## Facts

- Health Med Corporation was a Delaware corporation whose principal asset was a 42% block of stock in Health-Chem Corporation, a publicly traded Delaware corporation.
- Marvin M. Speiser and Leon C. Baker each owned 50% of Health Med’s common stock; Speiser served as president; Speiser and Baker were the corporation’s only directors.
- A circular ownership structure existed: Health Med owned a large stake in Chem; Chem owned a subsidiary, Medallion Group, Inc.; Medallion held 95% of Health Med’s equity as convertible preferred stock (with limited voting power before conversion but potentially 95% voting power upon conversion).
- No annual meeting of Health Med stockholders had been held for several years.
- Speiser sought a court order compelling Health Med to hold an annual stockholder meeting under DGCL § 211(c).
- Baker asserted equitable defenses to the meeting demand and counterclaimed for declaratory relief that, under DGCL § 160(c), Health Med should be prohibited from voting its Chem shares due to the circular ownership arrangement and its alleged effect on Chem’s public stockholders.

## Issues

1. Whether equitable defenses (including unclean hands and estoppel) could defeat a stockholder’s statutory right to an order compelling an annual meeting under DGCL § 211(c) when the corporation admitted it had not held annual meetings for years.
2. Whether allegations of circular ownership and control stated a justiciable claim for declaratory relief under DGCL § 160(c) that could bar Health Med from voting its shares of Chem.

## Decision

- The court granted Speiser judgment on the pleadings on the DGCL § 211(c) claim and ordered that Health Med convene an annual meeting of stockholders.
- The court denied Speiser’s motion to dismiss Baker’s DGCL § 160(c) counterclaim, holding the pleadings raised a legitimate statutory question that warranted further litigation.
- The court did not decide the merits of the DGCL § 160(c) claim; it held only that dismissal at the pleading stage was not appropriate.

## Legal Principles

- DGCL § 211(c) provides a strong, enforceable stockholder right to compel an annual meeting when the corporation has failed to hold one as required.
- Equitable defenses will not bar DGCL § 211(c) relief absent pleaded facts sufficient, as a matter of law, to overcome the statutory entitlement to a meeting.
- DGCL § 160(c) restricts voting of a corporation’s own stock held directly or indirectly through controlled entities, reflecting a policy against indirect self-voting and vote manipulation.
- In assessing a DGCL § 160(c) challenge to circular ownership arrangements, the court may consider statutory purpose and alleged practical effects on stockholder voting, including whether the structure could suppress public stockholder voting power and entrench control.

## Conclusion

The Court of Chancery enforced Health Med stockholders’ statutory right to an annual meeting under DGCL § 211(c) despite asserted equitable defenses, while permitting a DGCL § 160(c) declaratory challenge to proceed based on allegations that a circular ownership structure could improperly enable indirect self-voting and impair public stockholder franchise.


Speiser v. Baker, 525 A.2d 1001 (Del. Ch. 1987)