Centralized Management Flashcards
DGCL § 102
Contents of certificate of incorporation (abridged)
(1) Name (must contain “corporation,” “association,” etc.; must be unique; can’t have word “trust” or “bank” in it.)
(2) Address of corporation’s registered office in DE and name of registered agent at same address
(3) Nature or purpose of business (can simply say “to engage in any lawful act or activity for which corporations may be organized” under DGCL.)
(4) Classes of shares (including number authorized to issue, relative senority, and rights of each class)
(5) Names/addresses of incorporators
(6) If powers of incorporators expire upon filing of the certificate, the names/addresses of the first board of directors.
DGCL § 109
Bylaws (abridged)
(a) bylaws can be adopted, amended, or repealed by the incorporators, by the initial directors (if named in the certificate), or (if no payment has been received for stock) by the board of directors. After receiving any payment for stock, these powers lie only in the shareholders. The certificate can give this power permanently to the board of directors, but shareholder’s must also retain this full power.*
(b) bylaws can contain any provision related ot the business and its affairs/conduct as long as it’s not in conflict with law or the certificate.
*There are slightly different rules for nonstock corporations, which we didn’t cover
DGCL § 141
Board of directors (abridged)
(a) The corporation “shall be managed by or
under the direction of a board of directors,” unless others are given that power in the certificate.
(b) BOD shall be one or more people; number fixed in bylaws (unless fixed in certificate, then must amend certificate to change); directors need not be shareholders unless certificate says otherwise; quorum = majority of directors unless certificate says otherwise. (Also some details on director terms and resignation, etc.)
(c) (powers of and rules regarding committees)
(d) directors may be divided into 1, 2, or 3 classes; voting rights may be unevenly split between shareholder classes
(e) board and committee members are protected from liability for relying in good faith on corporate records/documents provided by company employees, officers, and other people reasonably thought to have professional competence
(f) can take any action that requires a meeting without actually meeting if you obtain written consent
(g) board and committee members can have out-of-state offices
(h) board can fix directors pay unless certificate says otherwise
(i) conference calls can be meetings
(j) (nonstock corporations)
(k) shareholders can remove board members without cause unless certificate says it mus be for cause (and other less important stuff)
DGCL § 142
Officers (abridged)
(a) shall have officers with titles/duties according to the bylaws (or resolutions by board of directors if doesn’t conflict with bylaws) and as may be necessary to sign instruments and stock certificates; one officer shall record meetings/keep records; one person can hold multiple offices unless certificate says otherwise
(b) how officers are chosen and their term length shall be according to bylaws or the board of directors (or “another governing body”); must stay on until successor starts; can resign after written notice
(c) may secure the “fidelity” of the officers by “bond or otherwise”
(d) failure to elect officers doesn’t dissolve/affect the corporation
(e) shall fill vacancies according to bylaws (or board of directors/governing body if not mentioned in bylaws)
DGCL § 211
Stockholder meetings (abridged)
(a) May be held wherever according to the certificate or bylaws or (if not in bylaws) according to the BOD. If BOD ability to choose the place, they may choose to do it remotely. If directors not present at a meeting place, they may participate and vote remotely if authorized by the BOD (must be able to verify director and must record remote participation).
(b) shareholders shall have an annual meeting to elect directors (and other “proper business” may be transacted) according to the bylaws unless directors are elected by written consent instead; written consent must be authorized by the certificate and can only be used to elect directors in lieu of an annual meeting if (1) such consent is unanimous OR (2) every vacant spot is filled by the written consent.
(c) not having the meeting doesn’t affect corporate acts or dissolve the corporation; if annual meeting is late, it shall be held as soon as is convenient; if meeting doesn’t occur for >30 days after originally planned (or >13 months since last meeting), CoC can order a meeting (and details such as time/place), and whoever is there is sufficient for quorum regardless of what the bylaws say.
