Delaware Business Litigation Report

Court of Chancery Upholds Special Committee Action

Perelegos v. Atmel Corporation, C.A. No. 2320-N (February 8, 2007) The actions of special committees of  a board are often questioned, but this decision strongly affirmed the power of a properly organized and functioning  special committee. Indeed, given that the committee here removed the corporation's founder as its CEO, there can be few corporate actions more important than the act upheld here. There are still limits on that power, however, as the Court of Chancery also held that the board could not cancel the special stockholders' meeting called by the fired chairman to review the acts of the Special Committee. This reflects the strong Delaware respect for the rights of stockholders to vote on who should be on the board. This decision also resolved several other issues that should be noted. First, it upheld use of email to give notice of a board meeting. Sceond, it uphled notice to a board member's agent, pursuant to a bylaw that aiuthorized that form of notice. Third, the decision carefully interprets what would constitute the "material" conflict that is sufficient to disqualify a member of a special committee from acting. This is important because that issue has seldom been addressed in Delaware, although there are many cases that do address board member conflicts in other contexts. Here, the Court held that a special committee member who is chosen to fill the officer position that the committee has just voted to open by firing the incumbent is not thereby disqualified from the vote to fire. The facts here are critical to this result. One can easily imagine a different result when the committee member was promised the job before the vote to remove the officer involved. Share