Adrienne Ward Quoted in Bloomberg Law on How Activists Are Confronting Onerous Advance-Notice Bylaws

Olshan litigation partner Adrienne Ward was quoted in a Bloomberg Law article (subscription required) on how some boards of directors have amended advance-notice bylaws to keep activist nominees off shareholder ballots. “The bylaws are a form of contract,” Adrienne explained. “If a contract provision is illegal, generally the approach is to strike that particular provision unless it materially taints the entire contract. That’s what you see playing out, where the vice chancellors are asked to strike this entire set of bylaws. So far they’re saying, ‘No, I’m only going to strike the ones that I’m finding problematic.’” Adrienne cautioned that the series of cases brought since 2019 challenging such bylaws’ disclosure requirements underscores activists’ perils in trying to avoid the “trap” laid by board members who may be seeking a pretext for rejecting a nomination. It is prudent for activists to file notices early, Adrienne said, along with any challenges to the specific questions being asked. Furthermore, she pointed out that the changes to universal proxy card rules are only indirectly the reason for onerous advance-notice bylaws: “None of the bylaw changes were necessitated by the universal proxy rules, but that’s used as an excuse. Then the companies can sort of say, ‘We did all these changes on a clear day. We weren’t being presented with an activist at the time. We weren’t doing this to try to disenfranchise anyone. We’re just trying to have state-of-the-art bylaws.’” Adrienne concluded that past lawsuits filed by activists have largely concerned the way boards are using the bylaws rather than their overall validity, however, challenges brought by ordinary shareholders may force judges to stop taking the issue case-by-case and instead develop a unified doctrinal approach. “I think that’s in the future, but it’s coming up pretty soon,” she said.