Small Business Reading Room

Delaware Corporate Laws continue to evolve

Section 1. The amendments to Section 141(d) provide that the certificate of incorporation may confer greater or lesser voting powers on one or more directors, whether or not such director or directors is or are separately elected by the holders of any class or series of stock.

Section 2. The amendment to Section 158 eliminates the requirement that a corporation with uncertificated shares issue a certificate for such shares upon the request of the holder of such shares. Notwithstanding this amendment, a corporation with uncertificated shares still is permitted to issue a certificate upon the request of a holder, but the corporation is not obligated to do so.

Section 3. The amendment to Section 251(g)(7)(ii) now permits the organizational documents of the surviving entity to be amended to eliminate a classified board provision or any other provision authorized by subsection (d) of Section 141 of Title 8.

Sections 4 through 18. The amendments to Section 265 provide for the conversion of an other entity, including a non-Delaware other entity, to a Delaware corporation. The addition of subsection (f) makes it clear that upon conversion to a corporation, the corporation is a continuation of the existence of the converting other entity. The addition of subsection (j) confirms the flexibility permitted in the Code regarding a conversion to a domestic corporation.

Sections 19 through 27. The amendments to Section 266 provide for the conversion of a Delaware corporation to an other entity, including a non-Delaware other entity. The amendments to subsections (e) and (f) and the addition of subsection (h) clarify the effects of a conversion of a Delaware corporation to an other entity. New subsection (g) confirms the flexibility permitted in this section regarding a conversion of a domestic corporation. New subsection (i) provides that if a converting Delaware corporation has no outstanding capital stock, no vote of stockholders is required to authorize the conversion.

Section 28. Section 271 has been amended to add new subsection (c). The purpose of subsection (c) is to provide that (i) no stockholder vote is required for a sale, lease or exchange of assets to or with a direct or indirect wholly-owned and controlled subsidiary, and (ii) the assets of such a subsidiary are to be treated as assets of its ultimate parent for purposes of applying, at the parent level, the requirements set forth in subsection (a). The amendment is not intended to address the application of subsection (a) to a sale, lease or exchange of assets by, or to or with, a subsidiary that is not wholly-owned and controlled, directly or indirectly, by the ultimate parent.

Sections 29 through 45. The amendments to Section 388 provide that any non-United States entity may domesticate in Delaware. New subsections (i) and (j) clarify the effects of a domestication of a non-United States entity as a Delaware corporation. New subsection (k) confirms the flexibility permitted in the Code regarding a domestication as a Delaware corporation.

Sections 46 through 66. The amendments to Section 389 reflect the newly defined terms “non-United States entity” and “foreign jurisdiction” in Section 388, Title 8, Delaware Code.

Sections 67 through 79. The amendments to Section 390 create two types of filings under Section 390: a certificate of transfer when the Delaware corporation is not to continue its existence in Delaware and a certificate of transfer and domestic continuance when the Delaware corporation elects to continue its existence as a Delaware corporation. The amendments confirm that so long as a corporation continues to exist as a corporation of the State of Delaware the resulting entity is the same entity as existed prior to transfer. The amendments to subsections (d) and (e) and new subsection (f) clarify the effects of a transfer of a Delaware corporation. New subsection (g) confirms the flexibility permitted in the Code regarding a transfer of a Delaware corporation. New subsection (h) provides that if a transferring Delaware corporation has no outstanding capital stock, no vote of stockholders is required to authorize the transfer.

Section 80. This section provides for an effective date of August 1, 2005.

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