In Smollar v. Potarazu, the Court of Chancery denied a stockholder’s request to expedite proceedings and to appoint a temporary receiver in connection with a challenge to an alleged impeding sale of VitalSpring Technologies, Inc. (“VitalSpring”) to an unidentified third-party. Plaintiff Marvin Smollar, a VitalSpring stockholder, filed the complaint against defendant Sreedhar V. Potarazu (“Defendant”), VitalSpring’s chief executive officer and sole director, following Defendant’s announcement that VitalSpring would be sold pending approval by the Federal Trade Commission. According to Defendant, the sale — which was projected to be completed around October 19, 2014 — was ultimately delayed pending further FTC guidance.
In his complaint, Plaintiff sought to enjoin the sale until VitalSpring released audited financial statements pursuant to an agreement with its stockholders and held an annual meeting of stockholders. VitalSpring apparently had not held an annual meeting of stockholders for several years contrary to Delaware law. According to Plaintiff, Defendant’s failure to hold annual meetings, to release audited financials and general lack of corporate transparency called into question the veracity of Defendant’s claims that a buyer for VitalSpring existed.