Document: Gentili v. L.O.M. Med. Int’l., Inc., C.A. No. 7600-VCG (Del. Ch. Aug. 17, 2012)

The Delaware Court of Chancery concluded that stockholder consents purporting to ratify the election of directors at an aborted annual meeting of stockholders of L.O.M. Medical International Inc. (“L.O.M.”) were ineffective to elect certain of the defendants as directors of L.O.M (the “Challenged Directors”). On April 17, 2012, L.O.M. attempted to hold an annual meeting of stockholders; however, L.O.M.’s president adjourned the meeting before any action was taken on the election of directors. Subsequently, one of the Challenged Directors purported to preside over a resumed meeting at which the Challenged Directors were allegedly elected directors of L.O.M. Written consents of stockholders holding approximately fifty-three percent (53%) of L.O.M.’s outstanding voting power were later delivered to L.O.M which purported to ratify the election of the Challenged Directors at the resumed meeting. Plaintiffs brought this Section 225 action to confirm that L.O.M’s annual meeting had been validly adjourned and not lawfully reconvened prior to a vote on the election of directors.

Defendants moved to dismiss plaintiffs’ complaint. The Court found that it could only grant defendants’ motion if the stockholder consents ratified an action of the L.O.M. board that, in turn, disposed of the plaintiffs’ contention that the votes were not validly taken at the annual meeting. According to the Court, the stockholder consents were ineffective to accomplish anything. In effect, there was no board action to ratify, and the consents could not themselves be considered “votes” for the election of directors. Under Section 211(b) of the DGCL, stockholders may only elect directors by written consent in lieu of an annual meeting if the consent is unanimous or if all of the corporation’s directorships are vacant and filled by such action. Because the consent at issue in Gentili v. L.O.M. Med. Int’l., Inc. was not unanimous, and all of the directorships to which directors could have been elected at the April 17, 2012 meeting were not vacant, the consent was ineffective to elect directors.