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Issue # 2

"If the board had not been motivated to add the new positions because of the impending motion to take control of the board and had acted independently of the consent solicitation, which merely had an incidental impact upon the possible effectuation of any action authorized by the shareholders, it is very unlikely that such action would be subject to judicial nullification."

"When a board of directors acts to prevent shareholders from creating a majority of new board positions and filing them it does not involve the exercise of the corporation’s power over its property, or with respect to its rights or obligations; rather, it involves allocation, between shareholders as a class and the board, of effective power with respect to governance of the corporation"

- Page 330

"Whether, in these circumstances, the board, even if it is acting with subjective good faith may validly act for the principal purpose of preventing the shareholders from electing a majority of new directors."

- Page 329

Issue #1

"Whether a board acts consistently with its fiduciary duty when it acts, in good faith and with appropriate care, for the primary purpose of preventing or impeding an unaffiliated majority of stockholders from expanding the board and electing a new majority."

- Page 326

Holding

Violates board's duty of loyalty to shareholders.

"Even though the board of Atlas Corp. acted on their view of the corporation’s interest and not selfishly, their December 31 action constituted an offense to the relationship between corporate directors and shareholders that has traditionally been protected in courts of equity."

- Page 326

Target Board's Duties

Atlas Corp. - Mining company

Blasius Industries, Inc. - Largest shareholder of Atlas Corp. with 9.1% of Atlas' outstanding stock.

Timeline of Events

Lasting Impact

  • The Business Judgment Rule does not apply to cases where a board of directors seeks to interfere with shareholder voting rights.
  • A per se rule preventing boards from interfering with shareholder votes would be too broad.

Oct. 29, 1987 - Blasius files Schedule 13D disclosing ownership in Atlas and future intentions for Atlas' management.

Dec. 30, 1987 - Consent from Blasius delivered to Atlas.

Dec. 31, 1987 - Telephone meeting of

Atlas board that adds to new members.

Blasius Industries, Inc. v. Atlas Corp.

564 A.2d 651 (Del.Ch. 1988)

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