Delaware General Assembly

Signed 7/16/20

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

6/5/20

Lynn

Reps. Bush, Griffith
Sen. Brown, Delcollo, Hansen, Townsend

Reps. Brady, Dorsey Walker, Ramone, Spiegelman
Sen. Ennis

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

Section 1. Section 1 of this Act amends Section 102(a) to provide that the name of a corporation must be such as to distinguish it from the name of any registered series of a limited partnership. Section 2. Section 2 of this Act amends Section 102(b)(7). Section 102(b)(7) authorizes a corporation to include in its certificate of incorporation an exculpatory provision that eliminates or limits the liability of directors for monetary damages for certain breaches of duty. The amendment to Section 102(b)(7) clarifies that an exculpatory provision has the effect of eliminating or limiting liability for monetary damages with respect to any act or omission of a director occurring while the exculpatory provision is in effect. Unless the provision provides otherwise at the time of such act or omission, any future amendment, repeal or elimination of that provision will not revoke the elimination or limitation of liability. Section 3. Section 3 of this Act amends Section 108(c). To conform to amended Section 116, Section 108(c) is being amended to permit an incorporator or initial director to rely on Section 116 as a basis to document, sign and deliver a consent by electronic means, unless the use of Section 116 is expressly restricted or prohibited by a provision of the certificate of incorporation. Section 4. Section 4 of this Act amends Section 110. The amendments to Section 110 clarify the types of events that give rise to the availability of emergency powers and confirm certain of the specific powers relating to stockholders’ meetings and dividends that may be exercised during an emergency condition. The amendments to Section 110 are not intended, by implication or otherwise, to limit or eliminate the availability of any powers or emergency actions that are not specifically enumerated with respect to stockholders’ meetings, dividends, or other matters that are practical and necessary in connection with the particular emergency, or to affect the validity of any action taken in an emergency situation but not authorized by the amendments or taken in a non-emergency situation. Section 5. Section 5 of this Act amends Section 116. Section 116(a)(2) establishes non-exclusive means to sign documents for purposes of chapter 1 of title 8. An amendment to this provision clarifies that a person may “execute” a document (such as agreements of merger and other documents that require execution pursuant to chapter 1 of title 8) by using any type of signature contemplated by Section 116(a)(2). Section 116(b) is being amended to allow persons to rely on Section 116(a) as a basis for using an electronic transmission to document director, stockholder, member and incorporator consents and for signing and delivering those documents by electronic means. This amendment supplements provisions that already permitted these consents by electronic means before this amendment. A conforming amendment to Section 116(a)(3) requires that the electronic delivery of stockholder or member consents, and the electronic delivery of documents evidencing a proxy granted by a stockholder or member, must satisfy additional requirements set forth in Section 228(d) (with respect to consents) and Section 212(c) (with respect to proxies). The final sentence of Section 116(b) is being amended to clarify that a provision in the certificate of incorporation or bylaws may restrict or prohibit only the electronic means (but not the manual means) to document an act or transaction and to sign and deliver a document. Section 6. Section 6 of this Act amends Section 132(a)(4) to remove erroneous references to a foreign “general” partnership. Section 7. Section 7 of this Act amends Section 135 to reflect the current practice of the Office of the Secretary of State relating to the appointment of a successor registered agent by a registered agent of a corporation. Section 8. Section 8 of this Act amends Section 141(f). To conform to amended Section 116, Section 141(f) is being amended to permit a director to rely on Section 116 as a basis to document, sign and deliver a consent by electronic means, unless the use of Section 116 is expressly restricted or prohibited by a certificate of incorporation or bylaw provision adopted pursuant to Section 116(b). Section 9. Section 9 of this Act amends Sections 145(c) and 145(f). Section 145(c) provides current and former directors and officers a right to indemnification if they are successful (on the merits or otherwise) in defending claims brought against them by reason of their conduct as directors and/or officers. Amended Section 145(c) defines the group of officers who are entitled to this statutory right of indemnification as the