viernes, 7 de diciembre de 2007

Caso: Blasius Industries, Inc. v. Atlas Corp

Los directores nuevos habían tratado de que el nombramiento de directores no sea realizado en reunión de accionistas sino por voto directo, lo cual al final la corte ratifico.

Blasius Industries, Inc. v. Atlas Corp., the court noted that the shareholder franchise is the ideological underpinning of directorial power and, therefore, held that a board’s action designed principally to interfere with or frustrate a shareholder vote would only be upheld if there was a "compelling justification." The compelling justification standard of review is a stringent test, practically guaranteeing that the conduct in question will be struck down. (In Blasius, the incumbent directors, despite their good faith belief that the bidder’s proposed recapitalization would saddle the company with too much debt, were not justified in expanding the board to defeat a proxy contest.) On the other hand, a large body of precedent upholds various defensive measures under Unocal’s enhanced scrutiny doctrine (see, e.g., the court’s decision in Unitrin, Inc. v. American General Corp., upholding a stock repurchase program that gave management an effective blocking position). Because enhanced scrutiny review differs from, and may be more permissive than, compelling justification review, the application of one standard instead of the other could determine the outcome of a challenge

Mc Dermot

Blasius acquired 9% of the stock of Atlas. It then tried to increase the number of the directors on the board. To prevent that, the actual board decide to appoint two new members to the board. Thus the action by Blasius in the court. Blasius by filing a Schedule 13D disclosed that it wanted to take control of Atlas. After a proposal of recapitalization sent by one of the owners of Blasius, the board decided to add the two members.


Whether a decision by the board of directors to increase the number of the directors is permissible.


The court decided that the action of the board of directors to increase the number of directors is valid. It nevertheless decided the decision void and null, not because it was made in bad faith but because it is not in their option to do so, even though the board might be the wiser of the two.

It rejected the argument of the plaintiff wanting a rule of per se invalidity as being too broad. The way they took the action was not a wise as they had enough time to inform the shareholders that then would have been able to make a sound judgment. Thus, the action of the board is void because A it constituted an unintended violation of the duty f loyalty that the board owed to the shareholders@.


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