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New Hostility For An Old Delaware Antitakeover Law

Publication Date: 
September 24, 2009
The Wall Street Journal - Deal Journal
Peter Lattman

Professor Joe Grundfest, an expert in corporate law, is quoted in this article on the constitutionality of Delaware's antitakeover statute:

A pickup in hostile deals and a weakening of the poison pill have brought into focus an overlooked Delaware law that has thwarted takeover attempts–but might be unconstitutional, according to a new study by a Harvard University professor.

Delaware’s M&A bar and judiciary are abuzz over a yet-unpublished 63-page paper by Guhan Subramanian, a professor at Harvard’s law and business schools, that raises questions about constitutionality of Delaware’s antitakeover statute–Section 203 of the state’s corporate code. Covering more than half of all U.S. corporations, it is the most important antitakeover law in the country.


Joe Grundfest, a professor at Stanford Law School and a leading commentator on corporate governance, finds the results of Subramanian’s study compelling. Twenty years ago as an SEC commissioner, Grundfest aggressively lobbied against the statute, arguing that it would unfairly harm shareholders of corporate targets.

“I thought the statute was a bad idea when it was first proposed, and experience has unfortunately confirmed my fears,” Grundfest said. “Lawyers now have the data they need to renew a constitutional battle over these sorts of state takeover laws.”