice bylaw. In its decision, the Court of Chancery closely scrutinized the particular facts and circumstances that led to a stockholder's noncompliance with an advance notice bylaw, including whether the company's actions contributed to the stockholder's noncompliance, to determine whether the stockholder's nomination would be permitted.

Bay Capital involved Barnes and Noble Education's advance notice bylaw, which required that a stockholder submitting a director nomination be a "holder of record" as of the date of its nomination. In accordance with the advance notice bylaw, and based on the date of Barnes and Noble Education's 2018 annual meeting, a stockholder was required to submit its nominations for the 2019 annual meeting to Barnes and Noble Education by June 27, 2019. On June 27, Bay Capital, one of Barnes and Noble Education's stockholders, noticed its nomination of a slate of directors for election at the 2019 annual meeting; however, as of June 27, Bay Capital was only a beneficial owner of Barnes and Noble Education stock and not a record holder. Bay Capital became a record holder June 28, one day after the nomination deadline. Because Bay Capital did not meet the advance notice bylaw's record holder requirement June 27, 2019, Barnes and Noble Education rejected Bay Capital's nominations.

Bay Capital filed suit in the Court of Chancery and sought injunctive relief to permit Bay Capital to run its slate of directors at the 2019 annual meeting. The court found that Bay Capital was fully aware of the record holder requirement of Barnes and Noble Education's advance notice bylaw and was advised timely and repeatedly by its own adviser that Bay Capital must be a record holder to notice its nomination and that it could take a few days to complete the process of becoming a record holder. Despite this, the court noted that Bay Capital decided not to purchase its shares and initiate the process of transferring the shares into record name until a few days before the nomination deadline. The court then stated that "not even Delaware's strong public policy favoring the stockholder franchise will save Bay Capital from its dilatory conduct." The court noted that "Bay Capital blew the deadline" and then "made up excuses for doing so." Importantly, the court stated that "no record evidence suggests that [Barnes and Noble Education] is in any way at fault for [Bay Capital's] mistake" and "if this court required [Barnes and Noble Education] to accept the nomination in these circumstances, advance notice requirements would have little meaning under Delaware law."