Aprahamian v. HBO & Co.
531 A.2d 1204 · Court of Chancery of Delaware · 1987
Facts
HBO's board scheduled an annual meeting for April 30, 1987, but after a dissident shareholder committee launched a proxy contest and the election appeared too close to call, the incumbent board postponed the meeting until September 22, 1987, with a new record date. Plaintiffs sought a preliminary injunction, arguing the postponement would invalidate their solicited proxies and was an improper attempt to manipulate the election. The previous annual meeting was held in September 1986, but the traditional date for the annual meeting was April.
Issue
Can a corporation's board of directors postpone a previously scheduled annual stockholders' meeting when the postponement appears to be an attempt to manipulate the outcome of a proxy contest and would invalidate existing proxies?
Holding
The court granted a preliminary injunction, ordering the annual meeting to convene on May 15, 1987, to protect the original record date, and then immediately adjourn to be reconvened no later than June 3, 1987, after proper notice. The court found that the directors' postponement was an improper manipulation of the election machinery, and plaintiffs demonstrated a reasonable probability of success on the merits and irreparable harm.
Rule
Directors cannot postpone a scheduled annual meeting if it is possible to hold it as originally planned, especially when the postponement is motivated by a desire to manipulate the outcome of a proxy contest and would invalidate proxies. The business judgment rule does not apply to acts of interested directors manipulating the corporate election process, and those seeking postponement bear the burden of proving it is in the best interests of the stockholders.
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