In asserting an action under Section 225 of the Delaware General Corporation Law (the “DGCL”) to determine the proper board composition of a Delaware corporation or its officers, a question may arise as to who has standing to bring such a claim.  The standing of a Section 225 action is determined by the statute itself.

Pursuant to 8 Del. C. Section 225(a), “any stockholder or director, or any officer whose title to office is contested” has standing to bring such action to “determine the validity of any election, appointment, removal or resignation of any director or officer of any corporation, and the right of any person to hold or continue to hold such office”.

Notably, any stockholder of a Delaware corporation, no matter how small his or her shares in the company are, has standing to assert such a claim.  In addition, any director of a Delaware corporation, regardless of whether his or her position is disputed, also possesses standing to assert such claims.  To the contrary, only officers “whose title to office is contested” possesses the requisite standing to bring a Section 225 action.

The corporation itself only has standing to assert an action under Section 225(b) or (c).  Under Section 225(b), a corporation (or any stockholder) may petition the Court of Chancery to “hear and determine the result of any vote of stockholders upon matters other than the election of directors or officers.”

Finally, under Section 225(c), a corporation, or a stockholder derivatively on behalf of a corporation, may petition the Court to remove a director, “[i]f 1 or more directors has been convicted of a felony in connection with the duties of such director or directors to the corporation, or if there has been a prior judgment on the merits by a court of competent jurisdiction that 1 or more directors has committed a breach of the duty of loyalty in connection with the duties of such director or directors to that corporation”.  The Court may remove such director if he or she is found to not act in good faith and judicial removal is necessary to avoid irreparable harm.

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.