The Council of the Corporation Law Section of the Delaware State Bar Association has proposed legislation that will amend the General Corporation Law of the State of Delaware (the “DGCL”). If adopted, the legislation will affect a number of provisions of the DGCL, will address a number of different topics, and may change practice in a number of different ways, including with respect to the process by which public company merger transactions are conducted. The merger amendment would add a new Section 251(h) that would allow corporations to opt into a streamlined back-end merger process intended to obviate the need under certain circumstances for a corporation to hold a stockholder meeting, the results of which are a foregone conclusion. The proposed legislation also includes a new Section 204 that authorizes the ratification of certain defective corporate acts and stock issuances and a new Section 205 that confers jurisdiction upon the Delaware Court of Chancery to hear matters related to the new Section 204 as well as other matters relating to the cure of defective or potentially defective corporate acts. In addition, the proposed legislation will permit the formation of specialized public benefit corporations. Directors of a public benefit corporation, or PBC, would be permitted by statute to consider the best interests not only of a corporation’s stockholders but also of other persons, entities, communities or interests. Finally, the proposed legislation contains revisions to Sections 11 (a), 312(b), and 502(a) designed to address issues identified by the Delaware Secretary of State with respect to so-called “Aged Corporations.” A number of conforming revisions are required to other provisions of the DGCL, including Section 262, which governs stockholder appraisal rights.
If ultimately enacted into law, the proposed amendments will take effect on August 1, 2013, except for the new Section 204 and 205 and the changes related thereto, which would become effective on April 1, 2014.
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