Summary Advance notice bylaws Provisions with regard to director nominations as well as other stockholder proposals Designed to give directors adequate time to evaluate and respond to stockholder proposals Recent decisions by Delaware chancery court have limited application of advance notice bylaw provisions In each case, court ruled that advance [more...]
Statutes Delaware GCL § 141(c) Authorizes board committees 1996 amendment Made changes to the requirement that establishing a committee be made by "a resolution adopted by a majority of the whole board" Notable Cases Zapata v Maldonado (Del 1981) Board with a majority of interested directors can still delegate to a board [more...]
Delaware State Law - Right to Inspect DGCL §220 Client mailing (2003) Client mailing (2004) Hughes Hubbard Cases Saito v McKesson HBOC (Del 2002) Orloff v Weinstein Enterprises Inc (Del Ch 2004) Stay issued pending appeal of an order for inspection of books and records of a subsidiary corporation Recent amendment of DGCL [more...]
Statutes Delaware GCL § 203 Adopted following US Supreme Court decision upholding Indiana's business combination statute CTS v Dynamics Corp of America 1987 Developments In re Fuqua Industries (Del Ch 2005) Alleged that board's waiver of DGCL §203 was part of a management entrenchment scheme Court [more...]
Statutes Delaware GCL § 109 Bylaws Delaware GCL § 110 Emergency bylaws and other powers in emergency Notable Cases Adopting by-laws Frantz Manufacturing v EAC (Del 1985) Oberly v Howard Hughes Medical Institute (Del Ch 1984) Amending by-laws SEC v Transamerica (D Del 1946) In re Osteopathic Hospital (Del 1963) In re Brandywine [more...]
Statutes Delaware GCL § 154 Determination of amount of capital; capital, surplus and net assets defined Delaware GCL § 160 Corporation's powers respecting ownership, voting, etc., of its own stock; rights of stock called for redemption Delaware GCL § 243 Retirement of stock Delaware GCL § 244 Reduction of capital Notable Cases [more...]
Statutes Delaware GCL § 241 Amendment of certificate of incorporation before receipt of payment for stock Delaware GCL § 242 Amendment of certificate of incorporation after receipt of payment for stock; nonstock corporations Delaware GCL § 245 Restated certificate of incorporation Delaware GCL § 394 DGCL part [more...]
Statutes Delaware GCL § 141(d) Authorizes classified boards Delaware GCL § 141(k)(1) Limits removal of classified directors from board Developments Delaware makes changes to the DGCL Effective 8.01.06 Revises DGCL § 141(d) Many companies are declassifying their boards Precedent Board Declassifications [more...]
Statutes Delaware GCL § 341 Law applicable to close corporation Delaware GCL § 342 Close corporation defined; contents of certificate of incorporation Delaware GCL § 343 Formation of a close corporation Delaware GCL § 344 Election of existing corporation to become a close corporation Delaware GCL § 345 Limitations on [more...]
Statutes Delaware GCL § 102 Incorporators; how corporation formed; purposes Delaware GCL § 104 Certificate of incorporation; definition Delaware GCL § 105 Certificate of incorporation and other certificates; evidence Notable Cases Corporate business or purpose Philadelphia National Bank v BSF (Del Ch 1964) Reargument Denied [more...]
Summary Black-letter Rule Corporate insider may not pursue an opportunity if The corporation is financially able to exploit the opportunity The opportunity is within the corporations line of business The corporation has an interest or expectancy in the opportunity and By taking the opportunity for his own, the corporate fiduciary will [more...]
Statutes Delaware GCL § 121 General powers Delaware GCL § 122 Specific powers Delaware GCL § 123 Powers respecting securities of other corporations or entities Delaware GCL § 124 Effect of lack of corporate capacity or power; ultra vires Delaware GCL § 125 Conferring academic or honorary degrees Delaware GCL § 126 [more...]