officers who are deemed to have consented to the jurisdiction of the State for acts relating to breach of officer duties pursuant to Section 3114(b) of title 10. Section 3114(b) of title 10 does not apply to residents of the State, but amended Section 145(c) treats residents as if they were non-residents to ensure that persons who hold the officer positions identified in Section 3114(b) are entitled to indemnification, whether or not they are residents of the State. The amendment does not define who qualifies as an officer under Section 145(c) for purposes of a right to indemnification for an act or omission occurring on or before December 31, 2020 and does not define who qualifies as an officer for purposes of the other subsections of Section 145. Section 145(c) is also amended to add a new subsection (2) that permits (but does not require) a corporation to indemnify other persons who are not current or former directors or officers if they are successful in defense of a proceeding referenced in subsections (a) and (b) of Section 145. A corporation may rely on Section 145(f) to make this permissive indemnification a mandatory right for these other persons, such as pursuant to a provision in the certificate of incorporation, the bylaws, an agreement, or vote of stockholders or disinterested directors. This amendment to Section 145(c) is consistent with case law holding that a corporation lawfully may agree to provide indemnification to a person who is not a director or officer solely based on that person’s successful defense of a claim covered by Section 145(a) or (b), without an inquiry into whether such person has met the conduct requirements of Section 145(a) or (b). See, Cochran v. Stifel Financial Corp., Del. Ch. C.A. No. 17350 (Dec. 13, 2000), aff’d in part and reversed in part, both on unrelated grounds, 809 A.2d 555 (Del. 2002). Section 145(f) prohibits the elimination or impairment of a right to indemnification or to advancement by amendment to the certificate of incorporation or the bylaws after the occurrence of the act or omission that is the subject of the civil, criminal, administrative, or investigative action, suit or proceeding for which indemnification is sought, unless the provision in effect at the time of the act or omission explicitly authorizes such elimination or impairment after such act or omission has occurred. The amendment to Section 145(f) clarifies that such prohibition applies in the case of any repeal or elimination of the certificate of incorporation or the bylaws. Section 10. Section 10 of this Act amends Section 212(c) to add a new subsection (3), which clarifies that a stockholder or member may rely on Section 116 as basis to document a proxy and to sign and deliver a document evidencing the proxy, unless an express provision of the certificate of incorporation or bylaws adopted in accordance with Section 116(b) prohibits or restricts those actions being taken by electronic means. An amendment to subsection (1) of Section 212(c) simplifies the language but does not enact a substantive change. Section 11. Section 11 of this Act amends Section 213(b). To conform to amended Section 228(d), Section 213(b) is being amended to eliminate redundant references to where, and to whom, a consent may be delivered. Section 12. Section 12 of this Act amends Section 228. Section 228(d) is being amended by deleting the provisions on documenting, signing and delivering a consent by electronic means, so that those actions may be effected pursuant to amended Section 116, unless an express provision of the certificate of incorporation or bylaws adopted in accordance with Section 116(b) restricts or prohibits a consent from being documented, signed or delivered electronically. The last sentence of amended Section 228(d)(1) requires certain additional information to be provided to the corporation in connection with delivering a consent electronically. Redundant references to where, and to whom, a consent may be delivered have been deleted from amended Sections 228(a) and (b). References to “written consents” or consents set forth “in writing” have been replaced with a new sentence added to Section 228(c) stating that a consent must be set forth in writing or in an electronic transmission. Section 13. Section 13 of this Act amends Section 232(b) to clarify that a stockholder’s or member’s consent is not required in order for a corporation to give the stockholder or member notices by electronic mail pursuant to Section 232(a). Section 14. Section 14 of this Act amends Section 251(g)(7) to eliminate the requirement, in connection with a merger pursuant to such Section, that the organizational documents of the surviving entity contain provisions identical to the certificate of incorporation of the constituent corporation immediately prior to the merger. This amendment shall not be construed to eliminate the requirement in Section 251(g) that the organizational documents of the surviving