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A Demanding Right of Way: An Analysis of the Intersection of Stockholder Corporate Governance and Bankruptcy

Norton Annual Survey of Bankruptcy Law
November 2020, R. Stephen McNeill and Joseph D. Farris III

“A shareholder without a shareholder's rights is at best an anomaly, and at worst a shadowy figure in corporate limbo who would be voiceless in the conduct of the business of which he is part owner and largely defenseless against neglect or overreaching by management.”

Corporate governance issues remain at the heart of discussions and debate across many business, legal, financial, and governmental organizations, nationally and abroad, as evidenced by the multiplicity of Internet blogs, scholarly articles, lawsuits, upticks or downturns in financial markets tied to changes in a board of director’s composition, and the like. This is also true as it relates to bankruptcy proceedings, particularly where the interests of stockholders collide and conflict with those of creditors and the debtors themselves. This article examines the intersection of corporate governance under Delaware law, and in particular the right to demand a stockholder meeting, with the rights and powers provided to debtors under the Bankruptcy Code; and proposes a four-part test for courts to use in considering stockholders’ request for a stockholders’ meeting of a bankruptcy corporation.

For the full article or for more information on the Norton Annual Survey of Bankruptcy Law, Volume 2020, visit Thomson Reuters.