The framework for formation and governance of Delaware corporations.
Delaware’s General Corporation Law (DGCL) is an enabling statute that, along with the opinions issued by the Court of Chancery, provide the road map for boards of directors acting on behalf of the corporation for the benefit of the corporation’s shareholders.
The mandatory provisions of the DGCL are minimal and address only issues of utmost importance to protecting investors, such as the right to elect directors and to vote on certain major transactions. Even some of the mandatory terms of the statute can be changed by managers and stockholders acting together to choose a different approach.
The predictability of Delaware business law increases certainty in business planning: “The basic organization and content of the DGCL have remained essentially unchanged for approximately forty years,” according to Lawrence A. Hamermesh in The Policy Foundations of Delaware Corporate Law.
Delaware business law encourages expansion and growth, enabling entities to expand their business in a variety of ways, including merging or consolidating with another entity, changing business structure, amending governing documents, or conducting asset sales.
The DGCL does not require businesses to operate in Delaware. Under Delaware law, a single person can serve as the sole stockholder, director, and officer of the corporation, and the DGCL does not impose restrictions as to the citizenship of stockholders, officers, or directors of a Delaware corporation. Therefore, a non-U.S. citizen may become a stockholder, officer, or director of a Delaware corporation.
General Corporation Law
“Under Delaware law, a single person can serve as the sole stockholder, director, and officer of the corporation. Indemnification and special protection against liability for officers and directors also is available.”
Robert L. Symonds Jr. and Matthew J. O’Toole
The Delaware Corporate Law Website offers a comprehensive collection of articles that lays out the advantages of Delaware Corporate Law in 10 languages. Topics include the benefits for international business, a primer on Delaware’s General Corporation Law, the fiduciary duties of Delaware directors, and a look at alternative entities.
Written by Randy J. Holland, This paper was presented at the Sandra Day O’Connor Project on the State of the Judiciary Annual Conference, entitled “Our Courts and Corporate Citizenship,” at the Georgetown University Law Center on October 2, 2008.
Delaware’s reputation as the preeminent authority on corporate law is the result of its well-established body of case law, enabling statutes, experienced jurists, and neutral and efficient court system. The white paper at this link explains the benefits of selecting Delaware as a forum for resolving business disputes.
New Sections 204 and 205 of the Delaware General Corporation Law (the “DGCL”) are unique provisions that allow a Delaware corporation to cure defects in authorization of certain corporate acts. Section 204 is a corporate “self-help” mechanism, while Section 205 provides a more flexible and more powerful judicial cure for defective corporate acts — while also providing a judicial check on a misuse of ratification pursuant to Section 204. These sections become effective on April 1, 2014.