Opinion ID: 2180171
Heading Depth: 1
Heading Rank: 12

Heading: State Law of Incorporation Governs Internal Affairs

Text: In McDermott, this Court held that the internal affairs doctrine is a major tenet of Delaware corporation law having important federal constitutional underpinnings. [32] Applying Delaware's well-established choice-of-law rule  the internal affairs doctrine  the Court of Chancery recognized that Delaware courts must apply the law of the state of incorporation to issues involving corporate internal affairs, and that disputes concerning a shareholder's right to vote fall squarely within the purview of the internal affairs doctrine. [33] Examen is a Delaware corporation. The legal issue in this case  whether a preferred shareholder of a Delaware corporation had the right, under the corporation's Certificate of Designations, to a Series A Preferred Stock class vote on a merger  clearly involves the relationship among a corporation and its shareholders. As the United States Supreme Court held in CTS, [n]o principle of corporation law and practice is more firmly established than a State's authority to regulate domestic corporations, including the authority to define the voting rights of shareholders.  [34] In CTS, the Supreme Court held that the Commerce Clause prohibits States from regulating subjects that `are in their nature national, or admit only of one uniform system, or plan of regulation,' [35] and acknowledged that the internal affairs of a corporation are subjects that require one uniform system of regulation. [36] In CTS, the Supreme Court concluded that [s]o long as each State regulates voting rights only in the corporations it has created, each corporation will be subject to the law of only one State. [37] Accordingly, we hold Delaware's well-established choice of law rules [38] and the federal constitution [39] mandated that Examen's internal affairs, and in particular, VantagePoint's voting rights, be adjudicated exclusively in accordance with the law of its state of incorporation, in this case, the law of Delaware.