(d) BOD (or whoever is authorized by the certificate/bylaws) can call special stockholder’s meetings
(e) director elections shall by by written ballots unless certificate says otherwise; if BOD authorizes it, and if voters’ identities can be verified, this requirement can be met by electronic transmission.
DGCL § 212(a)
Voting rights of stockholders (abridged)
(a) unless certificate says otherwise, each stockholder receives one vote per share of capital stock they own.
DGCL § 216
Quorum and required vote for stock corporations (abridged)
(a) certificate/bylaws decide how many stockholders/votes needed for quorum/voting, but quorum shall not be less than 1/3 of the shares entitled to vote. If only one class/series is voting, can’t be less than 1/3 of the shares in that class/series.
Default rules: majority = quorum; in all matters other than the election of directors, majority is sufficient to transact; directors shall be elected by a plurality; majority is sufficient for individual classes/series as well.
A bylaw enacted by stockholders which specifies the votes necessary to elect directors cannot be further amended or repealed by the BOD.
DGCL § 218
Voting trusts and other voting agreements (abridged)
(a) one or more stockholders can (by written agreement) deposit/transfer to a person/entity their stock for the purposes of voting pursuant to the terms of their agreement. The written agreement must be registered with the state office of the corporation and available to stockholders. If nothing in the agreement describes the right and manner of voting, the majority of the trustees determines it. If equally divided, then each trustee receives equal vote.
(b) amendments to these agreements must be written and filed with the state office of the corporation.
(c) such an agreement between 2+ stockholders must be followed for the purposes of voting
(d) this section doesn’t invalidate any legal, valid agreement between stockholders
DGCL § 223
Vacancies and newly created directorships (abridged)
(a) Unless the certificate/bylaws say otherwise, vacancies and newly created directorships (from an increase in spots) may be filled by a majority of directors (even if less than quorum) or by a single remaining director (also applies within a certain voting class); if a corporation has no directors, if a company (for any reason) has no directors, then any officer, stockholder, executor, etc. (or any fiduciary of a stockholder) may call a special meeting in accordance with the certificate/bylaws, or may ask the CoC to order an election
(b) for selections within a class series (subject to a, above) any directors elected must stay on until the class elects again and the successor has begun his/her term.
(c) if, when filling director vacancies or newly created directorships, the existing directors make up less than a majority, stockholder(s) with more than 10% or more of the stock can apply to the CoC to order an election.
(d) Unless the certificate/bylaws say otherwise, a retiring director can be repaced by the vote of the majority of the remaining directors.
DGCL § 228
Consent of stockholders or members in lieu of meeting (abridged)
(a) Unless the certificate says otherwise, any action that may/shall be taken at an annual/special stockholder meeting may be taken without a meeting, without prior notice, and without a vote providing the same number of stockholders that would have been necessary to pass the action in a vote give written consent. This decision must be delivered to the corporation’s state office, principal place of business, or to the officer/agent of the corporation that keeps records.
(b) (same for nonstock corporation)
(c) To be valid, written consent must be signed and must be delivered to the corporation’s state office, principal place of business, or to the officer/agent of the corporation that keeps records within 60 days.
(d) a telegram, cablegram, or other electronic transmission to consent to an action shall be deemed to be written, signed and dated according to this section, provided that the consenter can be identified and a date is recorded on the transmission. The transmittall date = date signed. Consent must be delivered to the corporation’s state office, principal place of business, or to the officer/agent of the corporation that keeps records. Copies, faxes, and other reliable reproductions can be used as the original writing as long as the entire document is reproduced.
(e) If a less than unanimous action is taken by written consent, prompt notice must be given to those stockholders who did not consent and would have been able to vote if the action took place at a meeting. If the action requires filing a certificate, the certificate must mention that written consent was obtained.
