On July 2, 2015, the Delaware Supreme Court ruled in Hill International, Inc. v. Opportunity Partners L.P. that a provision in a corporation's advance-notice by-law requiring disclosure of the date of the following year's meeting was not satisfied with disclosure that the meeting would take place "on or about" a given date ( (Del. Jul. 2, 2015)). The decision illustrates that by-laws are interpreted strictly according to ordinary rules of contract interpretation.

The case arises from a proxy contest at Hill International, Inc., a large construction-management firm. The stockholder attempting to nominate directors to Hill's board was Opportunity Partners L.P., an Ohio limited partnership and affiliate of Bulldog Investors, LLC. Bulldog is an investment advisor that beneficially owns approximately 5.5% of Hill's common stock. Through Opportunity Partners, Bulldog sought to nominate two directors to Hill's board at Hill's 2015 annual meeting.

Hill's by-laws contain provisions for stockholders to provide advance notice to the company before nominating directors or bringing up other business at the company's annual meeting. The nomination by-law states the following in relevant part:

The nomination by-law (and stockholder-proposals by-law, which contains nearly identical language) thus provides for two possible timelines for advance notice if a stockholder wishes to nominate directors to the board:

On April 30, 2014, Hill publicly disclosed in its 2014 proxy statement filed that it "anticipate[d]" holding its 2015 annual meeting "on or about June 10, 2015." The proxy statement added that stockholders who wished to submit a proposal for that meeting would have to submit their proposal between March 15, 2015 and April 15, 2015. This statement was based on an assumption that Hill's disclosure qualified as "prior public disclosure of the date of the meeting" under its by-laws, and that the 30-day-window timeline was therefore operative for stockholder submissions. (The calculation of March 15–April 15 was in fact incorrect for these purposes; the correct period would have been March 12–April 11. This error was inconsequential to the decision.)

Nearly a year later, on April 13, 2015, Opportunity Partners delivered a letter to Hill in which it gave notice of its intent to present two proposals for consideration and submit two nominees for election to the board at Hill's 2015 annual meeting. (Regardless of whether this letter would have satisfied Hill's advance-notice by-laws, it was later superseded by an ensuing letter from Opportunity Partners.)

On April 30, 2015, Hill filed its 2015 definitive proxy statement and announced that the 2015 annual meeting would be held on Tuesday, June 9, 2015. This was the first time that Hill disclosed an exact date for the 2015 meeting.

On May 7, 2015—seven days after the April 30 disclosure of the exact date of the annual meeting and 33 days before the date of the meeting—Opportunity Partners delivered another letter to Hill in which it gave notice of its intent to present at the meeting two new proposals and the same two director nominees for election to Hill's board. Four days later, Hill notified Opportunity Partners that the May 7 letter was untimely under Hill's by-laws. Opportunity Partners filed suit in the Court of Chancery seeking an injunction.

On June 5, 2015, the Court of Chancery enjoined Hill from conducting any business at its June 9 annual meeting, other than to convene the meeting for the sole purpose of adjourning it and allowing Opportunity Partners to make its submissions at the reconvened meeting (Opportunity P'rs L.P. v. Hill Int'l, Inc., (Del. Ch. Jun. 5, 2015)). The Court of Chancery subsequently entered the Order as a partial final judgment ( (Del. Ch. Jun. 16, 2015)).

The Delaware Supreme Court heard the case on expedited appeal. Hill contended that its disclosure in its 2014 proxy statement that the meeting would be held "on or about June 10, 2015" satisfied the requirement in its by-laws that it provide "prior public disclosure of the date of the meeting." According to Hill, the phrasing in its 2014 proxy statement was consistent with every proxy statement it had ever issued, and that its stockholders would have understood that the 2015 meeting would be held on or about June 10. Because the 2014 proxy statement disclosure was made well more than 70 days before the date of the meeting, Hill argued that Opportunity Partners was required to submit its proposals and nominations between March 12, 2015, and April 11, 2015. The May 7 notice from Opportunity Partners was therefore too late.

Opportunity Partners responded that the 2014 proxy statement disclosure that the meeting would take place "on or about June 10, 2015" did not satisfy the "prior public disclosure" requirement. By Opportunity Partners' reading, Hill only disclosed the date of the meeting on April 30, 2015, when it first publicized the exact date of June 9, 2015. Because April 30 is fewer than 70 days before June 9, Opportunity Partners argued that under Hill's by-laws it had 10 days from April 30 to submit its proposals and nominations—which it did, when it submitted notice to Hill on May 7.

The Delaware Supreme Court affirmed the Court of Chancery's injunction.

The Supreme Court began by noting the principle that the by-laws of a corporation form part of a broad contract among directors, officers and stockholders, and that the rules of contract interpretation therefore apply to the by-laws (for a previous ruling on the basis of this principle, see the Supreme Court's ruling in Airgas as discussed in Legal Update, Delaware Supreme Court Overturns Chancery Court Ruling on Airgas By-law Amendment). The rules of contract interpretation require that words and phrases in a by-law be given their commonly accepted meaning, and that if the language is unambiguous, the court does not go beyond it to search for the parties' intent.

In the court's view, the language in Hill's by-law requiring disclosure "of the date of the meeting" unambiguously meant that if the company wanted to require its stockholders to submit their proposals during the 30-day window between 60 and 90 days before the meeting, it would have to disclose the actual date of the meeting more than 70 days beforehand. The court considered Hill's disclosure in its 2014 proxy statement that the meeting would be held "on or about June 10, 2015" to have been mere disclosure of an "anticipated" date within a "range of possible days." This disclosure of an "approximate, anticipated, or targeted time frame that is intended to encompass more than one 'date'," as the court put it, was meant to give Hill flexibility for setting the date for the meeting. That in itself was permissible, but the flexible time frame could not be used against Opportunity Partners to trigger the advance-notice requirement. The court found further support in the fact that Hill ultimately scheduled the meeting for June 9 and not June 10, evidencing that June 10 was never intended to be a firm date.

The dispute over Hill's 2014 disclosure arose only because of the formulation in Hill's advance-notice by-law. Because the by-laws required an affirmative step of disclosing the 2015 annual meeting date to trigger the 30-day-window requirement, Hill was made vulnerable to an action if its disclosure were to be less than fully compliant with the by-laws. The most obvious takeaway from the case, then, is for companies with similar formulations in their by-laws to be sure to announce an exact date for the upcoming annual meeting well in advance of the meeting.

However, the better practice for advance-notice by-laws is to draft a trigger that is pulled automatically on the basis of the date of the previous year's annual meeting. This is the formulation in Standard Clause, By-laws (DE Public Corporation): Advance Notice, where the advance-notice period begins on the 120th day "in advance of the anniversary of the previous year's annual meeting" and ends 30 days later. Using this method, the company does not have to make any decisions or disclosures to trigger the advance-notice period.

More broadly, the Supreme Court's ruling shows that advance-notice by-laws, though permissible and routinely upheld, will be interpreted as strictly as any other contract, and that parties must comply closely with their terms. Advance-notice by-laws are beneficial for companies in that they give the board time to evaluate stockholder proposals and nominees and prevent surprises by activists. If they are drafted clearly, are adopted on a "clear day" without concerns of inequitable treatment of a stockholder and are fully complied with, only the most "compelling facts" will force the court to grant a stockholder equitable relief (see AB Value P'rs v. Kreisler Mfg. Corp., , at *5 (Del. Ch. Dec. 16, 2014)).