As John and Liz shared on TheCorporateCounsel.net, the Delaware General Assembly passed this year’s amendments to the Delaware General Corporation Law in May, and Delaware Governor Matt Meyer signed the amendments into law in mid-June. They will, as usual, go into effect on August 1st. Everything about this year’s amendments – from process to substance – is far less controversial than the last few years. As John noted, nobody’s been running around with their hair on fire about proposed changes to the DGCL this year. It was kind of nice that at least this one thing was a bit back to business as usual.

In fact, this Greenberg Traurig alert — their annual alert on the ways the DGCL changes are relevant to drafting corporate and M&A documents — characterizes the changes as relatively minimal. The relevant changes include:

– An important clarification regarding the voting standard for class votes required to change the amount of authorized stock of that class.

– A required agreement by a dissolving corporation for service of process after dissolution.

Here’s what the alert says about the class votes clarification:

Section 242(b)(2) provides that a class vote is required to increase or decrease the authorized number of shares of that class, unless the certificate of incorporation includes a provision that such change in authorized shares may be approved by holders of a majority of the total outstanding shares irrespective of Section 242(b)(2). For decades, such “opt-out” provisions were relatively common in certificates of incorporation. In 2023, however, subsection (d) was added to Section 242, and subsection (d)(2) provides that, under certain circumstances for corporations with publicly listed stock and unless otherwise expressly provided in the certificate of incorporation, approval by only a majority of votes cast is required for those votes on changes to authorized shares of a class.

Some uncertainty arose in practice and case law over whether provisions in certificates of incorporation opting out of the class vote requirement under subsection (b)(2) would also operate to opt out of the votes cast standard under subsection (d)(2). As a result, Section 242(d)(2) has been amended to clarify that only a provision that expressly states that the corporation is not to be governed by Section 242(d)(1) or (2) (or both) or requires a greater or additional vote than the majority of total outstanding voting standard contemplated by subsection (b)(2) will effectively opt out of the subsection (d)(2) votes cast standard. This amendment should provide greater clarity and comfort for corporations with certificates of incorporation that include traditional Section 242(b)(2) opt-out provisions, while providing a roadmap for language to include in newly adopted and amended certificates of incorporation.

We’ll be posting memos in our “State Law” Practice Area.

– Meredith Ervine