In an application for a preliminary injunction to prevent stockholders from exercising their rights of ownership until there had been a determination whether such stock should be cancelled because issued without corporate authorization, the success of the petitioner depended upon whether a quorum of the directors was present at the meeting authorizing its issuance. This in turn depended upon whether the by-law requiring a board of directors of ten members had been amended by custom to require only seven. For the four years preceeding the meeting at which the stock was authorized, during which time, however, there were neither directors' nor stockholders' meetings, there had been only seven directors, a condition which continued for several subsequent meetings. Held, the injunction should issue; no quorum was present and the stock was improperly issued. Although recognizing the doctrine that a by-law may be amended by a custom inconsistent therewith acquiesced in by the stockholders, the court refused to apply it here because of the total stockholder and director inaction prior to the issuance of the stock. Belle Isle Corp. v. MacBean, (Del. Ch. 1946) 49 A. (2d) 5.
Cornelia Groefsema S.Ed.,
CORPORATIONS--AMENDMENT OF BY-LAWS BY CUSTOM,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol45/iss5/11