Delaware General Corporations Law Updates Address COVID-19, Power of Attorney Information, and Emergency Provisions | Fox Rothschild LLP
Delaware passed new amendments to its General Corporate Law (DGCL) on July 16, 2020. Amendments to Sections 102, 110, 116, 145, 212, 228, 232, 251, 363, 365, and 367 appear to address the COVID-19 pandemic, while others are changing proxy information exchange, business emergency provisions, and rules for public benefit corporations.
We detail these changes below.
Article 102 – Corporate name and liability of directors
Section 102(a) has been amended to add “registered series of a limited partnership” to the list of names from which a corporate name must be distinct in the state of Delaware records.
Section 102(b)(7) allows for a provision in a corporation’s certificate of incorporation to eliminate or limit directors’ liability for monetary damages for certain breaches of fiduciary duty. It also provides that any future modification, repeal or elimination of such a provision shall not affect the enforcement by a company of any act or omission of a director occurring before the modification, repeal or disposal, unless the provision provides otherwise at the time of the act. or omission.
Article 110 – Extended emergency measures for boards of directors
Section 110(a) has been amended to include additional circumstances under which a board of directors may take emergency action, including an epidemic, pandemic or a declaration of national emergency by the US government. The list of triggering events is not exhaustive and includes a catch-all provision for “other similar conditions”.
In addition, section 110 has been amended to provide that if a quorum cannot be easily achieved, a majority of the directors present may pass emergency by-laws. It also allows the board of directors to postpone or change the location of a shareholders’ meeting and to postpone record dates and dividend payment dates, subject to special rules for listed companies. The Emergency Bylaws may contain any “convenient and necessary” provision to deal with the circumstances of the Emergency, notwithstanding any different provision in the DGCL or the Company’s Charter. A company that changes the record date or payment date in accordance with this provision is required to provide shareholders with notice of the change as soon as possible (and in any event before the original record date). For companies subject to the reporting requirements of the Securities Exchange Act of 1934, notice must be given by filing with the Securities and Exchange Commission.
Section 110(i) follows a prior order from the Governor of Delaware authorizing the postponement of annual meetings or the transition of annual meetings to remote means. It also allows companies that had declared a dividend for which the record date had not yet occurred to postpone the dividend to a later date in certain circumstances.
Changes to this Section 110 are effective retroactively to January 1, 2020.
Article 116 – Electronic signatures
Section 116 expands the definition of “electronic signature and eliminates the exception in Section 116(b) for the electronic execution of board, shareholder, and founder consents instead of a meeting, except as expressly provided in the certificate of incorporation.
Article 145 – Definition of “director” of the company
Amended Section 145(c) redefines who is considered an “officer” with respect to any act or omission that occurs after December 31, 2020. The new definition includes president, chief accounting officer, chief executive officer, chief financial officer, chief legal director, operating officer, controller and treasurer of a company.
The amendments to this section also add a new section 145(c)(2), which allows a corporation to indemnify any other person who is not a current or former director or officer of the corporation against expenses ( including attorneys’ fees) actually and reasonably incurred by such person in successfully defending the claims against him.
The amendments to Section 145(c) are effective after December 31, 2020.
Section 212 – Electronic Execution/Transmission of Proxy Information
Section 212(c) has been amended to permit the electronic execution and transmission of proxy information provided it includes or is delivered with information enabling the company to determine the delivery date and identity of the shareholder granting the proxy.
Article 228 – Electronic consent
Section 228 has been amended to allow electronic consent of shareholders or members instead of a meeting.
Article 232 – Notice by electronic mail to shareholders
Section 232(b) has been revised to permit corporations to give notice under Section 232(a) to shareholders by electronic mail to the shareholder’s address shown on the records of the corporation, without the prior consent of the shareholder.
Article 251 – Mergers of national companies
The amended section 251 eliminates, with limited exceptions, a requirement applicable to certain domestic company mergers that immediately after the merger becomes effective, the organizational documents of the surviving entity contain provisions identical to the certificate of incorporation of the constituent company immediately prior to the effective time of the merger.
Section 363 – Voting requirements for converting a business into a public benefit corporation
The amendment to this section reduces the two-thirds to simple majority voting requirement for conversion from a common stock corporation to a public benefit corporation and vice versa. It also repeals section 363(b)(2), which applies this amendment to certain mergers involving the conversion of stock to or from a public benefit corporation.
The repeal of section 363(b)(2) will be effective with respect to a merger or consolidation effected pursuant to an agreement entered into (or, with respect to an amalgamation effected pursuant to article 253, of the resolutions of the board of directors adopted) on or after July 16, 2020.
Article 365 – Balancing of directors’ decisions
The amended Section 365 clarifies that under Section 365(c), a director will not be considered “interested” for purposes of a balancing decision required by Section 365(a) on the sole basis of his ownership or interest in the shares. of a public benefit corporation, except to the extent that such ownership would create a conflict if the corporation were not a public benefit corporation. Further, absent a conflict of interest, failure to comply with the balancing requirement will not constitute an act or omission of bad faith for the purposes of Section 102(b)(7) or section 145, unless the certificate of incorporation expressly provides otherwise. . This eliminates the need for a provision in the certificate of incorporation to protect directors from violations under section 365(c) by making it the statutory default.
Article 367 – Continuation of balancing pursuits
The amendment to section 367 clarifies that any legal action to enforce the balancing requirement must be brought by plaintiffs holding at least 2% of the outstanding shares of the utility company or, in the case of some listed companies, shares worth at least $2 million. if this number is lower.