eral rule at stockholder meetings, absent a contrary provision in the certificate of incorporation.41 Sometimes stock is given more or less than one vote per share. The 1969 amendments now provide that in such a case action may validly be taken if it is approved by a majority or other specified proportion of the votes.42 Cumulative Voting: In Delaware cumulative voting always has been and continues to remain permissive rather than dictated to corporations as a matter of state policy.43 The Delaware cumulative voting provision has been amended to make clear that, if the certificate of incorporation adopts cumulative voting, it may specify that one or more classes, or series within classes, of stock shall enjoy cumulative voting. The statute previously spoke only of “each holder of stock" without specific reference to classes or series. 44 Minor Changes: The 1969 amendments specify that the validity of a voting trust, as well as a voting agreement, is not adversely affected during its 10-year period of validity even though it may by its terms run beyond ten years.45 IV. STOCK AND CORPORATE FINANCE MATTERS Pre-emptive Rights: The 1967 revision of the Delaware statute simplified the problem of pre-emptive rights by abolishing them altogether except so far as they are granted by the certificate of incorporation.46 The 1969 amendments restate this principle somewhat more emphatically.47 The amendments also declare that if, but only if, the certificate of incorporation so provides, stockholders have a pre-emptive right to securities convertible into stock of that class.48 Finally, the pre-emptive right may be granted to particular classes or series within classes of stock.49 Convertible Securities: The 1969 amendments greatly enlarge the category of permissible convertible securities. Stock of any class or series may be made convertible, in contrast to the original limitation of this feature to "preferred or special stock." Thus the statute 41. Section 212 (a) (first sentence) p. 21. 42. Amended section 212 (a) p. 21. 43. Section 214 p. 32. 44. Amended section 214 p. 32. 45. Amended section 218 p. 21. The amendment is unnecessary since the same rule had already been stated in section 218 (a) with respect to voting trusts, and this provision was not deleted. 46. Section 102 (b) (3) p. 16. 47. Amended section 102 (b) (3) p. 16. 48. Amended section 102 (b) (3) p. 16. 49. Amended section 102 (b) (3) pre-emptive rights existing on July 3. 1967 remain unchanged until altered by appropriate corporate action P. 16. INCE MIT I the Dear s by abs the ce e this pr is also dalis provides vok ible int granted' ments grea Tes. Stack d to the on k." This ndment is ion 218/ ghts existing priate corpor that either the security holder or the corporation may have the option to convert; on this point the original statute was silent. Thus a corporation could compel a conversion of any class of stock as to which it had reserved such a right.51 Conversion, however effected and by whomever, may be made into stock of any class or series.52 Fractional Shares and Scrip: The 1969 amendments extend the alternatives which the corporation may use when fractional shares are not issued, by requiring it to arrange for the disposition of fractional interests, unless it pays off the fractions in cash or issues scrip or warrants (the other two alternatives).53 The amendments also specify the various rights which may be enjoyed by holders of fractional shares but not by scrip or warrant holders (absent specific provision therefor).54 Minor Changes: The statutory requirement for stating the consideration to be received for stock no longer requires that the consideration be recited in terms of dollars.55 A housekeeping change requires that the stock certificate for stock with special rights and preferences must recite or refer to the "powers" of that class of stock as well as to its rights, preferences, etc.56 V. POWERS OF CORPORATIONS Because of the already broad powers enjoyed by Delaware corporations, few changes were needed in this area. The most important provision relates to the power of corporations to do business, notwithstanding charter restrictions, at the request or direction of any apparently authorized governmental authority. Prior to amendment, this superseding power was available only "in time of war or other national emergency.' "' 57 The 1969 amendments authorize the corporation to "transact any lawful business which the corporation's board of directors shall find to be in aid of governmental authority." 58 Thus, the national emergency or war limitation is deleted, and the focus of the statute is on the board's finding 50. Amended section 151 (e) p. 16. 55. Amended section 153 p. 20. 58. Amended section 122 (12) p. 17. of fact and business judgment that corporate action, notwithstanding the charter, would be "in aid of governmental authority." 