Developments Delaware makes changes to the DGCL Effective 8.01.06 Revises DGCL §102(a)(1) Adds DGCL §102(e) Revises DGCL §391(a)(24) Two banks named Citizens settle trademark dispute Dispute followed acquisition of Mellon branches by Citizens Financial ($137 billion assets) Acquired branches were renamed to use Citizens name [more...]
Summary Voting system allows shareholders to cast all their director votes for a single candidate For each shareholder, number of director votes equals (x) number of voting shares held, multiplied by (y) number of directors being elected Can facilitate board representation for minority shareholders Delaware law allows for cumulative voting if [more...]
Statutes Delaware GCL § 103 Execution, acknowledgment, filing, recording and effective date of original certificate of incorporation and other instruments; exceptions Related Topics Delaware General Corporation Law
Summary Enables a shareholder to bring suit on behalf of the corporation for harm done to the corporation Recovery, if any, must go to the corporation Threshold issue is whether claim is derivative as opposed to a direct action for shareholder injuries Delaware Supreme Court recently revised the standard for determining whether a claim is [more...]
Delaware GCL § 141 Board of directors; powers; number, qualifications, terms and quorum; committees; classes of directors; nonprofit corporations; reliance upon books; action without meeting; removal § 141(a) Director fiduciary duties § 141(b) Director qualifications § 141(c) Board committees § 141(d) [more...]
2006 Amendments Changes Effective 8.01.06 Election of Directors - Majority Voting DGCL §216 Amendment authorizes stockholders to adopt a by-law to specify the vote necessary for election of directors (such as a majority vote) that the board cannot later amend or repeal DGCL §141(b) Amendment allows director resignations to become [more...]
Summary Covers law on director conflicts of interest Statutes Delaware GCL § 144 General Marciano v Nakash (Del 1987) Kerbs v California Eastern Airways (Del 1952) Aronson v Lewis (Del 1984) Cinerama v Technicolor (Del 1995) Weinberger v UOP (Del 1983) Fliegler v Lawrence (Del 1976) Marciano v Nakash (Del 1987) Cede v [more...]
Statutes Delaware GCL § 141(b) Authorizes board committees Related Topics Delaware General Corporation Law
Statutes Delaware GCL § 273 Dissolution of joint venture corporation having 2 stockholders Delaware GCL § 274 Dissolution before issuance of shares or beginning of business; procedure Delaware GCL § 275 Dissolution generally; procedure Delaware GCL § 276 Dissolution of nonstock corporation; procedure Delaware GCL § 277 [more...]
Statutes Delaware GCL § 170 Dividends; payment; wasting asset corporations Delaware GCL § 171 Special purpose reserves Delaware GCL § 172 Liability of directors and committee members as to dividends or stock redemption Delaware GCL § 173 Declaration and payment of dividends Delaware GCL § 174 Liability of directors for [more...]
Statutes Delaware GCL § 388 Domestication of non-United States corporations Delaware GCL § 389 Temporary transfer of domicile into this State Delaware GCL § 390 Transfer or continuance of domestic corporations Related Topics Delaware General Corporation Law
Summary Delaware corporations can exculpate a director from personal monetary liability for breaches of fiduciary duty Per DGCL § 102(b)(7) Subject to specified exceptions, permits stockholders, in the certificate of incorporation, to exonerate directors from personal liability for gross negligence Adopted in 1986 in response to Smith v Van [more...]
Summary Covers use of two or more classes of common stock With disparate voting rights Often used in carve-out IPOs of subsidiaries Parent companies can keep a class of high-vote common While selling low- or no-vote common stock to public While parent would have voting control even without use of dual class stock, keeping more than 80% of the [more...]
Summary Following is focused on Delaware law Business and affairs are managed by or under direction of the Board of Directors subject to the Board's satisfying its fiduciary duties DGCL § 141(a) Board of [more...]
Enhanced scrutiny when board interferes with stockholder voting Summary Enhanced scrutiny applies when board interferes with stockholder voting Even if board action is taken advisedly and in good faith Must demonstrate a "compelling justification" if the board's actions had "the primary purpose of impeding the exercise of stockholder [more...]
Summary Fiduciary duties can shift when company is near insolvency Directors can be required to consider interests of creditors Never directly addressed by Delaware Supreme Court Concept has been invoked by bank regulators in context of failing banks Who argue that a failing bank shouldn't "swing for the fences" when it's close to failing [more...]
aka "Duty of Candor" Summary Directors have a duty to make full and fair disclosure of pertinent information within Board's control "... not an independent fiduciary duty, but instead stems from, and is an application of, the general fiduciary duties of care and loyalty" Better described as a duty of disclosure [more...]
Statutes Notable Cases Guttman v Huang Board fiduciary duties 823 A2d 492 Ch Ct Opinion 5 05 03 - Strine Derivative claim that directors and officers: Sold stock at a time when they knew material non-public information Failed to prevent accounting irregularities that led to restatement of financials Plaintiffs claimed duty of [more...]
aka "Duty of Candor" Summary Directors have a duty to make full and fair disclosure of pertinent information within Board's control "... not an independent fiduciary duty, but instead stems from, and is an application of, the general fiduciary duties of care and loyalty" Better described as a duty of disclosure rather than [more...]
Enhanced scrutiny of defensive actions Summary Enhanced scrutiny applies to defensive actions Such as a large share repurchase in response to an unsolicited offer Line of cases began with Unocal (Del 1985) To take defensive action in response to a threatened change of control, directors must show: Reasonable grounds to believe threat to company [more...]
General Video v Kertesz (Del Ch 2006) Opinion 7.19.06 Vice Chancellor Lamb Introduction + Facts I Parties I.A. Background I.B. Previously filed lawsuits I.C. New York I.C.1 Texas state I.C.2 Texas federal I.C.3 Legal standard II. McWane Cast Iron Pipe (Del 1970) Analysis III. Texas actions are first-filed III.A [more...]
Statutes Delaware GCL § 371 Definition; qualification to do business in State; procedure Delaware GCL § 372 Additional requirements in case of change of name, change of business purpose or merger or consolidation Delaware GCL § 373 Exceptions to requirements Delaware GCL § 374 Annual report Delaware GCL § 375 Failure [more...]
Statutes Delaware GCL § 155 Fractions of shares Notable Cases Satterfield v Monsanto Lewis v Knutson Schreiber v Carney Pathe Industries v Cadence Industries Tisch Family Foundation v Texas National Petroleum Related Topics Delaware General Corporation Law
Statutes Delaware GCL § 101 Incorporators; how corporation formed; purposes Delaware GCL § 106 Commencement of corporate existence Delaware GCL § 107 Powers of incorporators Delaware GCL § 108 Organization meeting of incorporators or directors named in certificate of incorporation Issues Application of DGCL to [more...]
Statutes Delaware GCL § 145 Recent cases Kaung v Cole National Del 2005 Affirms Chancery's ordering plaintiff to pay defendant company's lawyer's fees Reverses Chancery's ordering plaintiff to repay sums already advanced Kaung v Cole National Del Ch 2004 Denied plaintiff advancement of expenses Legal fees sought [more...]
Summary Covers state and federal laws governing corporate loans to insiders Sarbanes-Oxley Act banned personal loans to directors and executive officers by public companies and other issuers Statutes Delaware GCL § 143 Notable Cases Ronsdorf v Jacobson (Del Ch 2004) Controlling stockholder must prove the entire fairness of [more...]
Statutes Delaware GCL § 291 Receivers for insolvent corporations; appointment and powers Delaware GCL § 292 Title to property; filing order of appointment; exception Delaware GCL § 293 Notices to stockholders and creditors Delaware GCL § 294 Receivers or trustees; inventory; list of debts and report Delaware GCL § 295 [more...]
California Section 2115 California § 2115 purports to apply California corporate law to non-California companies with substantial California contacts Examen v VantagePoint (Del Ch 2005) Denies defendant's motion for a permanently enjoining plaintiff from pursuing an action in California California action was stayed [more...]
Delaware - Limited Partnerships Title 6 Chapter 17 Statutory provisions §§ 101 - 111 General provisions §§ 201 - 219 Formation; Limited Partnership Certificate §§ 301 - 306 Limited Partners §§ 401 - 407 General [more...]
SEC Rule 10b-16 Rule 10b-16 Adopting release 34-8773 (1969)
Summary Covers application of DGCL to M&A disclosures Recent Cases Delaware Court of Chancery Gilliland v Motorola Inc Short-form Mergers Decision 10.08.04 859 A2d 80(Del Ch 2004) Required notice given after a short-form merger must either be accompanied by detailed financial disclosures or disclose summary [more...]
Statutes Delaware GCL § 251 Merger or consolidation of domestic corporations and limited liability company Delaware GCL § 252 Merger or consolidation of domestic and foreign corporations; service of process upon surviving or resulting corporation Delaware GCL § 253 Short-Form Mergers Delaware GCL § 254 Merger or consolidation [more...]
Statutes Delaware GCL § 391 Taxes and fees payable to Secretary of State upon filing certificate or other paper Delaware GCL § 392 Reserved Delaware GCL § 393 Rights, liabilities and duties under prior statutes Delaware GCL § 394 Reserved power of State to amend or repeal chapter; chapter part of corporation's charter or [more...]
Statutes Delaware GCL § 142 Officers; titles, duties, selection, term; failure to elect; vacancies Notable Cases Terms of officers Realty Acceptance v Montgomery (3 rd Circuit 1930) Powers and duties of officers Oberly v Howard Hughes Medical Institute (Del Ch 1984) Oberly v Kirby (Del 1991) Campbell v Loew's (Del Ch 1957) Potter v [more...]
Statutes Delaware GCL § 272 Mortgage or pledge of assets Notable Cases Greene v Reconstruction Finance (1 st Circuit 1938) Receiver of a Delaware company couldn't contest validity of a mortgage made without shareholder approval Applied predecessors to DGCL §§ 271, 272 Wright v Heizer (7 th Circuit 1977) "Delaware law [more...]
Summary Plurality vote means that the director nominee with the most votes is elected Without regard to the number of votes against or withheld Typical standard used for electing directors Rather than the majority rule standard used for other stockholder action Ensures a winner in contested elections Thus avoiding a failed election But can enable [more...]
Corporate Statutes Delaware GCL § 213 Fixing date for determination of stockholders of record SEC Rules Rule 10b-17 Requires issuers to provide advance information about: dividends or other distributions in cash or in kind planned splits or reverse splits rights or other subscription offerings Must provide to [more...]
Statutes Delaware GCL § 131 Registered office in State; principal office or place of business in State Delaware GCL § 132 Registered agent in State; resident agent Delaware GCL § 133 Change of location of registered office; change of registered agent Delaware GCL § 134 Change of address or name of registered agent Delaware GCL [more...]
Statutes Delaware GCL § 311 Revocation of voluntary dissolution Delaware GCL § 312 Revocation of voluntary dissolution Delaware GCL § 313 Renewal of certificate of incorporation or charter of religious, charitable, educational, etc., corporations Delaware GCL § 314 Status of corporation Related Topics Delaware General [more...]
Summary Type of Enhanced Scrutiny Revlon duties apply when: Company initiates bidding process to sell itself In response to an offer, Company abandons its long-term strategy and seeks an alternative transaction involving break-up of the Company Transaction will result in a sale of control If Revlon duties apply: Board must attempt in good faith to [more...]
