04 Sep 2020 Amendments to Delaware Entity Laws
We’ve recapped the recent amendments to Delaware’s Entity Laws
On July 16, 2020, amendments to the Delaware General Corporation Laws (DGCL) and Limited Liability Company Act (DLLCA) were signed into law. These entity amendments are effective on varying dates.
DGCL Entity Amendments
Section 102(b)(7) provides that a corporation may adopt an exculpation provision eliminating or limiting personal liability of a director or stockholders for breaches of fiduciary duty. Further if the corporation later repeals, amends or eliminates the exculpation provision it will not affect protection of prior acts or omissions, unless the provision provides otherwise.
Board of Directors Emergency Powers:
Section 110 was amended to expressly provide that the Board of Directors may invoke emergency bylaws in instances of a pandemic, epidemic or declared national emergency. Emergency powers may be invoked when a majority of directors is not present, or a quorum cannot be convened. New Section 110(i) has been added to grant flexibility to the board to postpone stockholder meeting and delay the payment date of a declared dividend in certain cases. The amendment is retroactive to January 1, 2020.
Section 145, provides that officers and directors have mandatory indemnification if they achieve a successful defense on the merits of any action, suit or proceeding under Section 145(a) or (b). 145(c)(1) clarifies the meaning of officer. Effective December 31, 2020, only the following officers will be entitled to mandatory indemnification under Section 145, president, CEO, CFO, COO, CFO, CLO, CAO, controller, or treasurer. The corporation may specify other officers who will be entitled to mandatory indemnification.
Section 116 was clarified and confirm that electronic transmission and consents are generally acceptable under DCGL.
Holding Company Mergers:
Section 251(g) amendment provides (a) that a corporation, without a vote of stockholders, may merge with and into a wholly-owned subsidiary under certain conditions, and (b) eliminates the provision that the governing documents of a wholly-owned subsidiary must be identical to those of the operating accompany.
Stockholder Email Notifications:
Section 232 is amended to clarify that stockholders, may receive notice from the corporation by email without prior consent.
Public Benefit Corporations:
Section 365 is amended to provide that in the absence of conflict of interest a failure to satisfy the balancing requirement does not constitute an act or omission not in good faith or a breach of loyalty for purposes of Section 201(b)(7) or Section 145 is provide by default, unless certificate of incorporation states otherwise.
The amendments also change (i) the voting threshold to convert from a regular corporation to a PBC is reduced from 2/3 stockholder vote to a majority of stockholders, and (2) the removal of the application of appraisal rights to a conversion.
LLC Entity Amendments
Section 18-210 is amended to confirm that no appraisal rights are available with respect to interests in an LLC unless they are provided in the operating or merger agreement.
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