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Corporate Charters - Who Are Parties?


Corporate Charters - Who Are Parties?
Tuesday, February 23, 2021
Last summer, I considered the question of whether bylaws constitute a contract under California law.  
While a corporate charter operates in some respects as part of a contractual arrangement among the stockholders and the corporation and its board, the entity and its directors are not contractually bound to one another by the charter they are not counter-parties and the legal compulsion for directors to comply with the charter arises as part of their fiduciary duties, and not in contract.
Lacey v. Mota-Velasco, C.A. No. 2019-0312-SG (Del. Ch. Feb. 11, 2021).  This case involved a derivative claim by stockholders that was based on the theory that directors of a corporation could be liable to the corporation for breach of contract as a result of the corporation s failure to abide by its charter.  Vice Chancellor acknowledged that it is useful to consider  ....

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