Most major corporations incorporate in Delaware. Now the Delaware Supreme Court has given them another reason to do so. Now, a company can adopt, without shareholder approval, bylaws requiring investors who file lawsuits against it to pay the company’s legal fees if the suit is unsuccessful. Many legal experts say that this fee-shifting will result in fewer shareholder actions and less accountability.
Although the Court ruled in May, already more than two dozen companies have added fee-shifting language to their governing documents. Some have adopted new bylaws requiring that shareholders pay legal costs; others have simply disclosed the fee-shifting requirement in initial public offering statements.
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