DGCL § 242(b)
Amendment of certificate of incorporation after receipt of payment for stock; nonstock corporations (abridged)
(b) Amendments (to the certificate) shall be made and amended as follows:
(1) If the corporation has capital stock, the BOD shall set forth a resolution proposing the amendment, say why it’s advisable, and either call a special stockholder meeting or direct that it be voted on at the annual meeting. Notice of the meeting shall be provided to stockholders. At the meeting, if a majority of the stockholders (or the class) approve the amendment, a certificate outlining the amendment and recording that it was duly adopted shall be made and filed.
(2) Stockholders of a class of shares, whether or not entitled to vote by the certificate, are entitled to vote as a class if a proposed amendment will increase/decrease the number or par value of their shares, or if it will change their powers/preferences/rights. If the proposed amendment only affects a series within a class, then that series is entitled to vote, but not the rest of the class. The number of authorized shares within a class can be increased/decreased (but not below the number of outstanding shares) by a majority of the stockholders of the corporation if so provided in the certificate, in an amendment to the certificate that created the class, or in any other amendment to the certificate that was approved by a majority vote of the stockholders of that class.
(3) (basically the same as #1 for nonstock corporations)
(4) When the certificate requires for an action by the BOD, or by the holders of any class/series of shares, or by the holders of any other securities with voting powers a greater number/proportion than is required by any section of this title, the provision of the certificate requiring that greater number/proportion cannot be altered/amended/repealed except by such greater vote.
DGCL § 251(b)
Merger or consolidation of domestic corporations (abridged)
(b) BOD of each corporation that wants to merge/consolidate must pass resolutions approving the action and declaring its advisability. Agreement shall state T&C’s (and the mode of carrying them out); for mergers: amendments to the certificate of the acquirer as desired (if not, a statement that the certificate will remain); for consolidations: that the certificate of the resulting corporation will be as stated in the attachment; the manner, if any, of converting/cancelling existing shares and what cash/property/rights/securities that holders of those shares will receive; and other details as may be desired. Any terms of the agreement can be made dependant on facts outside of the agreement as long as it is expressly set forth in the agreement.
DGCL § 251(c)
Merger or consolidation of domestic corporations (abridged)
(c) The agreement (pursuant to b, above) shall be sumbitted to the stockholders of each constituent corporation at a special or annual meeting in order to act on the agreement. Notice of the time/place/purpose of the meeting shall be sent to all stockholders at least 20 days prior to the meeting and shall contain a copy of the agreement (or a brief summary). If, at the meeting, the agreement is passed by a majority of the stockholders, it must be certified/recorded on the agreement (unless a certificate of merger/consolidation is used instead). When/if each constituent corporation approves the agreement, it is recorded/filed and becomes effective.
Instead of filing the agreement, a certificate of merger/consolidation can be filed which states: (1) the name and state of incorporation of each constituent corporation; (2) that each constituent corporation approved the agreement; (3) name of the resulting corporation; (4) for merger: changes to the certificate of incorporation (if any); (5) for consolidation: that the certificate is attached; (6) that the executed agreement is on file; (7) that a copy of the agreement will be on file and available without cost to any stockholder.
DGCL § 271
Sale, lease, or exchange of assets (abridged)
(a) Every corporation may (at any meeting of the BOD) sell/lease/exchange all (or substantially all) of its property/assets in exchange for consideration (which may be - in whole or in part - money, property, stock, securities) as its BOD deems to be in the best interests of the corporation when authorized by a majority vote of the stockholders at a meeting called upon with at least 20 days notice. Notice must have stated that such a resolution would be considered.
(b) Depite authorization from the stockholders to sell/lease/exchange, the BOD may abandon that plan without further action from the stockholders, subject to the rights of third parties under any related contract(s).
(c) For the purpose of this section, property/rights/assets of the corporation include those of any subsidiaries. A subsidiary is any entity wholly-owned/controlled, directly or indirectly, by the corporation, including corporations, partnerships, LP’s, LLP’s, LLC’s, and/or statutory trusts. Despite section (a), unless otherwise stated in the certificate, no stockholder resolution is necessary for the sale of any property/rights/assets of the corporation to a subsidiary.
