Friday, July 17, 2007
General Assembly Approves 2007 Amendments to Corporate Laws
Dover – The Delaware General Assembly approved the following legislation in 2007 affecting Delaware’s business entity laws:
Highlights of this year’s legislation, which is effective August 1, 2007, except as noted, are summarized below:
NOTE: THE FOLLOWING SUMMARY OF 2007 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.
CONSTITUTIONAL AMENDMENT RELATING TO CERTIFICATION OF QUESTIONS OF LAW TO THE DELAWARE SUPREME COURT
The Delaware Constitution was amended to authorize the U.S. Securities and Exchange Commission (SEC) to bring critical and urgent questions concerning Delaware law to the Delaware Supreme Court. The amendment provides the SEC with access to expedited decisions and greater certainty with regards to matters of Delaware corporate law. Previously, only federal courts and other state Supreme Courts were able to certify questions of law to Delaware’s Supreme Court.
AMENDMENTS RELATING TO THE APPRAISAL STATUTE
The Delaware General Corporation Law was amended to create a presumptive approach to awarding interest in appraisal proceedings. Ordinarily, interest is to “be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment.” This has been Delaware’s default legal rate of interest for some time, and has frequently been the basis for awards of interest in recent appraisal cases. By making it the presumptive approach to awards of interest in such cases, however, it is hoped that unproductive litigation efforts on the interest issue can be avoided. Under the proposal, however, the Court of Chancery still retains discretion, for “good cause,” to choose a different approach in awarding interest.
Petitions for appraisal can be filed by beneficial owners, rather than only by stockholders of record (although demands for appraisal must still be made by record owners).
Reference to a “national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc.” has been deleted from the so-called “market out” in light of last year’s reorganization of the NASDAQ stock markets.
These amendments to the appraisal statute are to apply only with respect to transactions consummated pursuant to agreements entered into after August 1, 2007.
AMENDMENTS RELATING TO VOTING RIGHTS IN SPECIALIZED SITUATIONS
Section 141(d) has been amended to clarify that when a provision of the certificate of incorporation endows some directors with greater or lesser voting power than other directors, that differentiation of voting power applies both in voting by the board of directors and in voting by committees and subcommittees of the board, unless otherwise provided in the certificate of incorporation or bylaws.
Section 216(4) has been amended to clarify that, unless otherwise provided in the certificate of incorporation or the bylaws, a plurality vote (and not a majority of the quorum) is the vote required to elect directors where one or more classes or series of stock votes as a separate class or series on the election of directors. 2006 amendments relating to the ability to provide in the bylaws for majority voting in the election of directors remain unaffected.
AMENDMENTS RELATING TO ALTERNATIVE BUSINESS ENTITIES
The Delaware Limited Liability Company Act, the Revised Uniform Limited Partnership Act, and the Revised Uniform Partnership Act have been amended in several ways including provisions that:
NOTE: THE ABOVE SUMMARY OF 2007 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.