Litigation » A Rush To Adopt Exclusive Forum Provisions

A Rush To Adopt Exclusive Forum Provisions

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June 27, 2014

Since the Delaware chancery court approved exclusive forum provisions in corporate bylaws last year, many new and existing public companies – including about 75 percent of Delaware corporations going public in the first quarter of this year  – have adopted them. Exclusive forum provisions designate the venue in which shareholder lawsuits over fiduciary duty and other issues must be filed. As important as the Delaware decision itself is the fact that courts in other states have been upholding them, explain attorneys Michael O’Bryan, Kevin Calia and James Beha in a client alert from Morrison & Forster. They suggest companies that anticipate litigation because of pending sale or shareholder activism implement them “sooner rather than later, to minimize the potential challenges to the provisions based on the timing of any alleged misconduct.” Proxy advisory firms have advised against exclusive forum provisions, but where they have been put to a shareholder vote, shareholders generally have supported them.

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