Statutes Delaware GCL § 243 Retirement of stock Delaware GCL § 244 Reduction of capital Notable Cases Retirement of stock Johnston v Wolf Reduction of capital Martin v American Potash & Chemical Johnston v Wolf Wright v Heizer Greenmail Disney adopts an anti-greenmail by-law 2005 Form 8-K 8.18.05 [more...]
Statutes Delaware GCL § 253 Authorizes the board of directors of a Delaware corporation that owns 90 per-cent or more of each of the outstanding classes of stock of a subsidiary that are entitled to vote on a merger to merge the subsidiary into itself without any requirement for action to be taken by the board of directors of the subsidiary [more...]
Statutes Delaware GCL § 211 Meetings of stockholders Delaware GCL § 212 Voting rights of stockholders; proxies; limitations Delaware GCL § 213 Fixing date for determination of stockholders of record Delaware GCL § 214 Cumulative voting Delaware GCL § 215 Voting rights of members of nonstock corporations; quorum; proxies [more...]
Summary Covers DGCL provisions about stock certificates Statutes Delaware GCL § 158 Stock certificates; uncertificated shares Delaware GCL § 167 Lost, stolen or destroyed stock certificates; issuance of new certificate or uncertificated shares Delaware GCL § 168 Judicial proceedings to compel issuance of new certificate or [more...]
Statutes Delaware GCL § 152 Issuance of stock; lawful consideration; fully paid stock Delaware GCL § 153 Consideration for stock Delaware GCL § 156 Partly paid shares Delaware GCL § 161 Issuance of additional stock; when and by whom Delaware GCL § 162 Issuance of additional stock; when and by whom Delaware GCL § 163 [more...]
Summary Covers corporate law issues affecting stock options, rights and warrants Statutes Delaware GCL § 157 Rights and options respecting stock Developments Lillis v AT&T and AT&T Wireless (Del Ch 2005) Former holders of out-of-the-money options brought suit Options were cancelled when AT&T Wireless merged with [more...]
Statutes Delaware GCL § 159 Shares of stock; personal property, transfer and taxation Delaware GCL § 169 Situs of ownership of stock Notable Cases Greene v Johnston (Del 1953) duPont v Delaware Trust (Del Ch 1976) Haft v Dart Group (D Del 1995) Equitable Trust v Gallagher (Del 1954) Pabst Brewing v Jacobs (D Del 1982) [more...]
Summary Covers corporate law issues related to terms, rights and preferences of stock Including for preferred stock Statutes Delaware GCL § 151 Classes and series of stock; redemption; rights Developments Shintom v Audiovox (Del 2005) Claimed that DGCL § 151(c) requires that holders of preferred stock must [more...]
Statutes Delaware GCL § 201 Transfer of stock, stock certificates and uncertificated stock Delaware GCL § 202 Restrictions on transfer and ownership of securities Notable Cases Bender Memory Metals (Del Ch 1986) Reeves v Transport Data Communications (Del Ch 1974) Corporacion Venezolana de Fomento v Vintero Sales (SD NY 1978) [more...]
Statutes Hollinger v Hollinger International (Del Ch 7.29.04) § 271.1 Gimbel v Signal Cos aff'd 316 A2d 619 § 271.2 Katz v Bregman appeal refused sub nom Plant Indus v Katz Wingate v Bercut § 271.3 Gimbel v Signal Cos aff'd 316 A2d 619 9 Philadelphia Natl Bank v BSF Co rev'd 204 A2d 746 Atwood Grain & Supply Co [more...]
Statutes Delaware GCL § 321 Service of process on corporations Delaware GCL § 322 Failure of corporation to obey order of court; appointment of receiver Delaware GCL § 323 Failure of corporation to obey writ of mandamus; quo warranto proceedings for forfeiture of charter Delaware GCL § 324 Attachment of shares of stock or any [more...]
