## Facts

- Examen, Inc. was a Delaware corporation headquartered in California.
- VantagePoint Venture Partners 1996, a Delaware limited partnership, held Series A preferred stock in Examen, representing about 83% of Examen’s preferred shares and no common stock.
- Examen’s board approved a merger with a Delaware subsidiary of Reed Elsevier Inc.
- Under Delaware merger law, the merger vote would be taken by the stockholders entitled to vote, generally voting together as a single class unless governing documents required a class vote.
- Examen’s Series A Certificate of Designations did not grant the preferred stock a separate class vote on the proposed merger.
- VantagePoint argued that California’s “quasi-foreign corporation” statute (Cal. Corp. Code § 2115) applied because of Examen’s California contacts and would require a separate preferred-class vote, enabling VantagePoint to block the merger.
- Examen filed a Delaware Court of Chancery action seeking a declaration that VantagePoint had no class vote right; the Chancery Court granted judgment on the pleadings for Examen based on the internal affairs doctrine.
- VantagePoint filed a parallel California action invoking § 2115; the California court stayed that case pending resolution in Delaware.
- VantagePoint took an expedited appeal to the Delaware Supreme Court.

## Issues

1. Whether stockholder voting rights for a merger between two Delaware corporations are governed by Delaware law under the internal affairs doctrine, notwithstanding the corporation’s substantial contacts with California.
2. Whether California Corporations Code § 2115 may be applied to alter the internal voting rights of a Delaware corporation.
3. Whether the Series A preferred stock was entitled to a separate class vote on the merger under applicable law and Examen’s governing instruments.

## Decision

- The Delaware Supreme Court affirmed the judgment on the pleadings for Examen.
- The court held that the internal affairs doctrine required applying Delaware law to determine voting rights in the merger of two Delaware entities.
- The court refused to apply California § 2115 to override Delaware law on internal governance matters of a Delaware corporation.
- Applying Delaware law and Examen’s Certificate of Designations, the court held that VantagePoint had no right to a separate class vote of the Series A preferred stock on the merger.

## Legal Principles

- The internal affairs doctrine is a choice-of-law rule under which only the state of incorporation governs matters central to corporate governance, including allocation of voting power among stockholders.
- The doctrine is supported by constitutional considerations (including due process, full faith and credit, and commerce concerns) that favor a single, predictable source of law for corporate internal affairs.
- Stockholder voting requirements for a merger of Delaware corporations are determined by the DGCL and the corporation’s charter-level instruments; absent a charter-based class vote right, shares typically vote together on the merger.
- A foreign state’s statute purporting to displace Delaware law on a Delaware corporation’s internal affairs will not be applied by Delaware courts to alter Delaware-governed voting rights.

## Conclusion

The Delaware Supreme Court held that Delaware law exclusively controlled the merger voting rights of a Delaware corporation and that California’s quasi-foreign corporation statute could not confer a separate preferred-class vote; VantagePoint therefore lacked a class veto over the merger.


VantagePoint Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108 (Del. 2005)