Delaware Court Blocks Empery Digital Board From Tightening Activist Director Rules Mid-Cycle

The Delaware Court of Chancery ruled that Empery Digital's board violated its own bylaws when it demanded additional documentation from ATG Capital Opportunities Fund after the activist had already submitted a valid director nomination notice. The decision, delivered without fanfare in a jurisdiction that sets global corporate governance norms, establishes that boards cannot impose new procedural requirements on activists mid-process—even under the guise of "clarification."

ATG Capital filed a nomination notice under Empery Digital's advance notice bylaws, which require shareholders to disclose ownership details, nominee biographies, and questionnaires within a specified window before the annual meeting. The board responded by requesting supplemental information beyond what the bylaws explicitly required, including granular detail on beneficial ownership relationships and voting arrangements. When ATG declined to provide materials it deemed outside the bylaw scope, the board rejected the nomination as deficient. ATG sued, and the Chancery Court sided with the activist. The court found that Empery Digital's bylaws—while comprehensive—did not authorize the board to layer on discretionary requests after a nomination had been submitted in apparent compliance.

The ruling matters because it clarifies the boundary between legitimate bylaw enforcement and opportunistic gatekeeping. Boards routinely use advance notice provisions to filter out poorly documented or strategic-ambiguity nominations, and Delaware law has historically deferred to boards when bylaws grant them interpretive latitude. This case affirms that deference has limits. If a company's bylaws enumerate specific disclosure requirements, the board cannot unilaterally expand them once the nomination clock has started. That distinction will force companies with aging or ambiguous advance notice provisions to either tighten their language prospectively or accept that activists can hold them to the text as written. It also creates asymmetry: activists now have case law supporting a strict-construction reading of nomination rules, while boards defending rejections will need to point to explicit bylaw language, not implied authority.

For family offices and allocators watching proxy mechanics, the decision reduces one form of board entrenchment. Activists with $50 million to $200 million positions in small- and mid-cap targets can now cite *ATG v. Empery Digital* when boards attempt to burden nominations with requests that stray beyond black-letter bylaw text. That makes the cost of running a short-slate campaign marginally lower and the probability of getting a nominee on the ballot marginally higher, particularly in companies where advance notice provisions were drafted before the current cycle of activist intensity. The decision does not prevent boards from adopting more restrictive bylaws going forward—it simply prevents them from reinterpreting existing ones on the fly.

Operators and allocators should watch for amended bylaws in the Q1 2025 proxy season. Companies that lost proxy fights or faced credible activist threats in 2024 are likely to propose bylaw amendments that explicitly grant boards discretion to request supplemental documentation or that enumerate a longer list of required disclosures. Activist funds will oppose these amendments, and the vote outcomes will signal which shareholder bases prioritize board flexibility versus nomination accessibility. ISS and Glass Lewis guidance on these amendments, expected in late March 2025, will set the template for institutional voting. Separately, boards at companies with thin trading volumes or concentrated ownership should review their nomination bylaws now, before an activist files and the court interprets ambiguity against them.

Empery Digital's stock trades under $4 per share with a market capitalization below $80 million. ATG Capital has not disclosed whether it will proceed with the director nomination or settle for governance concessions. The company has not announced a bylaw review, but the legal fees from this litigation will exceed the cost of retaining Delaware counsel to redraft the provisions.