Late last week, a bill that would prohibit public companies from adopting by-laws that shift legal fees in shareholder litigation to the losing party came one step closer to becoming Delaware law Thursday. The bill, S.B. 75, overwhelmingly passed during a late House session. Forty of the chamber's 41 members voted in favor of the measure, which would amend Delaware General Corporation Law to include a ban on fee-shifting or “loser pays” bylaws related to shareholder litigation.
The proposed ban has been praised by shareholders who contend that fee-shifting tramples their rights and chills meritorious suits. Not surprisingly, the legislation is opposed by corporations and other advocates who have argued fee-shifting provisions protect companies from aggressive and litigious investors. The bill unanimously passed the House Judiciary Committee earlier this month. This measure passing the Delaware House is great news for shareholders and consumer advocates in general.
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