Blog Bite: Don't Ignore the 'Action Without Meeting' Clause!

In Delaware, and in most other US jurisdictions, a written resolution of shareholders (in lieu of a shareholders’ meeting) can only pass if at least a majority of shareholders entitled to vote approve (>50%), although in some cases a corporation could, in its by-laws, raise that threshold to require a supermajority (e.g. ≥66.7%).

The “Action Without Meeting” clause in a corporation’s bylaws sets out the rules for providing notice to other shareholders before any corporate action is taken without a shareholders’ meeting. Notice of shareholder resolutions without a meeting can be vital, as otherwise a majority shareholder (or a particular voting block of shareholders constituting a majority) could impose a decision on the board of directors and other shareholders without even giving the other parties a chance to confer and participate in the decision-making process. This could lead to all sorts of drama, like a majority shareholder replacing the entire board of directors overnight!

Awareness is just the first step, but to really cover your bases, always consult with local counsel.

For more on this document, check out Clausehound’s Delaware Public Benefit Corporation By-Laws learning library template, and be sure to click through our tags to learn more about each clause!

Written by Sahil. As Lead Content Analyst at Clausehound, Sahil puts his passion for research and writing, and his Law and Business major to good use developing easy to understand blog content and other eLearning materials for entrepreneurs, law students, and business students alike.