Objectors Must Post Security in Rare Chancery Cases, Court Says

New rules at the Delaware Court of Chancery have raised the ire of attorneys who represent shareholders or other class members who object to proposed settlements.

Any class member is free to challenge a proposed settlement or attorney fee awards—that hasn’t changed. But if an objector seeks to oust a lead plaintiff, now they must provide “adequate security” to assume leadership.

The rules recently updated by the court don’t define “adequate security.” Vice Chancellor J. Travis Laster, who co-chairs the subcommittee overseeing the rule revisions, said it’s up to the court’s discretion.

Under existing law, a court ...