Delaware Law and the Right of Shareholders to Call Special Meetings

The Allergan/Valeant/Pershing contest currently centers around an effort by Pershing to call a special meeting.  Allergan is a Delaware corporation and has a bylaw that permits shareholders to call a special meeting "upon the written request of the holders of record of at least twenty-five percent (25%) of the outstanding shares of common stock of the Corporation".  Bylaws, Article II, Section 3.

Delaware law provides that a special meeting "may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws."  See DGCL § 211(d).  In other words, the board, but not shareholders, have the right to call a special meeting.  The MBCA takes a different approach.  Shareholders with at least 10% of the outstanding voting shares may call a special meeting, although the percentage may be raised to as high as 25% in the articles.  See MBCA § 7.02; but seeMd. C. § 2-502(b)(1) (setting the presumptive percentage for calling a shareholder meeting at 25%).  

Consistent with this approach, Allergan, as a Delaware corporation, initially did not provide shareholders with the right to call a special meeting.  The Activist Investor Blog has an interesting history of how this changed.  Apparently Allergan only changed its policy and put in place a bylaw that allowed shareholders to call special meetings after John Chevedden submitted a shareholder proposal seeking the authority that passed with 55% of the vote.  

Interestingly, however, Allergan, before it implemented the special meeting bylaw, was not unusual in denying shareholders this authority.  According to one law firm's analysis, more than half of the Delaware corporations in the S&P 500 do not have bylaws that permit shareholders to call special meetings. 


Ownership Threshold for Calling Meeting

Number of Companies

No special meeting right


50% or more













Once Allergan put in place the bylaw that gave shareholders the authority to call a special meeting, it selected the most common percentage, 25%. In most cases, 25% represents an impossible standard. With most public companies having dispersed ownership, obtaining consent from a quarter of the shareholder population is extraordinarily difficult.  In this case, Pershing may succeed because it owns almost 10% of the outstanding shares.  In theory, agreement of the five largest institutions holding shares in Allergan would be enough. 

Nonetheless, the current battle highlights the need for greater shareholder activity with respect to special meetings.  The special meeting strategy at Allergan is only possible because of the earlier efforts of John Chevedden.  Yet the approach is not common.  In 2014, only six proposals seeking the right of shareholders to call special meetings were submitted (although another seven were submitted that sought to lower the percentage of shares needed to call a meeting).  See Sullivan & Cromwell 2014 Recap, at 11. Four of the proposals passed while they collectively averaged 48% of the shares cast. 

J Robert Brown Jr.