2005 Amendments to Corporate Law - Division of Corporations

Friday, June 24, 2005

General Assembly Approves 2005 Amendments to Corporate Laws

Dover – The Delaware General Assembly approved the following legislation in 2005 amending Delaware’s business entity statutes:

SB 85 – General Partnership amendments
SB 86 – Limited Liability Company amendments
HB 150 – Corporate amendments
HB 151 – Limited Partnership Amendments

Highlights of this year’s legislation, which is effective August 1, 2005, are summarized below:

NOTE: THE FOLLOWING SUMMARY OF 2005 LEGISLATION AFFECTING DELAWARE BUSINESS ENTITY LAWS IS NEITHER AUTHORITATIVE NOR ALL-INCLUSIVE. THIS SUMMARY DOES NOT REPRESENT OFFICIAL POLICY OF THE STATE OF DELAWARE AND HAS BEEN PREPARED ONLY FOR GENERAL INFORMATION PURPOSES AND NOT FOR LEGAL ADVICE.

AMENDMENT RELATING TO SALES OF ALL OR SUBSTANTIALLY ALL CORPORATE ASSETS

Section 271 of the Delaware General Corporation Law has been amended to establish that a sale, lease, or exchange of all or substantially all of the corporations assets to a subsidiary that is wholly owned and controlled, directly or indirectly, by the corporation does not require approval by the corporations stockholders. The amendments also establish that the property and assets of such a subsidiary are considered to be property and assets of the corporation for purposes of Section 271; thus, for example, a sale of assets by such a subsidiary that involves all or substantially all of the assets of the corporation and its wholly owned and controlled subsidiaries would require approval by the board of directors and stockholders in accordance with the statute.

AMENDMENT ELIMINATING MANDATORY DELIVERY OF STOCK CERTIFICATES

Section 158 of the Delaware General Corporation Law has been amended to provide that a corporation that issues shares not represented by stock certificates is not required, at the request of a stockholder, to deliver a certificate representing the stockholder’s shares. This eliminates any statutory obstacles for publicly held corporations to go certificateless.

AMENDMENTS ENHANCING FLEXIBILITY OF ENTITY CONVERSION

Sections 265 and 266 of the Delaware General Corporation Law have been amended to fully enable both Delaware and non-Delaware entities to convert into Delaware corporations, and to permit Delaware corporations to convert into alternative forms of business entity, both Delaware and non-Delaware.

AMENDMENTS CLARIFYING ABILITY TO RELY ON RECORDS OF AND INFORMATION RELATING TO ALTERNATIVE BUSINESS ENTITIES

The Delaware Limited Liability Company Act, the Revised Limited Partnership Act, and the Revised Uniform Partnership Act have been amended by the addition or revision of provisions that clarify the ability of general and limited partners, managers, and members to rely upon records of the entity and upon opinions, reports, or statements made by other persons, including experts, in relation to the business of the entity.