## Facts

- Hyman Katz, a Plant Industries, Inc. stockholder, sued the corporation and its directors, including CEO Robert B. Bregman.
- Plant, a Delaware corporation, undertook a restructuring that included selling several unprofitable U.S. subsidiaries in 1980.
- Plant then agreed to sell its Canadian subsidiary, Plant National (Quebec) Ltd., to Vulcan Industrial Packaging, Ltd.
- The Canadian subsidiary comprised Plant’s entire Canadian business and had been its only income-producing facility for the prior four years.
- The Canadian operations accounted for approximately 51% of Plant’s total assets, about 45% of net sales, and roughly 35–52% of pre-tax income in recent years.
- Katz asserted another bidder had offered a higher price, but the board treated itself as committed to the Vulcan agreement.
- Plant stated the sale would raise cash to improve the balance sheet and facilitate a shift from steel drums to plastic drums.
- Katz sought a preliminary injunction to prevent closing absent a stockholder vote.

## Issues

1. Whether the proposed sale of Plant’s Canadian operations constituted a sale of “all or substantially all” corporate assets requiring stockholder approval under 8 Del. C. § 271.
2. Whether a stockholder could seek injunctive relief to enforce the statutory voting right, notwithstanding challenges to the stockholder’s suitability to sue derivatively or on behalf of a class.

## Decision

- The Court of Chancery granted a preliminary injunction.
- The court held the Canadian-operations sale would constitute a sale of “substantially all” of Plant’s assets within the meaning of 8 Del. C. § 271.
- The court ordered that the transaction could not be consummated unless and until approved by a majority of Plant’s outstanding voting stock at a properly noticed meeting.
- The court confined its ruling to the statutory voting-rights question and did not decide price adequacy or fiduciary-duty claims.
- The court treated the claim as enforceable by Katz in his capacity as a stockholder asserting a personal statutory right.

## Legal Principles

- Under 8 Del. C. § 271, a Delaware corporation may sell “all or substantially all” of its assets only with authorization by a majority vote of the outstanding shares entitled to vote.
- Whether assets are “substantially all” is assessed using both:
  - a quantitative inquiry (relative share of assets, revenues, and earnings), and
  - a qualitative inquiry (whether the transaction is unusual and substantially affects the corporation’s existence and purpose).
- A divestiture that removes the corporation’s principal income-producing, core operating business and effects a major shift in business direction is likely to fall within § 271 even if the corporation retains other assets.
- Injunctive relief is available to protect the statutory stockholder voting right where a transaction is structured to close without the required approval.

## Conclusion

The court enjoined the sale because transferring Plant’s principal, profitable Canadian operations would materially change the company and amounted to a “substantially all assets” transaction under § 271, triggering a mandatory stockholder vote before closing.


Katz v. Bregman, 431 A.2d 1274 (Del. Ch. 1981)