Delaware General Corporation Law

Delaware General Corporation Law
Short title	Delaware General Corporation Law
Legislature	Delaware General Assembly
Long title	An Act to provide a General Corporation Law for the State of Delaware.
Enacted by	Delaware General Assembly
Date enacted	March 10, 1899
Date commenced	March 10, 1899
Status	Current, as amended.

Delaware General Corporation Law. The primary statute governing the formation, operation, and dissolution of corporations in the State of Delaware. Enacted in 1899, it is administered by the Delaware Division of Corporations and interpreted by the Delaware Court of Chancery and the Delaware Supreme Court. Its flexible, business-friendly provisions and well-developed body of case law have made Delaware the preeminent domicile for major United States corporations, including a majority of those listed on the New York Stock Exchange and the S&P 500.

Overview and History

The law was originally enacted on March 10, 1899, by the Delaware General Assembly, largely supplanting an earlier 1883 statute. Its development was influenced by the desire to attract corporate business from other states like New Jersey, which had pioneered flexible incorporation laws under the guidance of James B. Dill. A key early proponent was Josiah Marvel, a Republican state senator from Wilmington, Delaware. The statute has been continuously amended, with significant modern revisions guided by the Delaware State Bar Association's Corporation Law Council. This process ensures the law evolves in response to business needs and judicial interpretations from the Delaware Court of Chancery.

Key Provisions and Features

The law provides a highly flexible framework for corporate organization and finance. It allows for a single incorporator, mandates only one director for closely held corporations, and permits the creation of various classes of stock with disparate voting and economic rights. Key sections enable broad corporate purposes, facilitate the issuance of blank check preferred stock, and provide extensive freedom in drafting corporate bylaws and certificate of incorporation. The statute also features robust exculpation and indemnification provisions for corporate directors and officers, which are often cited as advantages over the Model Business Corporation Act.

Corporate Governance and Director Duties

The fiduciary duties of corporate directors and officers, primarily the duties of care and loyalty, are largely defined by the extensive common law of the Delaware Court of Chancery. The statute itself codifies aspects of these duties, such as the business judgment rule, and sets procedures for approving conflicted transactions. It outlines the powers and responsibilities of the board of directors, including the ability to establish committees like an audit committee. The law also governs the rights of shareholders, including inspection of books and records and the process for bringing derivative suits.

Mergers, Acquisitions, and Dissolution

The statute provides detailed procedures for fundamental corporate changes. These include statutory mergers, consolidations, asset sales, and amendments to the certificate of incorporation. It establishes voting requirements for shareholder approval and outlines the appraisal rights available to dissenting shareholders. Specific provisions address squeeze-out mergers involving controlling shareholders. The law also details the voluntary and involuntary processes for corporate dissolution and the winding up of corporate affairs.

Comparison with Other State Laws

Delaware's statute is often contrasted with the Model Business Corporation Act, adopted in various forms by many other states. Key differentiators include Delaware's greater flexibility in capital structure, more permissive indemnification rules, and the central role of its specialized judiciary. While states like Nevada and Wyoming compete for smaller businesses with low fees and strong privacy statutes, Delaware remains dominant for large, publicly traded companies due to its predictable and sophisticated body of precedent from courts like the Delaware Supreme Court.

Notable Legal Precedents and Interpretations

The meaning and application of the statute are defined by a vast corpus of decisions. Landmark cases from the Delaware Court of Chancery and Delaware Supreme Court include *Smith v. Van Gorkom* (1985) on director duty of care, *Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc.* (1986) on sale-of-control scenarios, and *Blasius Industries, Inc. v. Atlas Corp.* (1988) on shareholder voting rights. More recent influential decisions include *Corwin v. KKR Financial Holdings LLC* (2015) and cases involving poison pill plans like *Moran v. Household International, Inc.* (1985). These rulings provide the substantive corporate law that complements the statutory text.

Category:Delaware law Category:United States corporate law Category:1899 in American law