CURRENT MONTH (August 2023)
2023 Amendments to the Delaware General Corporation Law
By Pamela Millard and Alexander DiRienzo, Potter Anderson & Corroon LLP
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, and the legislation addresses several significant topics, including simplifying the procedures required to ratify a defective corporate act because of a failure of authorization and simplifying the required contents of a certificate of validation under Section 204 of the DGCL; clarifying the record date for identifying which stockholders are entitled to notice of stockholder action via written consent; modifying the need for or reducing the minimum stockholder vote required for charter amendments effecting forward stock splits, reverse stock splits, and changes in the number of authorized shares of a class of stock; providing appraisal rights in connection with a transfer; continuance or domestication of a Delaware corporation to a non-U.S. entity; and creating a safe harbor in which stockholder approval would not be required for a mortgage or pledge of assets.
Authority to Sell Treasury Shares (Sections 152, 153, 157, and 160(b))
The amendments to Sections 152, 153, and 157 of the DGCL build on amendments adopted in August 2022 that expanded a board’s ability to delegate authority to an individual or entity to issue stock or options in the corporation, and also harmonized the procedures to authorize rights and options to purchase stock with existing procedural requirements to issue stock.
The amendments to Sections 152 and 153 of the DGCL, which govern the approval and issuance of stock, clarify that treasury shares may be sold for less than the minimum consideration required to issue stock, which is typically par value. In addition, Section 153 was amended to provide that (i) the consideration received for treasury shares may be greater than, less than, or equal to the par value of the shares, and (ii) the consideration a corporation may receive for treasury shares may consist of cash, any tangible or intangible property, or any benefit to the corporation, harmonizing Section 153 with language already contained in Section 152.
The amendments to Section 157 of the DGCL further modernize the statute by providing that, in addition to granting board authority to a person or body, including a committee of the board, to issue rights and options, the board may also delegate authority to determine the terms upon which shares may be acquired by the corporation upon the exercise of rights or options. As a practical matter, the amendments expand the delegation of authority permitted under Section 157 to include vesting terms, acceleration, and other typical features of equity awards.
In connection with the amendments to Section 152, 153, and 157, Section 160(b) of the DGCL was amended to clarify that a corporation may resell treasury shares resulting from the corporation’s redemption or repurchase of treasury shares out of surplus, in accordance with Section 153, so long as the shares have not been retired, and the corporation’s certificate of incorporation does not require the shares to be retired.
See Business Law Today’s upcoming full-length article on this topic for information on other amendments.