59 VI. MISCELLANEOUS PROVISIONS Certificate of Correction: The amendments expressly validate the present convenient administrative practice in the Secretary of State's office by which the corporation may file a certificate correcting an inaccurate or defectively executed instrument required or authorized to be filed in that office. The corrected instrument is retroactively effective to the date of filing the original instrument, except for saving the interests of persons "substantially and adversely affected by the correction," as to whom it is effective as of the filing of the certificate of correction.60 Foreign Corporations Doing Business in Delaware: The statute now specifically bars issuing to a non-Delaware corporation a certification that it has filed its charter with the Delaware Secretary of State, unless the foreign corporation's name is such as to distinguish it from the names of other corporations organized in Delaware or reserved or registered with the Secretary of State, unless the other corporation consents thereto.61 This makes applicable to foreign corporations the same restrictions on name use which have applied to enterprises incorporating in Delaware.62 59. A change of limited significance deleted the former provision, which barred both Delaware and qualifying foreign non-banking corpor ations from buying gold and silver bullion or foreign coins. Amended section 126 (a) (Delaware corporations) p. 17., Id. section 379 (a) (foreign corporations) p. 32. 60. Amendment adding new section 103 (f) p. 16. 62. Section 102 (a) (1) . Changes and Comments The Technical Amendments Act, adopted by the Delaware General Assembly with an effective date of January 2, 1968, made various changes and corrections of detail in the Delaware General Corporation Law of 1967. Most of the alterations were minor changes designed to achieve linguistic uniformity throughout the statute and otherwise to polish and perfect the original statute. Only a few amendments made substantive alterations or additions. The 1968 changes will be discussed under the same general headings as the 1969 amendments. I. FUNDAMENTAL CORPORATE CHANGES A. Mergers and Consolidations Although the Technical Amendments Act made some language modifications in the merger sections of the statute, none are substantively important except for the following: Consideration and Fractional Shares: In addition to various linguistic changes,1 an amendment to the basic merger statute (section 251) added a provision authorizing the surviving corporation to pay cash in lieu of delivering fractional shares of "any other corporation the securities of which are to be received in the merger or consolidation." 2 The 1967 statute had a like provision permitting cash in lieu of fractional shares of the surviving or resulting corporation. The 1968 Amendments thus took account of this small but troublesome problem resulting from the increasing use in mergers of consideration consisting of securities other than those of the surviving corporation. Mergers Involving Charitable Corporations: The Delaware statutes have long provided for a merger or consolidation between a stock and a non-stock corporation, including domestic and foreign (non-Delaware) corporations. In Stevens Bros. Foundation Inc. v. Commissioner, the federal Internal Revenue Service con 5 1. Tech. Amend. Act § 16, revising section 251 (b) and 251 (c). 3. Section 251 (b) (5) . 4. Section 257. 5. Section 258. 6. 324 F. 2d 633 (8th Cir., 1963), cert. denied, 376 U. S. 969 (1964). 8 tended and the Tax Court held, that a charitable non-stock corporation organized under Delaware law to merge with a noncharitable corporation was sufficient to withdraw the charitable corporation's federal tax-exempt status. Although the Court of Appeals decisively rejected this position, the 1968 amendments to both sections 257 and 258 destroyed the basis of the argument by declaring that a “charitable non-stock corporation" could not effect a merger with any stock corporation if the former's "charitable status .. would thereby be lost or impaired," saving, however, the power of a stock corporation to be merged into a surviving charitable non-stock entity." Other Changes: Various other changes, chiefly to conform with the substantive amendments, were made in 1968.10 B. Other Fundamental Changes In various other provisions, the 1968 Act amended procedures governing restatements of the certificate of incorporation,"1 revocation of a previously adopted corporate dissolution, and revival of corporate existence,13 as well as certain clarifying additions to the appraisal right section.14 None of these altered substance. II. MANAGEMENT POWERS AND PROCEDURES Resignation of Directors: Although the question was not doubtful in Delaware, the 1968 amendments codified the settled rule that a director could resign at any time upon written notice to his corporation. 15 Resignation of Officers: Another amendment specified that a corporate officer holds office until the election and qualification of 7. 39 T. C. 93 (1962). 8. 324 F. 2d at 642-646. 9. Tech. Amend, Act §§ 21-22, adding, respectively, new sections 257 (e) and 258 (d). 10. Amendments primarily to conform the statute to changes in the key merger provision, section 251, were made by Tech. Amend. Act § 17 (section 252); § 18 (section 253); § 19 (section 255); and § 20 (section 256). Tech. Amend. Act § 23 made small linguistic changes in section 259 (a). 11. Tech. Amend. Act § 15, revising section 245 (b). 14. Tech. Amend. Act § 24, revised section 262 (b) (minor non-substantive addition). It also rewrote section 262 (k), but this has been superseded by a further revision of 262(k) in the 1969 amendments, as to which see p. 4, supra. 15. Tech. Amend. Act § 3, revising section 141 (b). |