Gorman v. Salamone, C.A. No. 10183-VCN (Del. Ch. July 31, 2015): Bylaw Permitting Stockholders to Remove and Replace Officers Held Invalid

In Gorman v. Salamone, the Delaware Court of Chancery held that bylaw amendment that purported enacted by Westech Capital Corp.'s majority stockholder granting stockholders the authority to remove corporate officers over the objection of the corporation's board of directors was invalid under Delaware law. The Court found that such a bylaw provision would allow stockholders to "make substantive business decisions" for the corporation which "unduly interfere(s) with directors' management prerogatives" under Section 141(a) of the DGCL.

Following prolonged litigation relating to certain voting agreement's, Westech's majority stockholder acted by written consent to amend the bylaws of the company to provide that: "[a]ny officer may be removed, with or without cause, at any time by the Board or by the stockholders acting at an annual or special meeting or acting by written consent pursuant to Section 2.8 of these Bylaws. The Board shall, if necessary, immediately implement any such removal of an officer by the stockholders." Relying on the amended bylaw, the majority stockholder then removed the Company's chief executive officer and elected himself to fill the position.