The Delaware Court of Chancery refuses to enjoin Sotheby’s annual meeting and allows Sotheby’s “poison pill” to protect against an activist’s proxy contest.

Implications for our Clients -

In a thirty year-long series of decisions beginning with Moran v. Household International, Inc., 500 A.2d 1346 (Del. 1985), the Delaware courts have affirmed the value of shareholder rights plans to boards seeking to protect and maximize shareholder value. While the ruling in Third Point is on a preliminary basis, the decision demonstrates that independent directors acting in good faith and on an informed basis with the advice of outside advisors should be afforded substantial latitude to adopt and maintain rights plans with features responsive to the threats to corporations posed by activist hedge funds.