The D&O Diary featured a version of this post, entitled “New Debate in January on Delaware Bylaws re Shareholder Liability,” as a guest blog post. Many thanks to Kevin LaCroix of The D&O Diary for publishing our post.

The ability of corporations to impose liability on shareholders through bylaws and charter provisions has been the subject of much debate recently.  On May 8, 2014, the Supreme Court of Delaware held in ATP Tour, Inc. v. Deutscher Tennis Bund, 91 A.3d 554, 555 (Del. 2014), that “a fee-shifting provision in a non-stock corporation’s bylaws can be valid and enforceable under Delaware law.” This decision (in favor of ATP, represented by Proskauer’s own Brad Ruskin) prompted a proposed amendment to the Delaware General Corporation Law (DGCL) that would eliminate the ability of Delaware stock corporations to impose liability on shareholders through bylaw and charter provisions, including fee-shifting liability, and a debate about the use of bylaws to define the bounds of shareholder litigation.  Act to Amend Title 8 of the Delaware Code Relating to the General Corporation Law, S.B. 236, 147th Gen. Assemb. (Del. 2014).  Senator Bryan Townsend, D-Newark, was able to delay the debate on the proposed legislation until the Delaware legislature reconvenes in January 2015.