If the sale is of assets quantitatively vital to the operation of the corporation and is out of the ordinary and substantially affects the existence and purpose of the corporation then it is beyond the power of the Board of Directors.
The complaint sought the entry of an order preliminarily enjoining the proposed sale of the Canadian assets of defendant Plant Industries, Inc. ("Plant Industries") to Vulcan Industrial Packaging, Ltd. Plaintiff Hyman Katz allegedly was the owner of approximately 170,000 shares of common stock of Plant Industries, on whose behalf he has brought the action, suing not only for his own benefit as a stockholder but for the alleged benefit of all other record owners of common stock of Plant Industries. According to the complaint, Mr. Bregman, the chief executive officer of the corporation, proceeded on a course of action designed to dispose of a subsidiary of Plant Industries known as Plant National (Quebec) Ltd., a business which constituted Plant Industries' entire business operation in Canada and allegedly constituted Plant Industries' only income producing facility during the past four years. In seeking injunctive relief, as prayed for, plaintiff relied on two principles, one found in 8 Del. C. § 271 to the effect that a decision of a Delaware corporation to sell "all or substantially all of its property and assets" required not only the approval of such corporation's board of directors but also a resolution adopted by a majority of the outstanding stockholders of the corporation entitled to vote thereon at a meeting duly called upon at least twenty days' notice. Support for the other principle relied on by plaintiff for the relief sought, namely an alleged breach of fiduciary duty on the part of the board of directors of Plant Industries, was allegedly found in such board's studied refusal to consider a potentially higher bid for the assets in question.
Should the prayer for preliminary injunction to enjoin the proposed sale of the Canadian assets of Plant Industries, Inc. to Vulcan Industrial Packaging, Ltd. be granted?
The court granted plaintiff's request for a preliminary injunction. Since proposed sale constituted a sale of substantially all of the assets of defendant corporation, an injunction was required to prevent consummation of the proposed sale at least until it had been approved by a majority of outstanding stockholders entitled to vote at a meeting.