Alignment Advance Notice Bylaw
Public companies would be well advised, on a lovely, clear day (in the Delaware sense), to update their advance notice bylaws. In the normal course these bylaws receive little attention, but in the event of an activist campaign they are critical to the board’s ability to discharge its fiduciary duties. The board will have a […]
Iliana Ongun and Scott Golenbock are Partners at Milbank LLP. This post is based on a Milbank memorandum by Ms. Ongun, Mr. Golenbock, and Dean Sattler.
Public companies would be well advised, on a lovely, clear day (in the Delaware sense), to update their advance notice bylaws. In the normal course these bylaws receive little attention, but in the event of an activist campaign they are critical to the board’s ability to discharge its fiduciary duties. The board will have a positive duty to inform itself, among other things, of the activist’s plans and proposals, the degree of the activist’s financial alignment with long-only stockholders, and the qualifications and independence of the activist’s nominees. This information will inform any settlement discussions, support a recommendation for or against the activist’s nominee and allow the board to ensure that stockholders receive accurate and timely disclosure regarding the nomination.
In light of recent Delaware cases regarding the enforceability of advance notice bylaws, and in order to elicit information necessary to board and stockholder decision-making, Milbank has prepared a model advance notice bylaw, focusing in particular on the degree of alignment between the activist and the other stockholders of the corporation. The link to this bylaw can be found here (the “Alignment ANB”).
Key features of the Alignment ANB include the following:
