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Board Classification in Maryland: Evaluating Section 3-803 of the MGCL

by Venable LLP - Washington Office

April 14, 2014

Previously published on April 9, 2014

Since 1999, Section 3-803 of the Mary land General Corporation Law (the “MGCL”) has permitted the board of directors of a Mary land corporation or the board of trustees of a Mary land real estate investment trust with a class of equity securities registered under the Securities Exchange Act of 1934 and at least three independent directors or trustees to elect to classify itself notwithstanding any contrary provision i n the charter, declaration of trust or by laws and without a stockholder vote . This statute, adopted by the Mary land legislature specifically to address the abuses of hostile takeover s, has recently received negative commentary from governance scorekeepers and activists. Green Street Advisors has urged boards to opt out of Section 3-803, R EI T Zone Publications has issued several missives similarly attacking Section 3-803 and a union group, focused on the hotel industry, has sent stock holder proposals seeking an opt-out from this provision of Mary land law.


The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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