Court of Chancery Appoints Receiver to Conduct Annual Meeting
Rich v. Fuqi International, Inc., C.A. No. 5653-VCG (Del. Ch. June 12, 2013).
Issue Addressed: Should a receiver be appointed to enforce an order to hold an annual shareholders’ meeting pursuant to DGCL section 211? Answer: Yes.
Brief Background: The Court of Chancery previously ordered this company to hold a shareholders’ meeting pursuant to DGCL section 211 but the company did not comply. Some of the prior decisions involving this company were highlighted on these pages here. The court reasoned that the appointment of a receiver to conduct the meeting was less of a burden on shareholders than the imposition of monetary penalties. Despite prior decisions in this and other cases that rejected as a defense the alleged inability to produce audited financial statements as required by SEC regulations, the company sought unsuccessfully to obtain an injunction in federal court to avoid compliance with the Court of Chancery’s prior order to hold the annual meeting.
This case is one of an increasing number of similar matters that I refer to as the “China series” of Chancery opinions involving Delaware corporations whose operations are based in China, and who appear to struggle with adherence to the formalities and standards that the Delaware General Corporation Law requires.