Frantz Manufacturing Co. v. EAC Industries

501 A.2d 401 (1985)

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Frantz Manufacturing Co. v. EAC Industries

Delaware Supreme Court
501 A.2d 401 (1985)

SC

Facts

EAC Industries (EAC) (plaintiff) gained control of 51 percent of the voting shares of Frantz Manufacturing Company (Frantz) (defendant). Subsequently, the existing Frantz board of directors transferred 125,000 shares of its treasury stock to an employee stock-ownership plan (ESOP) in an attempt to dilute EAC’s interest. This vote, however, occurred four days after EAC had changed Frantz’s bylaws to require unanimous consent and added the EAC president to Frantz’s board. EAC filed suit seeking a declaratory judgment that the amendment of the Frantz bylaws was valid, and that the Frantz board’s funding of the ESOP without unanimous consent was, as a result, invalid. The Delaware Court of Chancery issued an injunction to that effect, finding that the transfer to the ESOP was not valid. Frantz appealed.

Rule of Law

Issue

Holding and Reasoning (Christie, C.J.)

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