All eyes are on Delaware, where soon the Delaware Bar Association will recommend to the state legislature whether or not to curb the Delaware Supreme Court’s decision last year to uphold the facial validity of a board-approved bylaw that shifted the attorney fees of defendants to the unsuccessful (or less than completely successful) plaintiff. Much commentary has already focused on the merits of that decision, ATP Tours v. Deutscher Tennis Bund,1 and this column will not go there. That furrow has already been well plowed.2
Although this columnist agrees with the majority who believe ATP Tour paints Delaware into a dangerous corner where the limited liability of shareholders is no longer secure, he also doubts that board-approved bylaws will be much used. Why? The short answer is that the major proxy advisors—ISS and Glass-Lewis—have announced that they will oppose the re-election of any board that adopts such a bylaw. In an era when even DuPont can be credibly attacked by a lone hedge fund, this is a fight that few seasoned firms want. Thus, the more likely scenario for the future will be the insertion of fee-shifting provisions into the corporate charters of IPO firms. Then, shareholders will buy into the offering knowing of the limitation (at least when the SEC is sufficiently awake to require disclosure of the provision).3