entity contain provisions requiring approval of the holding company's stockholders for any act or transaction by the surviving entity that, if taken by the constituent corporation immediately prior to the merger, would have required stockholder approval. This Act also makes clerical changes to Section 251(g)(4). The amendments to Section 251(g) shall be effective with respect to agreements of merger or consolidation consummated pursuant to an agreement entered into on or after their enactment into law. Section 15. Section 15 of this Act amends Section 262(b) to conform to the amendments to Section 363 relating to public benefit corporations. The amendments to Section 262 shall be effective with respect to a merger or consolidation consummated pursuant to an agreement entered into, or, with respect to a merger consummated pursuant to Section 253, resolutions of the board of directors adopted, on or after their enactment into law. Section 16. Section 16 of this Act amends Section 266 to reflect the current practice of the Office of the Secretary of State relating to the issuance of a certified copy of a certificate of conversion to non-Delaware entity. Section 17. Sections 17, 18 and 19 of this Act amend Sections 363, 365 and 367, respectively. The amendments to Section 363 will lower from two-thirds to a majority the stockholder vote required for (1) amendments to a certificate of incorporation that convert a conventional corporation into a public benefit corporation or convert a public benefit corporation into a conventional corporation and (2) mergers that convert shares of conventional corporations into shares of public benefit corporations or shares of public benefit corporations into shares of conventional corporations. Those amendments will also eliminate appraisal rights for (1) amendments to a certificate of incorporation that convert a conventional corporation into a public benefit corporation and (2) mergers that convert shares of conventional corporations into shares of public benefit corporations. The amendments to Section 363(b)(2) shall be effective with respect to a merger or consolidation consummated pursuant to an agreement entered into, or, with respect to a merger consummated pursuant to Section 253, resolutions of the board of directors adopted, on or after their enactment into law. The amendments to Section 365(c)(1) clarify that, for the purposes of Section 365(b), a director will not be interested with respect to a balancing decision due to the director’s interest in stock of the corporation, except to the extent that such ownership would create a conflict of interest if the corporation were not a public benefit corporation and (2) provide that any failure to satisfy the balancing requirement shall not constitute an act or omission not in good faith for the purposes of Section 102(b)(7) or Section 145, unless the certificate of incorporation otherwise provides. The amendments to Section 367 clarify that any lawsuit to enforce the balancing requirement to which public benefit corporations are subject must be brought by plaintiffs owning at least 2% of the corporation’s outstanding shares or, in the case of certain listed companies, shares with a value of at least $2,000,000 if such number is lower. Section 18. Section 20 of this Act amends Section 377(b) to conform the process relating to the resignation of a registered agent of a foreign corporation to the process applicable to the resignation of a registered agent of a corporation under Section 136. Section 19. Section 21 of this Act amends Section 391(a)(16) to include the maximum fee payable to the Secretary of State for a written report of a record search. Section 20. Sections 22 through 24 of this Act relate to the effectiveness of the amendments to Title 8. Section 22 of this Act provides that each of Sections 1 through 3, Sections 5 through 13, Section 16, and Sections 17 (other than with respect to the repeal of Section 363(b)(2)) through 21 of this Act is effective upon its enactment into law. Section 23 of this Act provides that Section 4 of this Act is effective retroactively as of January 1, 2020 with respect to any emergency condition occurring on or after such date and with respect to any action contemplated by Section 4 of this Act and taken on or after such date by or on behalf of the corporation with respect to a meeting of stockholders held or a dividend as to which the record date or payment date is anticipated to occur during the pendency of such condition. Section 24 of this Act provides that each of Sections 14, 15 and 17 (solely with respect to the repeal of Section 363(b)(2)) of this Act is effective only with respect to a merger or consolidation consummated pursuant to an agreement entered into, or, with respect to a merger consummated pursuant to Section 253, resolutions of the board of directors adopted, on or after enactment into law of such Section.

82:256

30

7/16/20

N/A

View HTML View PDF