285 A.2d 437 (Del. 1971)
Schnell v. Chris-Craft Industries is a foundational Delaware corporate law case that anchors the equitable limits on directors' use of otherwise lawful corporate powers.
May a board of directors, consistent with Delaware law, use its statutory and bylaw authority to advance an annual meeting date and related record date for the purpose and with the effect of impeding a pending proxy contest and frustrating stockholders' voting rights?
Directors may not use the corporate machinery and the bylaw and statutory authority they possess for inequitable purposes. As articulated by the Delaware Supreme Court, "inequitable action does not become permissible simply because it is legally possible." When directors manipulate meeting or record dates, or otherwise interfere with the stockholder franchise, equitable principles and fiduciary duties constrain their conduct; actions taken with the purpose or effect of disenfranchisement or entrenchment are subject to invalidation and equitable relief.
No. The board's advancement of the meeting and record dates to thwart the dissidents' proxy contest was inequitable and therefore impermissible, notwithstanding that the actions were facially authorized by statute and bylaw. The Delaware Supreme Court reversed and ordered equitable relief to prevent the inequitable manipulation and to protect the stockholder franchise.
Schnell is a cornerstone of Delaware corporate jurisprudence because it: (1) cements the primacy of equity over literal statutory compliance when directors act inequitably; (2) protects the stockholder franchise by condemning manipulations of meeting mechanics designed to entrench incumbents; and (3) foreshadows doctrinal developments—Blasius's special scrutiny for board actions interfering with voting rights and Unocal's enhanced scrutiny for takeover defenses. For students, Schnell teaches that compliance with the DGCL is a necessary but not sufficient condition for lawful board action: fiduciary and equitable principles always overlay statutory powers. It is thus a key citation when analyzing advance notice bylaws, meeting logistics, record date settings, and other procedural mechanisms in contested elections.