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Centaur Partners, IV v. National Intergroup, Inc.

Delaware Supreme Court
582 A.2d 923 (1990)


Centaur Partners, IV (Centaur) (plaintiff) held 16 percent of the shares of stock in National Intergroup, Inc. (National) (defendant). At its May 17, 1984 annual stockholder meeting, National amended Article Eighth of its articles of incorporation and Section 16 of its bylaws. The amended Article Eighth provided the following: the number of directors shall be set as provided in the bylaws, the number of directors shall not be less than three, the board shall be divided into three classes, and a vote of 80 percent of the shares of National shall be required to amend Article Eighth or any similar provision. The amended Section 16 of the bylaws provided the following: the size of the board of directors shall be set by the board, it shall not be less than three, the board shall be classified, and an 80 percent vote of the shareholders shall be required to amend or repeal this or any similar provisions. The proxy statements created for the meeting indicate that the purpose of these amendments was to prevent unfriendly takeovers of the corporation. In 1990, Centaur wished to increase the size of the board from nine to 15 members, and it proposed an amendment to Section 16 making that change and preventing the board of directors from further amending the bylaws regarding the size of the board. It filed a declaratory judgment action against National, seeking a ruling that a simple majority vote of the shareholders was sufficient to increase the size of the board. Centaur argued that the phrase “or any similar provision” in Article Eighth was ambiguous and therefore the principle of majority voting must control. The trial court ruled against Centaur, holding that the phrase was unambiguous and effectively created a supermajority requirement.

Rule of Law


Holding and Reasoning (Walsh, J.)

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