Delaware Supreme Court Affirms Dismissal Of As-Applied Equitable Challenges To Advance Notice Bylaws As Unripe

On April 29, 2026, the Delaware Supreme Court, sitting en banc, affirmed a pair of decisions by the Delaware Court of Chancery dismissing stockholder complaints seeking to assert as-applied equitable challenges to the adoption of advance notice bylaws.  In re The AES Corporation and Owens Corning, Cons. No. 218, 2025, No. 257, 2025 (Del.).  The Court held that plaintiffs’ challenges to the bylaws were not ripe for adjudication because the stockholders did not allege that they intended to nominate anyone to the boards and did not identify anyone else allegedly deterred by the provisions.

Plaintiffs filed separate actions against the boards of two corporations alleging that their respective directors breached their fiduciary duties by adopting allegedly “defensive” advance notice bylaw provisions that served to entrench the incumbent directors against potential stockholder nominees.  In each action, the stockholder plaintiff expressly disclaimed any challenge to the facial validity of the bylaw and sought instead to pursue only an as-applied, equitable challenge to the board’s adoption of the bylaw.  The Court of Chancery dismissed both actions, holding that plaintiffs’ challenges were “hypothetical” because they failed to allege that they had been deterred from nominating candidates to the boards.

On appeal, the Supreme Court affirmed, explaining that the controversy presented by the stockholder plaintiffs “remains abstract” because neither plaintiff “alleges that he intends to run a proxy contest or identifies a stockholder who is presently chilled from doing so.”  As a result, the Court held, any ruling on whether the bylaws operate inequitably on the current record would amount to an improper advisory opinion.  The Court cautioned, however, that it was not establishing a bright-line rule and noted that “[w]e do not hold that an equitable challenge to the adoption of advance notice bylaws can never be ripe absent a rejected nomination.”  The Court also noted that its holding did not leave stockholders powerless because of other available avenues to challenge allegedly “aggressive bylaws regimes,” including voting against directors and proposing bylaw amendments.