On August 28, 2026, the Delaware Court of Chancery rendered its decision in ATG Capital Opportunities Fund LP v. Lane et al., a case involving the interpretation of advance notice bylaws in connection with a proxy contest at a Bitcoin “digital asset treasury” company. The Delaware Court of Chancery held that a corporation’s board of directors cannot reject a stockholder’s director nomination notice for failing to satisfy a disclosure requirement that the corporation’s advance notice bylaws does not specifically impose. The full text of the Delaware Court of Chancery’s opinion can be found here.

Background

Empery Digital Inc., a Nasdaq-listed Delaware corporation, pursued a strategy of acquiring and holding Bitcoin as its primary treasury asset. After cryptocurrency prices fell, Empery’s shares began trading at a discount to the net asset value of its Bitcoin holdings, drawing the attention of activist investors. An activist fund, ATG Capital Opportunities Fund LP, accumulated a stake in Empery’s stock and, days before the director nomination deadline for Empery’s annual meeting, submitted a notice nominating a full slate of nine director candidates.

Empery’s board rejected ATG’s nominations. The board’s rejection letter cited three primary grounds for the board’s decision to reject ATG’s nominations: (1) ATG did not disclose another stockholder as a “participant” in ATG’s solicitation and omitted required participant disclosures about such other stockholder, including his stock ownership and arrangements; (2) ATG failed to disclose its short position in a Bitcoin ETF, which the Empery board contended misaligned ATG’s interests with other stockholders and was required to be disclosed under Schedule 14A, and (3) ATG’s nominees’ questionnaires contained biographical omissions and inaccuracies regarding their employment histories and outside directorships.

ATG sued Empery’s board and Empery, contending that ATG’s nomination notice complied with Empery’s advance notice bylaws and that the board’s stated grounds were pretextual. The board countered that the notice violated the bylaws’ “participant” provision and the provisions incorporating the federal proxy rules under Section 14(a) of the Securities Exchange Act of 1934.

Outcome

The court ruled in favor of the plaintiff, finding that the Empery board lacked contractual grounds to reject ATG’s nominations and that the rejection was both improper and inequitable. Applying Delaware’s “twice-tested” framework, once under the law of the contract and again in equity, the Delaware Court of Chancery reached several key conclusions, including:

• No requirement to disclose coordination or a “group.” Empery’s advance notice bylaw governing stockholder director nominations did not require a nominating stockholder to disclose agreements, arrangements, or understandings, or the existence of a Section 13(d) group, in connection with a nomination, even though Empery’s bylaws contained a parallel provision governing advance notice of stockholder proposals that did include such requirements. The court declined to read that omitted requirement into the stockholder nomination advance notice bylaw.
• The other stockholder was not a “participant.” Reading the Schedule 14A definition incorporated into Empery’s bylaws narrowly, the court found that a “participant” is generally someone who finances or engages in the solicitation. The court found that suspected coordination alone did not make the other investor a participant, and the board could not reject the notice on that basis.
• No requirement to disclose a commodity or crypto hedge. The bylaws required disclosure of derivatives and short positions in the company’s own stock, but not hedges in unrelated assets (such as Bitcoin ETFs). The board could not demand disclosure the bylaws did not require, and the general incorporation of the federal proxy rules did not operate as a catch-all authorizing the board to require any information it deemed “material.”
• The rejection was inequitable. Even assuming the board genuinely feared that the activist intended to seize control and liquidate the company’s Bitcoin holdings, rejecting a nomination notice was a disproportionate response under enhanced scrutiny. The board’s proper remedy was to make its case to stockholders at the ballot box and, if it believed the activist’s proxy materials were misleading, to seek corrective disclosure, not to disenfranchise the electorate.

Practical Considerations

The Delaware Court of Chancery’s decision in ATG Capital is a cautionary tale for companies that assume their advance notice bylaws are broad enough to police an activist’s conduct. With 2027 proxy season quickly approaching, publicly traded Delaware corporations should keep in mind the following considerations, among others, when reviewing their advance notice bylaws this fall:

• Review the language of the director nomination bylaw as a standalone provision. Confirm that the provision governing advance notice of director nominations (as separate from the provision governing stockholder proposals) expressly requires disclosure of information that the company would want to know about the nominating stockholder and its director nominees, such as agreements, arrangements, and understandings among stockholders and the existence of any Section 13(d) group. As evidenced by the court’s decision in ATG Capital, parallel requirements in provisions governing advance notice of stockholder business proposals are not automatically read into the provisions governing advance notice of stockholder director nominations, and the informational requirements in each must be read on their own.
• Address hedging and economic-misalignment concerns directly. If the company wants to know about short positions or other hedges that could misalign a nominating stockholder’s interests with other stockholders, the bylaws and the director-and-officer questionnaire should expressly require disclosure of such hedging or other positions.
• Do not treat Section 14(a) incorporation as a catch-all. Boilerplate incorporation of the requirements of Schedule 14A and Rule 14a-9 of the Exchange Act does not give a board open-ended authority to demand whatever information it considers important or material to stockholders for purposes of the federal proxy rules. Disclosure requirements that the company would expect to enforce should be explicitly spelled out in the advance notice bylaws.

Ultimately, companies should ensure that the disclosure requirements in their advance notice bylaws are clear and explicitly cover the information that (i) the Board and company would want to know about the nominating stockholder and its director nominees, (ii) is necessary for the board and/or its nominating committee to evaluate the qualifications of the director nominees and (iii) the company will need in order to comply with the federal proxy rules.