Aon | Financial Services Group
Back to FSG Quick Insights | Subscribe to FSG Quick Insights >>
Corporate advance notice provisions, often found in a company's bylaws, require shareholders to provide advance notice to the corporation if they intend to bring up new business or propose nominees for the board of directors at a shareholders' meeting. Such provisions balance the need for orderly corporate governance with shareholders' rights to propose new business or nominate directors. They are designed to prevent ambush tactics where a shareholder might otherwise spring proposals on the company and other shareholders without adequate warning.
In recent years, plaintiffs’ attorneys have sued companies over these advance notice bylaw provisions, alleging that the requirements are too difficult to decipher and overly restrictive to shareholders’ rights. While recognizing that there is a legitimate corporate interest in maintaining advance notice bylaws, the plaintiffs’ bar has challenged specific bylaw wording and practical application of these notice provisions.
For example, plaintiffs have objected to certain bylaw provisions that require the disclosure of individuals “acting in concert” with the nominating shareholder, alleging that such provisions are overbroad and impermissibly allow companies to invalidate stockholder nominations for technical noncompliance. There have also been claims challenging bylaws requiring shareholder nominees to provide the board with irrevocable resignation letters that the board may later accept if it determines that the nominee made untrue statements in connection with the advance notice. Plaintiffs have asserted that such requirements allow the board of directors to usurp stockholders’ exclusive right to select the members of the Board.
Nevertheless, recent decisions in the Delaware courts have generally upheld the validity of advance bylaw provisions. In Paragon1, the corporation rejected a notice of nomination, and the court found that despite the "nitpicky" and "suspect" nature of certain alleged deficiencies, the nomination notice was invalid because it did not comply with the disclosure requirements of the bylaws.
In Kellner2, the court agreed that some of the advance notice bylaws at issue in that case were not valid, stating that the purpose of the provisions was to block a proxy contest rather than enhance transparency or protect stockholder enfranchisement. Nonetheless, the Kellner court still upheld the board’s rejection of the nominees for the corporation’s 2023 annual meeting, finding that they failed to comply with the requirements of the corporation’s valid advance notice bylaws.
Despite resistance from courts, plaintiffs’ attorneys remain actives in this area. The activity may be at least partially driven by Delaware’s so-called “corporate benefit” doctrine, under which a corporation can be ordered to pay a stockholder’s attorney a fee if the stockholder is successful in conferring a benefit to the corporation and its stockholders.
In light of this new wave of advance bylaw litigation, and to avoid costly and/or protracted litigation, companies might consider working with counsel to review their bylaws and determine whether any unclear, unreasonable, indecipherable, or ambiguous provisions warrant modification.
Companies should review their directors’ and officers’ liability insurance policies and consult with their broker to ensure appropriate coverage to respond to these and other shareholder claims. Moreover, before adopting advance notice bylaw provisions, public companies that are under the microscope of proxy advisory firms should consider (1) analyzing their respective investor bases for potential proxy advisory firm influence, and (2) proactively engaging with shareholders—including by discussing the benefits of advance notice provisions and the prevalence of such provisions among industry peers, as applicable—to get out ahead of negative proxy advisory firm scrutiny.
Consult with your broker or Aon’s Executive & Board Advisory Practice for any questions regarding the implications of advance notice provisions. If you have any questions about your coverage or are interested in obtaining coverage, please contact your Aon broker.
1 - Paragon Techs. v. Cryan, C. A. 2023-1013-LWW (Del. Ch. Nov. 30, 2023)
2 - Kellner v. AIM ImmunoTech., 320 A.3d 239 (Del. 2024)
About Aon
Aon (NYSE: AON) exists to shape decisions for the better — to protect and enrich the lives of people around the world. Through actionable analytic insight, globally integrated Risk Capital and Human Capital expertise, and locally relevant solutions, our colleagues provide clients in over 120 countries with the clarity and confidence to make better risk and people decisions that help protect and grow their businesses.
Follow Aon on LinkedIn, X, Facebook and Instagram. Stay up-to-date by visiting Aon’s newsroom and sign up for news alerts here.
©2025 Aon plc. All rights reserved.
Aon is not a law firm or accounting firm and does not provide legal, financial or tax advice. Any commentary provided is based solely on Aon’s experience as insurance practitioners. We recommend that you consult with your own legal, financial and/or insurance advisors on any commentary provided herein. All descriptions, summaries or highlights of coverage described herein are for general informational purposes only and do not amend, alter or modify the actual terms and conditions of any relevant policy. Coverage is governed only by the terms and conditions of such policy. Insurance coverage in any particular case will depend upon the type of policy in effect, the terms, conditions and exclusions in any such policy, and the facts of each unique situation. No representation is made that any specific insurance coverage would apply in the circumstances outlined herein. Please refer to the individual policy forms for specific coverage details.
The information contained in this document and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity.
This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.
Insurance products and services offered by Aon Risk Insurance Services West, Inc., Aon Risk Services Central, Inc., Aon Risk Services Northeast, Inc., Aon Risk Services Southwest, Inc., and Aon Risk Services, Inc. of Florida and their licensed affiliates.