UCLA Professor Stephen Bainbridge asked the following question concerning advance notice bylaw provisions in "The Professor is Stumped: Today's Corporate Law Question":
When an incumbent board of directors claims that a potential proxy insurgent has failed to comply with an advance notice bylaw, who decides whether the bylaw has been satisfied? The board (subject to judicial review and, if so, under what standard) or does the court make an independent determination?
In many cases, I suspect that the answer can by found in the bylaws. Below is an example that I found in the bylaws of a publicly traded, Delaware corporation that is headquartered in California:
Except as otherwise required by law, only such persons who are nominated in accordance with the procedures set forth in Section 6(a)(i) above shall be eligible to be elected at any meeting of stockholders of the Corporation to serve as Directors and only such other business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in Section 6(a)(i) above. Except as otherwise required by law, each of the Board or the chairman of the meeting shall have the power to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in Section 6(a)(ii) above. If any proposed nomination or other business is not in compliance, then, except as otherwise required by law, the chairman of the meeting shall have the power to declare that such nomination shall be disregarded or that such other business shall not be transacted. Notwithstanding the foregoing provisions of this Section 6, unless otherwise required by law or otherwise determined by the chairman of the meeting or the Board, if the stockholder does not provide the information required under clauses (a)(ii)(C)(2) and (a)(ii)(D)(1)-(3) of this Section 6 to the Corporation within the time frames specified herein, or if the stockholder (or a Qualified Representative of the stockholder (as defined below)) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or other business, such nomination shall be disregarded and such other business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 6 and Article IV, Section 7(n) of these By-Laws, to be considered a “Qualified Representative” of a stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or authorized by a writing executed by such stockholder (or a reliable reproduction or electronic transmission of the writing) delivered to the Corporation prior to the making of such nomination or proposal at such meeting by such stockholder stating that such person is authorized to act for such stockholder as proxy at the meeting of stockholders.
The above bylaws grant either the board or the chairman of the meeting to make the determination. Although these bylaws don't define "chairman of the meeting", they provide that that the chairman of the board presides at meetings of the stockholders.
Professor Bainbridge also raises the question of what standard of review would be applied, suggesting that he agrees that that business judgment rule applies. That will, perhaps, be the topic for a future blog post.