Stockholders may not be charged with the duty of anticipating inequitable action by management, and of seeking anticipatory injunctive relief to foreclose such action, simply because the new Delaware Corporation Law makes such inequitable action legally possible.
Appellant stockholders sued to enjoin the corporation from advancing the date of the annual stockholders' meeting. The appellees, management of the corporation, claimed they were allowed to do so by amendments to the Delaware business law in changing the by-law date. The trial court found in favor of appellees.
Did the appellees validly amended the by-law date of the annual meeting of the stockholders?
On review the court found that the conclusions of the trial court amounted to a finding that the corporation attempted to utilize the corporate machinery and the Delaware Law for the purpose of perpetuating itself in office, and to that end, for the purpose of obstructing the legitimate efforts of dissident stockholders in the exercise of their rights to undertake a proxy contest against management. The court held that these were inequitable purposes, contrary to established principles of corporate democracy. In reversing the judgment, the court stated that inequitable actions would not be allowed to stand simply because they were permitted by law.