- Associated Press - Tuesday, May 12, 2015

DOVER, Del. (AP) - The state Senate has passed a measure prohibiting publicly traded corporations from enacting bylaws that force shareholders to pay legal fees if they challenge the company in court and lose.

The measure passed on a 16-to-5 vote Tuesday and now goes to the House. The bill pits shareholder rights advocates against business groups who argue fee-hungry lawyers are filing frivolous lawsuits challenging almost every major corporate merger and acquisition.

The bill was introduced after Delaware’s Supreme Court ruled last year that fee-shifting bylaws could be permissible under Delaware’s general corporate law. The ruling was in response to a federal court query regarding a nonstock corporation.

While prohibiting corporations from shifting fees onto unsuccessful shareholder plaintiffs, the bill permits companies to enact bylaws making Delaware the exclusive forum for intra-corporate litigation.

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