The 2024 amendments to the General Corporation Law of the State of Delaware (the DGCL) have been signed into law and will become effective August 1, 2024. These amendments address issues that arose in recent decisions by the Delaware Court of Chancery and relate to foundational issues of corporate law. These important changes include:
- expressly empowering the corporation to enter into governance agreements with current and prospective stockholders, including specified provisions for restrictions on corporate action, approvals and consents over corporate action, and covenants that the corporation or other person or body will take or refrain from actions, under new subsection 18 of Section 122 of the DGCL;
- permitting the board of directors to approve agreements, instruments, and documents in substantially final form and to ratify agreements, instruments, and documents that are required by the DGCL to be filed with the Delaware Secretary of State, under new Section 147 of the DGCL;
- expressly permitting a merger agreement to provide for (i) penalties and consequences of a breaching or noncompliant party (including lost-premium damages) and (ii) appointment of a stockholder representative under new subsection (a) of Section 261 of the DGCL; and
- creating exceptions to documents that might otherwise be required to be attached to a merger agreement, including the surviving corporation’s certificate of incorporation in certain scenarios and disclosure letters, disclosure schedules, and similar documents that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions in the merger agreement, under new Section 268 of the DGCL.
Although these changes do not represent all of the amendments, this GT Update discusses the impact of the legislation on corporate and M&A documents, including stockholder agreements, board resolutions, and merger agreements, and certain related drafting considerations.
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