A. Organization Expenses. (1) Tax payable on filing Certificate of Incorporation: Taxes are calculated on the total authorized shares of capital stock, as follows: (Sec. 391 (a) (1)) The minimum tax payable shall not be less than $10.00. (2) Filing Fee: The filing fee is $25.00 (Sec. 391 (a) (7)). (3) Certification Fee: The fee for copying and certifying a certificate of incorporation varies with length but the minimum fee is $7.50. (Sec. 391 (a) (10).) (4) Recording Fee: The recording fee varies by county and averages $10.00. B. Annual Franchise Tax. Every corporation shall pay an annual franchise tax, which shall not be less than $20.00 nor more than $110,000.00 per year (Sec. 503 (c)). For all corporations other than regulated investment companies (See Sec. 503 (h)), the tax payable is the lesser of the amounts calculated under paragraphs (1) and (2): (1) Based on Authorized Number of Shares (Sec. 503 (a) (1)): Not over 1000 authorized shares From 5000 to 10,000 authorized shares Each additional 10,000 shares or part thereof $20.00 24.20 30.25 60.50 30.25 (2) Based on “Assumed No-Par" and "Assumed Par Value" Capital: (Sec. 503 (a) (2)): The tax base is the sum of (a) the total number of nopar shares multiplied by $100, as follows: plus (b) an "assumed par value capital" on which the tax is $121.00 per $1,000,000 (or fraction thereof) of the "assumed par value capital," which is calculated by dividing total assets by the total number of issued shares of all classes, both par and no par. If this quotient (which is the asset value per share) is greater than the par value of shares of any class, it is multiplied by the number of authorized par shares of that class. If this quotient is less than the par value of any class of authorized shares, their par value (rather than the quotient) is multiplied by the total number of authorized par shares of that class. When it is necessary to use the par value for some shares and the asset value per share for others, "assumed par value capital" is the sum of these calculations. If total "assumed par value capital" is less than $1,000,000, it is prorated. (Sec. 503 (a) (2). The total assets figure used in these calculations is taken from a sworn statement of designated officers; if not submitted, the franchise tax must be calculated on the basis of authorized shares (Sec. 503 (b).) (3) Regulated investment companies: They may calculate their annual franchise tax under the methods above or under a special third method and pay the smallest amount. The special method imposes a tax of $181.50 per $1,000,000 of average gross assets during the tax year, with a maximum tax of $55,000 (rather than $110,000.00 as with other corporations). (Sec. 503 (h).) C. Other Provisions Applicable to Annual Franchise Tax. (1) Assessment and Payment Date: The Secretary of State calculates the franchise tax which is due April 15, and gives notice by May 15, If not paid by July 1, it bears interest of 1% per month until paid. (Sec. 504.) The assessment is subject to review by the Secretary of State and by the Court of Chancery (Sec. 505). (2) Collection: The unpaid tax is a debt due the State which may sue at law after one month's arrears and which is a preferred debt in insolvency (Sec. 507). On motion of the Attorney General, after three months' arrears, the Court of Chancery may enjoin the corporation from doing business in the State until it pays the tax plus interest and costs (Sec. 508). If taxes are in arrears for two consecutive years, the following sanctions are applicable: (a) the Attorney-General may apply to the Court of Chancery for appointment of a receiver, or otherwise compel sale of choses in action, patents or licenses, to pay the tax (Sec. 509); (b) the corporation's charter becomes void, unless the Secretary of State extends the time to pay the tax (Sec. 510); and (c) the Governor of Delaware on January 31 of each year issues a proclamation listing the delinquent corporations whose charters are repealed (Secs. 511-514, 517). (3) Relief for Certain Corporations: Delaware corporations, all of whose assets are located in any country which bars removal of assets or withdrawal of income, or with which communication is unlawful, may be excused by the Secretary of State from paying any franchise taxes or filing reports (Sec. 518). If a corporation has not engaged in any business authorized under its charter, its franchise taxes are only one-half of the amount otherwise due (Sec. 503 (f)). Review of THE DELAWARE CORPORATION LAW For the DELAWARE CORPORATION LAW Corporation Service Company has published Professor Ernest L. Folk, Ill's final 400 page report to the Committee for the Revision of the General Corporation Law of the State of Delaware. Professor Folk, Professor of Law at the University of Virginia, was the Official Reporter and Adviser to the Delaware Committee. This report contains his proposed statutory changes, new statutory language, reasons for the changes in the statute and, in some cases, compares the old law and the proposed changes with statutes of other jurisdictions. This report was the basic material from which the Committee drafted the new statute. There is no legislative history as such connected with the new statute since no legislative debates or reports were recorded in the State of Delaware. This work would be a valuable asset to the law library of any firm engaged in corporate practice and valuable to law school libraries as well. The cost of this reproduction is $25.00 per copy. The report has been reproduced from its original form as submitted to the Committee. |