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On January 20, 2026, the Delaware Supreme Court reversed the Court of Chancery's decision in West Palm Beach Firefighters' Pension Fund v. Moelis & Co., holding that the challenged provisions of the stockholder agreement granting CEO Ken Moelis sweeping approval rights over most company decisions were at most voidable, not void. Without reaching the merits of whether the provisions were properly implemented, the Court held that since plaintiff's claims for relief accrued in 2014, plaintiff's challenge exceeded the analogous three-year statute of limitations enumerated in 10 Del. C. § 8106 and was barred by laches.
In its February 2024 decision, the Court of Chancery held that the challenged provisions were void under Delaware General Corporation Law ("DGCL") § 141(a) because § 141(a) permitted modification of certain Board powers only through the corporate charter. The Court of Chancery maintained that if a contractual provision has the effect of limiting Board ability in making internal governance decisions, then it violates § 141(a) and is void.
Following the Court of Chancery's decision, the Delaware legislature passed Senate Bill No. 313, which amended DGCL § 122 to expand stockholder power through private contracts. The amended § 122(18) specifically provides that a corporation can enter into a governance agreement without an authorizing provision in its certificate of incorporation. Under the new law, corporations may contractually agree to restrict themselves from taking certain actions or require the approval or consent of a stockholder before taking a specified action. Additionally, the amended § 122(5) clarifies that management contracts delegating board-level authority to an officer or agent of the corporation continue to be subject to § 141(a). Other related amendments enable greater Board flexibility in the merger approval process, discuss remedies for breached merger agreements, and clarify the standard for books and records requests. Though the amendment did not apply to any civil actions or proceedings pending before August 1, 2024, thereby allowing this appeal to proceed, it nullified the effect of the Court of Chancery's 2024 decision going forward because it allowed for the contractual limitation of Board power outside of a corporate charter.
In reversing the Court of Chancery's decision, the Delaware Supreme Court held that a corporate action taken in a manner inconsistent with the DGCL is not necessarily void. Rather, if the corporation can accomplish the challenged action in any lawful manner, the action is voidable and subject to equitable defenses. The Supreme Court clarified that void acts are illegal acts beyond the corporation's authority in any capacity.
Here, the court found that the challenged provisions were merely voidable, not void, because Mr. Moelis could have accomplished what he wanted via the company's certificate of incorporation. In other words, the challenged provisions could have lawfully been implemented by a means other than a stockholder agreement. As a result, plaintiff's claim that the challenged provisions were facially invalid is subject to equitable defenses, including laches.
The court subsequently held that plaintiff's claims were barred by laches because they accrued in 2014 with the execution of the stockholder agreement. Since all elements of plaintiff's claims were present in 2014, plaintiff then had three years to file suit. Because plaintiff waited almost nine years to bring his action, the court found that his claims were time-barred by laches.
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