DealLawyers.com Blog

On TheCorporateCounsel.net, I recently blogged about the 2023 amendments to the DGCL. The governor of Delaware signed those amendments into law on July 17th, and, with a few exceptions, they will be effective August 1st. Key changes include:

– Simplifying the process for ratifying defective corporate acts
– Eliminating the need for stockholder approval for forward stock splits in certain cases
– Reducing the voting threshold for certain reverse stock splits or changes to authorized shares
– Establishing “safe harbor” provisions from the stockholder approval requirement for certain dispositions of pledged assets
– Reducing the stockholder approval standard under Section 390 for domestication, transfer, or continuance from unanimous to majority, and allowing for appraisal
– Permitting plans of conversion into or by a Delaware corporation and domestication by a Delaware corporation

This Greenberg Traurig alert discusses the impact of these amendments on corporate and M&A documents — including charters, bylaws, stock option resolutions, stockholder notices, and new plans of conversion and domestication — and drafting considerations. Here’s an excerpt about foreclosure sale protective provisions:

Section 272 permits a corporation to mortgage or pledge property and assets without the consent of stockholders. The potential overlap between this authority and the requirement under Section 271 that a corporation obtain stockholder consent to a sale, lease, or exchange of all or substantially of its assets was the subject of recent litigation in Delaware.

The amendment to Section 272 provides that Section 271 will not apply to require stockholder approval of a sale, lease, or exchange of collateral assets or property that secure a mortgage or are pledged to a secured party if either the secured party exercises rights to effect such a transaction, or, under certain circumstances, the board authorizes the transaction as an alternative to reduce or eliminate the liabilities or obligations secured by such collateral property or assets. New Section 272(d) provides that a provision of the certificate of incorporation that first becomes effective on or after August 1, 2023 that requires stockholder approval of a sale, lease, or exchange of property or assets will not apply to a sale, lease, or exchange contemplated by Section 272 unless the provision expressly so requires. Thus, companies and investors should consider this change in drafting new charter-based protective provisions that are effective on or after August 1, 2023.

New Section 272(d) does not apply to charter-based protective provisions requiring stockholder approval of a sale, lease, or exchange that went into effect prior to August 1, 2023, and therefore companies and investors may consider whether such provisions ought to be amended to expressly exempt stockholder approval and permit the board to authorize a sale, lease, or exchange of collateral as contemplated by the amendments.

– Meredith Ervine