Section 225 of the Delaware General Corporation Law (“DGCL”) provides a mechanism through which shareholders, directors or officers of a corporation can challenge the appointment, removal or resignation of any director or officer of a corporation.

The recent decision of Martin v. Med-Dev Corp, C.A. No. 10525-VCP (Del. Ch. Oct. 27, 2015), demonstrates the importance of this provision of the DGCL.  In Martin, a director petitioned the Court to invalidate his resignation which was obtained through misrepresentation by the board.

The petitioning director, Martin, had agreed to resign with conditions, if two stockholders of his choosing were appointed to the board.  Paperwork was prepared to this effect.  However without his knowledge, the board secretly changed the terms of his resignation letter to make it unconditional, while representing to Martin that no changes had been made.

The Court found that the transaction was voidable because it was obtained through material misrepresentation.  Pursuant to Section 225, the Court ordered that the director be reinstated as the chairman of the board.

If you would like to speak to a litigator in Fox Rothschild’s Delaware office, please reach out to Sid Liebesman (302) 622-4237 or Seth Niederman (302) 622-4238.