2013 Amendments to the Delaware General Corporation Law
The Governor of Delaware has signed into law amendments to the General Corporation Law of the State of Delaware (the “DGCL”) proposed by the Delaware State Bar Association and subsequently approved by the Delaware legislature. A number of provisions of the DGCL are affected, the legislation addresses a number of different topics, and the amendments will change practice in a number of different ways, including with respect to the process by which public company merger transactions are conducted. The merger amendment adds a new Section 251(h) that would allow corporations to opt into a streamlined back-end merger process intended to obviate the need under certain circumstances for a corporation to hold a stockholder meeting, the results of which are a foregone conclusion. The legislation also includes a new Section 204 that authorizes the ratification of certain defective corporate acts and stock issuances and a new Section 205 that confers jurisdiction upon the Delaware Court of Chancery to hear matters related to the new Section 204 as well as other matters relating to the cure of defective or potentially defective corporate acts. In addition, the legislation will permit the formation of specialized public benefit corporations. Directors of a public benefit corporation, or PBC, would be permitted by statute to consider the best interests not only of a corporation’s stockholders but also of other persons, entities, communities or interests. Finally, the legislation contains revisions to Sections 114(a), 312(b), and 502(a) designed to address issues identified by the Delaware Secretary of State with respect to so-called “Aged Corporations.” A number of conforming revisions are required to other provisions of the DGCL, including Section 262, which governs stockholder appraisal rights.
The amendments will be effective on August 1, 2013, except for the new Section 204 and 205 and the changes related thereto, which will become effective on April 1, 2014.