Saturday, November 23, 2013

Hoschett v. TSI International Software, Ltd. case brief

Hoschett v. TSI International Software, Ltd. case brief summary
683 A.2d 43 (1996)

Plaintiff shareholder and defendant corporation filed cross motions for summary judgment in the shareholder's suit seeking an order requiring the corporation to hold an annual meeting of its shareholders as required by Section 211 of the Delaware General Corporation Law (DGCL).

The corporation had less than 40 shareholders of record and it had never held an annual meeting for the election of directors. The corporation argued that it had received a written consent representing a majority of the voting power of the corporation, which elected directors of the corporation, and thus it had satisfied the need to hold an annual meeting for the election of directors.

  • The court held that the mandatory requirement that an annual meeting of shareholders be held was not satisfied by shareholder action pursuant to section 228 of the DGCL purporting to elect a new board or to re-elect an old one. 
  • Delaware courts had long recognized the central role of annual meetings in the scheme of corporate governance. 
  • The purposes served by the annual meeting included affording to shareholders an opportunity to bring matters before the shareholder body, such as bylaw changes. 
  • These other matters of possible business were not necessarily made irrelevant by a consent designation of directors. 
  • The shareholder here had established a prima facie case for the relief he sought.

The court ordered the corporation to hold an annual meeting and make available a complete list of shareholders as required by the DGCL.

Recommended Supplements for Corporations and Business Associations Law

1 comment:

  1. Hoschett v. TSI International
    Plaintiff owns 1200 shares of common stock in TSI
    TSI is a privately held company, less than 40 stockholders, and has never had an annual meeting for the election of a board of directors
    Plaintiff seeks to compel such a meeting
    TSI claims right after suit was filed, a majority of shareholders signed a "consent" that the current 5 directors serve as director until a successor is duly elected and qualified – satisfying the need for an annual meeting
    May the majority of shareholders effectively avoid the annual meeting requirement?
    Purpose of annual meeting
    provides discipline in
    occasion for interaction,
    There is some incorporation of democratic ideals in corporate governance


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