§ 101 Incorporators; how corporation formed; purposes: § 101.1 Scope and application of statute Case 1: Reed v. Tidewater Coal Exch. Inc 116 A. 898 Case 2: Oberly v. Howard Hughes Medical Inst. 472 A.2d 366 Case 3: Plechner v. Widener College, Inc. 418 F.Supp. 1282 aff'd 569 F.2d 1250 Case 4: Chapin v. Benwood Foundation, Inc 402 A.2d [more...]
§ 121 General powers § 121.2 Intracorporate allocation of corporate powers Case 1 Bruch v National Guar Credit Corp 116 A 738 Case 2 Rice & Hutchins Inc v Triplex Shoe Co 147 A 317 affd 152 A 342 Case 3 Maddock v Vorclone Corp 147 A 255 Case 4 Gaskill v. Gladys Belle Oil Co 147 A 337 Case 5 Sterling v Mayflower Hotel Corp 93 A2d 107 [more...]
§ 132 Registered agent in State; resident agent: § 132.1 In general Case 1: Trans-Americas Airlines v. Kenton 491 A.2d 1139
§§ 141 Board of directors; powers; number, qualifications, terms and quorum; committees; classes of directors; non-profit corporations; reliance upon books; action without meeting, etc: § 141.1 Management of the corporation by a board of directors Case 1: Lehrman v. Cohen 222 A.2d 800 Case 2: In re National Intergroup, Inc. [more...]
Stock Transfer : Delaware GCL § 201 Delaware GCL § 202 Business Combination Statutes : Delaware GCL § 203 § 201 Transfer of stock, stock certificates and uncertificated stock: § 201.3 Issuer's duty to transfer stock Case 1: Lummis Atlas Corp. C.A. No. 5629 Case 2: Bender Memory Metals, Inc. 514 A.2d 1109 [more...]
n Charter Amendments Delaware GCL § 241 Delaware GCL § 242 Delaware GCL § 245 Capital accounts Delaware GCL § 243 Delaware GCL § 244 § 242 Amendment of certificate of incorporation after receipt of payment for stock; non-stock corporations § 242.2 The charter as contract and the power to amend § [more...]
" Substantially all assets ": Delaware GCL § 271 Pledge of assets : Delaware GCL § 272 § 271 Sale, lease or exchange of assets; consideration, procedure: § 271.1 Changes in the statute Case 1: Butler v. New Keystone Copper Co. 93 A. 380 Case 2: Gimbel v. Signal Cos. 316 A.2d 599 aff'd 316 [more...]
aka Empty Voting Summary Addresses practices that decouple voting power from economic ownership Focus of increasing critical attention as activist shareholders - including hedge funds - sway voting using financial techniques e.g Mylan Labs - King Pharma below Unclear how widespread the practice is Techniques include: Short selling Borrowing [more...]
GCL § 213 Notable Cases Jones Apparel v Maxwell Shoe (Del Ch 5.27.04) For purposes of setting record date for consent solicitation, charter provision controls
Statutes Delaware GCL § 218 Voting trusts and other voting agreements Notable Cases Oceanic Exploration v Grynberg (Del 1981) 428 A 2d 1 Disclosure Requirements - S-K 601(b)(9) Text of Rule Voting trust agreements and amendments thereto must be filed as an exhibit Applies to: S-1 S-4 S-11 F-4 10-K Form 10 [more...]
Summary "an exchange that is so one sided that no business person of ordinary, sound judgment could conclude that the corporation has received adequate consideration." In re Walt Disney (Del Ch 2005) at page 111 Brehm v Eisner 746 A.2d at 263 Not entitled to presumption of the business judgment rule Notable Cases In re Walt Disney (Del [more...]
Statutes Delaware GCL § 141(f) Authorizes board action by unanimous written consent Notable Cases Unanue v Unanue [Goya Foods] (Del Ch 2004) Dispute over validity of written consents to remove director of a closely-held company Rejects argument that plaintiffs had duties of disclosure beyond those set forth in DGCL § 228 [more...]