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.
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