Two firms made a decision to grab hold of the new opportunity made to transfer corporate legal fees to shareholders.
The “loser pays” bylaws, which prompt investors suing a firm and the losing side to pay for their costs, have been heaving discussed in the previous weeks, right after a decision from the Delaware Supreme Court opened the opportunity for them.
Yet, LGL Group Inc., an electrical component manufacturer, and Echo Therapeutics, a medical device maker, seem to be the first companies to adopt such bylaws, doing so in the previous month, according to recent regulatory filings.
Such newly introduced bylaws are a sign that some firms are eager to dampen shareholder cases, which has been a common sight the last several years.
Some legal critics hope that the Delaware SC’s decision of fee-transferring bylaws could discourage litigation by making it costly to file a lawsuit and lose.
A majority of attorneys say they’re not expecting bigger public firms to adopt these bylaws at the moment, but rather observe what the state assembly would do.
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