Mcdermott, Inc. v. Lewis

531 A.2d 206 (Del. 1987)

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Nature of the Case

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Facts

McDermott International was incorporated in Panama on August 11, 1959. Its executive offices are in New Orleans, Louisiana, and there are no operations in Delaware. International does not maintain offices in Delaware, hold meetings or conduct business here, have agents or employees in Delaware, or have any assets here. D and its subsidiaries operate throughout the United States. D's principal offices are in New Orleans. Following a 1982 reorganization, D became a 92%-owned subsidiary of International. The public stockholders of International hold approximately 90% of the voting power of International, while D holds about 10%. The reorganization was done for tax purposes and allowed the McDermott Group to retain, reinvest and redeploy earnings from operations outside the United States without subjecting such earnings to United States income tax. The prospectus also admitted that the 10% voting interest given to D would be voted by International, 'and such voting power could be used to oppose an attempt by a third party to acquire control of International if the management of International believes such use of the voting power would be in the best interests of the stockholders of International.' The Reorganization was supported by 89.59% of D stockholders. Panama's Article 35 states: 'Shares of a corporation owned by [an]other corporation in which the former corporation owns the majority of shares shall not be entitled to vote at Meetings of Shareholders nor shall be deemed as issued and outstanding shares for purposes of quorum.' Panama. Article 37 states: 'The provisions contained in the foregoing Articles 34, 35 and 36 shall be applicable to corporations registered in the National Securities Commission and those whose shares are sold on the market, even though such corporations do not offer their own shares to the public.' International is not registered with that Commission, it is not registered with that Commission. There is no general public policy of the Republic of Panama in favor of precluding Panamanian corporations from selling or issuing stock to their subsidiaries or precluding a subsidiary from voting any stock held of its Panamanian corporate parent, except for those corporations falling within the scope of Article 37. Ps filed these consolidated suits in the Court of Chancery seeking to enjoin or rescind the 1982 Reorganization under which D became a 92%-owned subsidiary of McDermott International, Inc. If International were incorporated either in Delaware or Louisiana, its stock could not be voted by a majority-owned subsidiary. The court gave partial summary judgment to P and D appealed.