## Facts

- Stanley Stahl owned roughly 30% of Apple Bancorp, Inc.’s common stock and sought to obtain control through a proxy contest.
- In November 1989, Stahl proposed expanding the board from 12 to 21 directors and nominated 13 candidates, which would give his slate voting control if adopted.
- On March 19, 1990, the board set April 17, 1990 as the record date for voting at the next annual meeting; under Delaware law this would have required holding the meeting by June 16, 1990.
- On March 28, 1990, Stahl announced a tender offer for the remaining shares at $38 per share, conditioned on gaining control of the board, and disclosed an intent to solicit proxies for his proposals and nominees.
- The board received financial advice that the tender offer was inadequate and that additional time was needed to evaluate alternatives.
- On April 10, 1990, the board decided to defer the annual meeting and announced it would explore extraordinary transactions, including a possible sale of the company.
- To avoid the June 16 deadline tied to the April 17 record date, the board withdrew the record date.
- On April 12, 1990, Stahl sued seeking a preliminary mandatory injunction compelling the directors to hold the annual meeting on or before June 16, 1990, alleging the deferral was inequitable entrenchment and manipulation of the stockholder franchise.
- The directors responded that the bylaws and statute permitted an annual meeting as late as September and that the deferral was undertaken to evaluate corporate alternatives in light of the tender offer.

## Issues

1. Whether the board breached fiduciary duties by withdrawing the record date and deferring the annual meeting to delay a contested election, allegedly entrenching incumbents.
2. Whether the meeting deferral constituted inequitable manipulation that materially impaired stockholders’ effective exercise of the franchise.
3. Whether the plaintiff satisfied the requirements for a preliminary mandatory injunction compelling the meeting to be held by the earlier deadline.

## Decision

- The Court of Chancery denied the motion for a preliminary mandatory injunction.
- The court held the deferral and withdrawal of the record date, on these facts, did not amount to impermissible manipulation of the corporate electoral process.
- The court concluded the board’s actions were a reasonable response to a perceived threat posed by a potentially inadequate and coercive tender offer and were consistent with fiduciary duties.
- Because the annual meeting was not canceled or indefinitely postponed and could occur within the permissible timeframe, the plaintiff failed to show a sufficient likelihood of success and equitable grounds for mandatory relief.

## Legal Principles

- Director conduct affecting the timing of a stockholder meeting is subject to close scrutiny when it materially impairs the effective exercise of the corporate franchise.
- Meeting-timing decisions are not per se inequitable; courts assess whether the action meaningfully precludes or substantially impedes stockholders’ ability to vote in a fair and effective manner.
- When board action is taken in response to a control threat, the court evaluates whether the board reasonably perceived a threat and whether its response was proportional and in good faith.
- Heightened justification associated with direct interference with voting rights is generally not triggered when stockholders retain a meaningful opportunity to vote within the legally permitted period.
- A preliminary mandatory injunction requires a strong showing, including a likelihood of success on the merits and equitable circumstances warranting extraordinary relief.

## Conclusion

The court declined to compel an earlier annual meeting, holding that withdrawing the record date and deferring the meeting during a control contest was permissible where stockholders’ voting rights were not materially impaired and the board acted reasonably to investigate alternatives to an allegedly inadequate tender offer.


Stahl v. Apple Bancorp, Inc., 579 A.2d 1115 (Del. Ch. 1990)