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Court of Chancery rules that supermajority voting provision did not apply to conversion

23 May 2025

In Gunderson v. The Trade Desk, Inc., the Delaware Court of Chancery held that a company’s conversion pursuant to Section 266 of the Delaware General Corporation Law (DGCL) did not require a supermajority vote because that provision in the certificate of incorporation applied to only actions taken pursuant to Section 242 of the DGCL, which governs amendments to certificates of incorporation. The court held that the doctrine of independent legal significance barred the parties from applying the supermajority provision to the conversion, because the conversion would be accomplished pursuant to a separate and distinct section of the DGCL, and the drafters of the company’s corporate documents did not include explicit language providing for supermajority voting requirement to extend beyond Section 242 to apply to mergers, consolidations, conversions or other similar transactions.

In September 2024, the board of Trade Desk, Inc. (Trade Desk) proposed to convert Trade Desk from a Delaware corporation to a Nevada corporation pursuant to Section 266 of the DGCL. Section 266 required approval of a majority of the outstanding shares of stock of Trade Desk entitled to vote. Trade Desk disclosed its intention to convert the corporation and noted in its proxy statement that a majority vote was necessary for approval. The plaintiff, a stockholder of Trade Desk, sought to enjoin the conversion, alleging that the conversion required supermajority approval because it would result in a repeal of the company’s certificate of incorporation (Charter). Article X of the Charter required a supermajority of the voting power of outstanding shares of stock for approval “to amend or repeal, or adopt any provision” inconsistent with certain specified articles of the Charter. Trade Desk argued that Article X’s supermajority approval requirement applied only to direct Charter amendments pursuant to Section 242 of the DGCL and not to amendments effected through other provisions of the DGCL.

The Delaware Court of Chancery held that a majority stockholder vote was the proper threshold for approval of the proposed conversion, relying on the doctrine of independent legal significance and the long line of case law related to that doctrine dating back to Keller v. Wilson & Co., which was decided in 1936. Under the doctrine of independent legal significance, actions that are authorized under one section of the DGCL may be valid even if they would not be achievable if pursued under a different section of the DGCL. The Court explained that there is a presumption that drafters of corporate documents governed by Delaware law are aware of and understand the doctrine of independent legal significance. Therefore, in the absence of language specifically requiring a supermajority vote for conversion pursuant to Section 266, such a vote would not be required.

This decision reinforces Delaware’s independent legal significance jurisprudence and provides guidance to drafters of corporate documents under Delaware law who intend to apply a supermajority voting threshold for actions taken pursuant to provisions of the DGCL.

Authored by Allison M. Wuertz, Jacey Gottlieb, Will Winter, and Sean MacDonald.