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Grant v. Mitchell - Civil Action No. 18370, 2001 Del. Ch. LEXIS 23 (Ch. Feb. 23, 2001)

Rule:

After the filing of the certificate of incorporation an organization meeting of the incorporator or incorporators, or of the board of directors if the initial directors were named in the certificate of incorporation, shall be held, either within or without this State, at the call of a majority of the incorporators or directors, as the case may be, for the purposes of adopting bylaws, electing directors (if the meeting is of the incorporators) to serve or hold office until the first annual meeting of stockholders or until their successors are elected and qualify, electing officers if the meeting is of the directors, doing any other or further acts to perfect the organizations of the corporation, and transacting such other business as may come before the meeting.

Facts:

Plaintiff Ralph Grant, defendant Julee Mitchell, and defendant's boyfriend, Jack Meltzer, formed nominal defendant Epasys, Inc. or the purpose of designing and marketing environmental regulation compliance software. The founders engaged the Boston office of a national law firm to advise them in the formation. However, a formal consent naming the directors was never executed. Epasys, Inc. began operation, but the business did not progress in the manner the founders had hoped. Plaintiff felt that Mitchell and Meltzer were not doing sufficient work and removed them from their offices. Plaintiff Grant, as a director and shareholder, sued under under Del. C. § 225 to determine the proper directors and officers of Epasys, Inc., claiming that is the sole director of Epasys, under authority of an incorporator's consent he executed on August 24, 2000, since he had never named any other directors. Defendant Mitchell, as director and shareholder, denied Grant's contention and argued that plaintiff had earlier exercised his authority as sole incorporator to create a two-person board comprised of Grant and herself.

Issue:

Was plaintiff the sole director of the nominal defendant corporation?

Answer:

No.

Conclusion:

The chancery court held that Mitchell was a director because Grant himself had admitted that he told Mitchell and Meltzer that one of them would be on the board. Moreover, the law firm's documents and unsigned drafts of a director consent indicated that the law firm believed Mitchell was a director. The court further found that plaintiff signed a foreign corporation certificate that stated both he and defendant were directors under penalty of perjury, and  there was no contradiction between an initial two-person board and a plan to add more directors.

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