Stockholders have a statutory right to amend the bylaws. In public corporations, stockholders can put forward bylaw amendment proposals via the shareholder proposal process. A bylaw amendment included as a shareholder proposal in the company's proxy statement that receives sufficient votes in favor is binding on the corporation and becomes a valid bylaw of the corporation.

Because a stockholder bylaw amendment that is binding on the corporation is permitted by law, one of the most common avenues for blocking shareholder proposals (that the proposal is contrary to the law) is usually not available for companies seeking to exclude such proposals.

The court in CA opined that the bylaw amendment as offered was not permissible under Delaware law. However, the court offered up in dictum that if the stockholders did not like the result announced by the court that stockholders had the option of causing the corporation to amend its certificate of incorporation, or alternatively, working with the legislature to amend the DGCL to permit the proposed amendment.  In the wake of CA, the Delawarenlegislature amended the corporate statute to make bylaws such at the one proposed by shareholders in CA permissible under the Delaware law.

Edit playlist item notes below to have a mix of public & private notes, or: