## Facts

- Emtrol Corporation was formed by Nicholas Giuricich and Bodo Kalen (technical expertise) and Continental Boilerworks, Inc. (capital).
- At formation, Continental received 80% of Emtrol’s shares; plaintiffs received 20% plus options to acquire additional shares upon profitability.
- Continental controlled Emtrol’s board structure, holding three of five original director seats; no agreement addressed board restructuring if plaintiffs’ ownership increased.
- After Emtrol became profitable, plaintiffs exercised their options and, together, acquired 50% of the stock; Continental held the remaining 50%.
- Plaintiffs demanded board restructuring to reflect equal ownership, but the existing board refused.
- Continental-affiliated directors later expanded the board from five to seven and filled the new seats with Continental-aligned individuals, creating a 5–2 majority.
- Plaintiffs called a shareholders’ meeting to elect directors; because ownership was split 50–50, stockholders failed to elect successors to directors whose terms had expired, creating a shareholder deadlock.

## Issues

1. Whether, under 8 Del. C. § 226(a)(1), the Court of Chancery may deny appointment of a custodian despite an existing shareholder deadlock that prevents election of successor directors, based on lack of irreparable injury or comparable equitable harm.
2. Whether § 226(a)(1) includes any non-statutory prerequisite—such as proof of irreparable injury—beyond the statutory condition of stockholder division resulting in failure to elect successor directors.

## Decision

- The Delaware Supreme Court reversed the Court of Chancery.
- The Court held that § 226(a)(1) does not require a showing of irreparable injury or other equitable harm once the statutory condition (failed election due to divided stockholders) is established.
- The case was remanded with directions to appoint a custodian pursuant to § 226(a)(1).

## Legal Principles

- Statutory interpretation begins with the statute’s plain language; courts may not add requirements the legislature omitted.
- Under 8 Del. C. § 226(a)(1), when stockholders are so divided at a meeting for election of directors that they fail to elect successors to directors whose terms have expired (or would expire upon qualification of successors), the Court of Chancery may appoint a custodian without proof of irreparable injury.
- The inclusion of an “irreparable injury” condition in § 226(a)(2) (director deadlock) and its absence in § 226(a)(1) reflects a deliberate legislative choice.
- The stockholder vote for directors is central to corporate governance; a deadlock that permits indefinite incumbent control frustrates the shareholder franchise and supports use of the statutory custodianship remedy.

## Conclusion

Because an undisputed 50–50 stockholder division prevented the election of successor directors, § 226(a)(1) authorized appointment of a custodian without any additional showing of irreparable injury, and the denial of relief based on an extra-statutory harm requirement was legal error.


Giuricich v. Emtrol Corp., 449 A.2d 232 (Del. 1982)