Skip Page Banner  
Skip Navigation

Review of 2011 Changes to Delaware General Corporation Law

Thursday, January 19, 2012

Erica Smith | Bloomberg Law The Delaware General Corporation Law (DGCL) is of particular importance to the field of corporate law and mergers and acquisitions, considering that more than half of all U.S. publicly traded companies and 63 percent of the Fortune 500 companies are incorporated in the state.1 These corporations elect to incorporate in Delaware—and thus have their internal affairs governed by the DGCL—because of the state's modern and flexible corporate laws and its specialized Court of Chancery, which is the country's preeminent forum for resolving business law issues.2 Given the DGCL's significance, it is imperative that corporate and M&A practitioners stay abreast of statutory developments. The 2011 amendments to the DGCL are briefly outlined below.3

TopicAmendmentProvision
Certificate of Incorporation - Contents - Name (Necessary Words)Permits waiver of requirement that corporation's name include certain words or abbreviations thereof (such as "incorporated"), if the corporation is both a nonprofit nonstock corporation and an association of professionals 8 Del. C. § 102(a)(1)
Certificate of Incorporation - Contents - Name (Use of Word "Trust" in Name)Permits waiver of certain requirements and restrictions that apply when a corporation has the word "trust" in its name, as long as use of the word "trust" does not refer to a trust business8 Del. C. §§ 102(a)(1), 395(a)-(d)
Certificate of Incorporation - Contents - Registered Office (Address)Clarifies that the address of the corporation's registered office in Delaware must be stated in accordance with Section 131(c) (see below)8 Del. C. § 102(a)(2)
Certificate of Incorporation & Other Instruments - Registered Office (Address)Provides (in new subsection (j)) that it is not necessary to amend the certificate of incorporation or other document filed with the Secretary of State prior to 8/1/11 to comply with Section 131(c) (see below); however, documents filed on or after 8/1/11 that change address of registered office must comply 8 Del. C. § 103(j)
Registered Office (Address)Provides (in new subsection (c)) that in any certificate of incorporation or other document filed with the Secretary of State, the address of a registered office must include the street, number, city, county, and postal code 8 Del. C. § 131(c)
Directors & Officers - Indemnification & AdvancementClarifies that the right to indemnification or advancement of legal expenses under a provision of a certificate of incorporation or bylaw cannot be eliminated or impaired by an amendment to such document after the occurrence of the act or omission to which the indemnification or advancement relates, unless the provision contains, at the time of the act or omission, an explicit authorization of such elimination or limitation4 8 Del. C. § 145(f)
Conversion to Delaware CorporationRequires that the certificate of conversion to corporation and the certificate of incorporation of another entity converting to a Delaware corporation be filed simultaneously in the office of the Secretary of State. If the certificates are to be effective post-filing, they must state the same effective date or time. 8 Del. C. § 265(b)
Payment of Franchise Taxes - Dissolution, Merger, Transfer, or ConversionRevises Section 277 to provide that before a corporation is dissolved, merged, transferred (without continuing its existence as a Delaware corporation) or converted, it must pay all franchise taxes due to or assessable by the state. This includes all franchise taxes due or which would be due or assessable for the entire calendar month during which such dissolution, merger, transfer or conversion becomes effective. The corporation must file all annual franchise tax reports, including a final annual franchise tax report for the year, in which such dissolution, merger, transfer or conversion becomes effective. However, if the Secretary of State certifies that an instrument effecting a dissolution, merger, transfer or conversion has been filed, such corporate action occurs at the effective time of such instrument. 8 Del. C. § 277
Payment of Franchise Taxes - Exempt CorporationsConforms Section 313 to Section 501(b), which was revised in 2010 to adopt the definition of "exempt corporation" for corporations that are not required to pay franchise taxes 8 Del. C. § 313
Foreign Corporations - Annual Report - Registered Office (Address)Provides that in the annual report filed by a foreign corporation, the address of the foreign corporation's registered office in Delaware must be stated in accordance with Section 131(c) (see above) 8 Del. C. § 374
DomesticationRequires that the certificate of corporate domestication and the certificate of incorporation of a non-U.S. entity domesticating to Delaware as a Delaware corporation be filed simultaneously with the Secretary of State. If the certificates are to be effective post-filing, they must state the same effective date or time. 8 Del. C. § 388(b)
Taxes & Fees Payable to Secretary of State upon Filing Certificate or Other PaperConforms Section 391 to Section 501(b), which was revised in 2010 to adopt the definition of "exempt corporation" for corporations that are not required to pay franchise taxes 8 Del. C. § 391(a)(3)
Payment of Franchise Taxes - Exempt CorporationsProvides that captive insurance companies licensed under Chapter 69 of Title 18 are not obligated to pay annual franchise taxes 8 Del. C. § 501(a)
Payment of Franchise Taxes - Exempt CorporationsClarifies that the definition of "exempt corporation" includes a religious corporation or purely charitable or educational association, and a company, association, or society, which, by its certificate of incorporation, has for its object the assistance of sick, needy or disabled members, or the defraying of funeral expenses of deceased members, or to provide for the wants of widows and families after death of its members8 Del. C. § 501(b)(5)
  DisclaimerThis document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy.©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.

To view additional stories from Bloomberg Law® request a demo now