DGCL Sections 204 and 205 Go Into Effect April 1, 2014

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Tomorrow, on April 1, 2014, some potentially important new provisions in the Delaware General Corporation Law (the DGCL) will go into effect. 

New Section 204 of the DGCL provides corporations with the ability to ratify certain corporate actions that would otherwise have been void or voidable because of their failure to comply with statutory law or the corporation’s organizational documents. Prior to Section 204 becoming effective, Delaware case law had held that such actions could not be subsequently ratified. Beginning April 1, provided they comply with the procedures set forth in Section 204, corporations may ratify such actions.

New Section 205 of the DGCL vests the Court of Chancery with exclusive jurisdiction over any action brought in respect of such defective corporate acts. Section 205 also vests the Court of Chancery with the ability to modify any procedure required under Section 204.   

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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