Delaware Supreme Court: Directors May Resign by Oral Statement


Last month, in Biolase, Inc. v. Oracle Partners, L.P. (Del. June 12, 2014), the Delaware Supreme court affirmed the oral resignation of a director while on a board call.

Bottom line: DGCL Section 141(b) is permissive (not mandatory): “Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation.” Delaware courts have consistently held that the word “may” in this statute is permissive and does not mean “may only.”

Interesting tidbits:

1. Bylaws: the company’s bylaws include a resignation provision similar to the statute and the same analysis applies to the bylaws, i.e., that the reference to “may” is permissive.

2. Silence doesn’t count (although this matter was not subject to appeal): another director, who also intended to resign while on the board call, and later confirmed this in an email, did not speak up during the board call and therefore did not resign while on the board call.

3. Vacancy: because two directors were expected to resign on the board call, two new directors were also appointed. Since one of the original two directors did not actually resign on the call (see 2), there was only one vacancy that could have been filled on the board call. The Supreme Court deferred to the Chancery Court’s factual determination to appoint one director based on the order that the names of the new directors appeared in the minutes.


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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