Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

The Bankruptcy StrategistFeaturesBankruptcyContractsLitigation

Delaware Bankruptcy Court Provides Guidance On Drafting Proxies

By Robert B. Greco
July 01, 2023

As the Delaware Supreme Court recently reaffirmed in Daniel v. Hawkins, 289 A.3d 631 (Del. 2023), proxies are generally construed narrowly under Delaware law. In light of these principles of strict construction, proxies in voting and support agreements, secured debt instruments, and other corporate documents should be drafted in a manner that fully reflects the intended scope of the parties' proxy relationship.

A recent opinion from the U.S. Bankruptcy Court for the District of Delaware, In re CII Parent, 2023 WL 2926571 (Bankr. D. Del. Apr. 12, 2023), provides helpful guidance on drafting proxies and highlights potential pitfalls for the unwary, including in relation to the proxyholder's power to execute and deliver stockholder consents.

The decision addressed a debtor's challenge to the validity of action taken by its secured creditor to effect corporate governance changes with the debtor's direct and indirect subsidiaries. The dispute arose after the creditor notified the debtor that it defaulted on its loans, which were secured by the equity in the debtor's subsidiaries. This default prompted the creditor to implement the governance changes days before the debtor filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. Acting as proxy pursuant to its authority under a one-page irrevocable proxy and guarantee and collateral agreement entered into in connection with the loans, the creditor executed and delivered a consent of the stockholders (or other equityholders) of each applicable subsidiary in order to effect these changes, which included removing the subsidiaries' directors and managers.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
How Secure Is the AI System Your Law Firm Is Using? Image

In a profession where confidentiality is paramount, failing to address AI security concerns could have disastrous consequences. It is vital that law firms and those in related industries ask the right questions about AI security to protect their clients and their reputation.

COVID-19 and Lease Negotiations: Early Termination Provisions Image

During the COVID-19 pandemic, some tenants were able to negotiate termination agreements with their landlords. But even though a landlord may agree to terminate a lease to regain control of a defaulting tenant's space without costly and lengthy litigation, typically a defaulting tenant that otherwise has no contractual right to terminate its lease will be in a much weaker bargaining position with respect to the conditions for termination.

Pleading Importation: ITC Decisions Highlight Need for Adequate Evidentiary Support Image

The International Trade Commission is empowered to block the importation into the United States of products that infringe U.S. intellectual property rights, In the past, the ITC generally instituted investigations without questioning the importation allegations in the complaint, however in several recent cases, the ITC declined to institute an investigation as to certain proposed respondents due to inadequate pleading of importation.

The Power of Your Inner Circle: Turning Friends and Social Contacts Into Business Allies Image

Practical strategies to explore doing business with friends and social contacts in a way that respects relationships and maximizes opportunities.

Authentic Communications Today Increase Success for Value-Driven Clients Image

As the relationship between in-house and outside counsel continues to evolve, lawyers must continue to foster a client-first mindset, offer business-focused solutions, and embrace technology that helps deliver work faster and more efficiently.