Rosenbaum v. CytoDyn Inc.: A Review of Advance Notice Bylaws

December 2021

Publication| Corporate Governance| Corporate Transactions| Mergers & Acquisitions| Special Committees & Investigations

In Rosenbaum v. CytoDyn Inc., the Delaware Court of Chancery denied an insurgent group’s challenge to the rejection of their notice of director nominations by CytoDyn Inc. The Court’s opinion brings some clarity to an area of the law that “may not be as settled as one would think,” providing a framework for reviewing actions taken by corporations under their advance notice bylaws. While the Court rejected the plaintiffs’ argument in favor of a reflexive application of the onerous “compelling justification” standard under Blasius, it also declined to follow the purely contractual approach advanced by the defendants. The Court explained that a board’s rejection of a non-compliant nomination notice is reviewed under Blasius if the decision is the product of “manipulative conduct” and that, in the absence of such conduct, a board’s decision to reject such a nomination notice will only be set aside in equity if the plaintiff proves that “there are ‘compelling circumstances’ that justify a finding of inequitable conduct.”

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