Delaware General Assembly

Signed 7/2/99

The General Assembly has ended, the current status is the final status.

5/12/99

Sharp

Sen. Vaughn, Amick, Winslow
Reps. Spence, Valihura, Wagner, DiLiberto

AN ACT TO AMEND TITLE 8 OF THE DELAWARE CODE RELATING TO THE GENERAL CORPORATION LAW.

Section 1. The amendment to Section 102(a)(1) provides that punctuation is optional in abbreviations of corporate names and that words (or abbreviations thereof) of foreign countries or jurisdictions, including, but not limited to, foreign countries or jurisdictions using the English language, designating corporate status are acceptable for purposes of Section 102(a)(1). Section 2. Section 111 is new. It clarifies that the Court of Chancery may entertain actions to interpret, apply or enforce any provision of the certificate of incorporation or bylaws of a corporation, regardless of whether there is some independent basis for subject matter jurisdiction in that court. Section 111 is not intended to limit in any way the subject matter jurisdiction of the Court of Chancery established under preexisting law. Section 3. The language of Section 170(a) has been revised to make clear that dividends may be declared and paid by nonstock nonprofit corporations as well as nonstock for profit corporations. Section 4. The amendments to Section 202 clarify that reasonable written restrictions on the amount of a corporation’s securities that may be owned by any person or group of persons are permitted under the General Corporation Law. Subsection (c) of Section 202 has been amended to provide that a restriction on transfer or ownership generally is permitted by Section 202 if it obligates the holder of restricted securities to sell or transfer restricted securities or if it causes or results in the automatic sale or transfer of restricted securities. The amendment to subsection (d) clarifies that maintaining or preserving tax attributes (including net operating losses) and qualifying a corporation as a real estate investment trust are among the tax advantages that are conclusively presumed to constitute a reasonable purpose for imposing restrictions on transfer or ownership. Subsection (d) also has been amended to provide that restrictions imposed for the purpose of maintaining any statutory or regulatory advantage or complying with any statutory or regulatory requirements under applicable law are conclusively presumed to be for a reasonable purpose. The amendments to Section 202 regarding restrictions on the amounts of securities that may be owned by any person or group are not intended to impact existing law relating to other types of limitations or restrictions on the rights of security holders based on the amount of securities owned, such as limitations on voting rights, conversion rights, or redemption rights. Section 5. The amendments to Section 242(b)(3) are intended to delete as redundant the requirement for a second meeting of the governing body of a nonstock corporation in connection with the amendment of its certificate of incorporation and to clarify the procedures for adopting such an amendment where a vote of the members of such corporation is required by the certificate of incorporation. Section 6. This section retitles Subchapter IX of the General Corporation Law to include the concept of conversion, conforming to the addition of new §§ 265 and 266 to such subchapter. Section 7. The amendment to Section 251(g) clarifies that a vote of the holding company’s stockholders is not required to elect or remove directors of a subsidiary (surviving) corporation and that the certificate of incorporation of a subsidiary (surviving) corporation need not be amended to so provide. Section 8. The amendment to Section 253(a) provides that the 90% ownership requirement applies only to a class of stock of which there are outstanding shares that would otherwise be entitled to vote on the merger, so that, if the only outstanding shares of a class of stock are shares that would otherwise not be entitled to vote on the merger, then the 90% ownership requirement for effecting a short form merger would not apply to such class of stock. Section 9. The amendment to Section 255(c) conforms the vote of the members required to approve a merger of a nonstock corporation to the vote required to approve a merger of a stock corporation by changing the required vote from a two-thirds vote to a majority vote of the members. Section 10. This section adds a new § 265 of the Act which provides that any limited liability company, limited partnership or business trust of this State may convert to a corporation of this State upon obtaining the requisite approval of a certificate of conversion and a certificate of incorporation by such converting entity, and the filing of such certificate of conversion and certificate of incorporation with the Secretary of State. Such conversion shall not affect any obligations or liabilities of the converting entity incurred prior to its conversion or the personal liability of any person incurred prior to such conversion. Section 11. This section adds a new § 266 of the Act which provides that any corporation of this State may convert to a limited liability company, limited partnership or business trust of this State upon obtaining the requisite approval, including the approval of the holders of all outstanding shares of stock of the corporation, whether voting or nonvoting, and the filing of a certificate of conversion with the Secretary of State. Such conversion shall not affect any obligations or liabilities of the converting corporation incurred prior to its conversion or the personal liability of any person incurred prior to such conversion. Section 12. The additions of subsections (a)(25) and (a)(26) to § 391 provide the applicable fees in connection with filings under §§ 265 and 266. Section 13. Section 13 provides for an effective date of July 1, 1999.

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Takes effect upon being signed into law

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