FOREWORD This Digest is published by Corporation Service Company for the legal profession, to whom Corporation Service Company offers its services in the incorporation and representation of Delaware Corporations, their qualification in other states and assistance in the preparation of any papers under the Statute. ABOUT THE AUTHOR Professor Ernest L. Folk, III, Professor of Law at the University of Virginia, was the official reporter and adviser to the Delaware Committee on the Revision of the General Corporation Law. He received his A.B. degree from Roanoke College, Roanoke, Virginia, in 1952 and his L.L.B. degree from the University of Virginia School of Law in 1956, where he was a member of the Law Review. In 1958 he received an M.A. from the University of Virginia. Professor Folk completely redrafted the Corporation Law for the State of South Carolina. Copyright 1969 by AMENDMENTS TO THE DELAWARE GENERAL CORPORATION LAW-1969 .. I. Fundamental Corporate Changes A. Mergers and Consolidations B. Sale of Assets C. Dissolution D. Appraisal Rights E. Amendments to the Certificate of Incorporation II. Management Powers and Procedures Page 1 1 1 2 3 4 5 5 7 8 9 10 11 11 11 12 12 13 13 14 16 16 16 16 17 17 17 19 19 20 20 21 21 Changes and Comments When the new Delaware General Corporation Law was adopted in 1967, the revisers contemplated keeping the statute under constant surveillance so that it would be fully and currently responsive to the constantly changing needs of the business world. Only thus would it be possible to maintain the excellence of a statute under which American corporations have been more frequently organized than under any other state law. In 1968, a number of technical amendments were adopted. In 1969, the General Assembly of Delaware enacted further amendments which polish and perfect a statute already acclaimed for its flexibility and capacity to handle corporate problems of widely varying character. The amendments did not alter the broadly liberal character of the statute nor introduce unsettling changes. The basic structure of the statute, including such popular features as the broad indemnification law and the flexible merger procedures, are preserved, but with some helpful clarifying changes in the latter. The purpose of this pamphlet is to describe and explain the principal 1969 amendments. They will be examined, under broad headings rather than in the numerical sequence of the statute, with initial attention to amendments of greatest current interest to the business community. I. “FUNDAMENTAL CORPORATE CHANGES" A. Mergers and Consolidations Vote: The most important change made by the new amendments is to reduce the vote necessary for stockholder approval of a merger with another corporation. Previously, section 251(c) required approval by "two-thirds of the total number of the outstanding shares of the capital stock" of the corporation. The new amendment requires only "a majority of the outstanding stock of the corporation entitled to vote thereon."2 Whether or not stock is entitled to vote on the merger is determined by the certificate of incorporation; ordinarily only common stock will have such voting rights. 1. See the Technical Amendments Act Section, infra at p. 11 for a brief summary of the principal changes made by the Technical Amendments Act (Delaware Senate Bill 273, Chapter 186, Laws of 1967) effective January 2, 1968. 2. Amended section 251 (c) (emphasis supplied) p. 25. vided that a surviving corporation could consummate a merger without obtaining the approval of its stockholders if it did not amend its certificate of incorporation or issue or deliver shares of any class of its stock in excess of 15% of the number of shares of that class outstanding immediately before the merger.3 The 1969 amendment leaves this untouched, except to require that the sur viving corporation execute and file with the Delaware Secretary of State a certificate reciting the facts which, under the statute, excuse any vote by the surviving corporation's shareholders.* Consideration: Another significant amendment to the basic merger provision enlarges the permissible types of consideration available for use in a merger. The new amendment now provides that in a merger "property" and "rights" may be used as consideration, as well as cash or shares or securities of the surviving or new or of any other corporation (as originally provided). Thus, the flexibility of choice for corporations is markedly enhanced. Conforming changes to enlarge permissible types of consideration have been made in the statutory provisions permitting merger of Delaware and non-Delaware corporations, and for short-form mergers between parent and subsidiary." Other Changes: Several housekeeping changes, not altering substance, were made in the provisions governing mergers between Delaware and non-Delaware corporations. See the discussion under "Appraisal Rights" for changes in the law relating to ap praisal rights which, in Delaware, are available only in certain cases of merger.9 B. Sale of Assets Delaware law has long permitted a corporation to sell all or substantially all of its assets with approval only of a majority of the shares of stock entitled to vote. Without changing the sub 3. Section 251 (f) p. 25. 4. Amended section 251 (f) p. 25. 5. Amended section 251 (b) (4) p. 24. 6. Amended section 252 (b) (3) pp. 26-27. 7. Amended section 253 (a) pp. 27-28. 8. Thus, the amendments make a consistent linguistic change more precisely specifying that when Delaware and non-Delaware corporations merge, one condition of the merger is that the statutes of the other juris diction "permit a corporation of such jurisdiction to merge or consolidate with a corporation of another jurisdiction." Amended section 252 (a) (rewording last sentence) p. 26; Id., similarly rewording section 253 (e) p. 28: Id., similarly rewording section 256 (a) p. 28; and Id., similarly rewording section 258 (a) p. 28. 9. Text, infra at p. 4. |