I enjoyed participating in the “Hot Issues For Your Annual Meeting” webcast yesterday.  My comments were largely focused on California and Nevada corporate law.  Roxanne Houtman of Potter Anderson Corroon LLP covered Delaware law.  Among other things, we discussed what happens when a corporation fails to hold an annual meeting of shareholders.  Although all three states provide that a court may order up an annual meeting, there are some key differences.

Pursuant to Section 211(c) of the Delaware General Corporation Law, the Court of Chancery can order a meeting if there is a failure to hold the annual meeting or take action by written consent to elect directors in lieu of an annual meeting for a period of 30 days after the designated annual meeting date, or if no date has been designated for an annual meeting, for a period of 13 months of the latest to occur of the organization of the corporation, its last annual meeting or the last action by written consent to elect directors in lieu of an annual meeting.  The analogous time periods under Section 600(c) of the California General Corporation Law are 60 days and 15 months.  Nevada’s statute, NRS 78.345, imposes an 18 month hiatus.

There are other subtle differences as well.  For example, California’s statute does not refer to actions by written consent to elect directors.  Both Delaware and California allow any shareholder to seek relief.  Nevada, in contrast, grants this right only to one or more stockholders holding stock entitling them to exercise at least 15 percent of the voting power.  Delaware is the only state of the three that also extends this right to directors.  California adds a further twist by imposing its rule (to the exclusion of the law of the state of incorporation) on foreign corporations subject to Section 2115.

Does any of this actually matter?  It did in at least one case, Hilton Hotels Corp. v. ITT Corp., 978 F. Supp. 1342 (D. Nev. 1997), and that case was a subject of my article, Battle for Control of ITT Corporation Spotlights Nevada (and Delaware) Corporate Law: Did Nevada Law Get Stockholders a Better Deal?, 12 Insights, January 1998.