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Corporate Law: After 25 Years, Delaware Begins To See The Light

A quarter century ago, I wrote a brief piece criticizing how Delaware handled stockholder action by written consent:

Another difficulty with section 228 arises from its focus on the date of the “earliest dated consent delivered” to the corporation.  The emphasis on the date of the consent in section 228 contrasts markedly with the focus on the date of delivery in section 213.  This difference appears bizarre in light of the fact that the 1987 amendments were adopted partly to codify the rule set forth in Empire of Carolina v. Deltona, 514 A.2d 1091 (Del. 1986), that the delivery of a consent was required to establish a record date.

Delaware’s Inadequate Protection of Shareholders When Action is Taken by Written Consent, 11 The Business Lawyer Update 4 (1991).

At the time, some members of the Delaware misprized my comments.  Now, it seems the Delaware corporate bar has arrived at the same conclusion as I did some 25 years ago. The Corporate Council of the Corporation Law Section of the Delaware State Bar Association recently released draft amendments to the Delaware General Corporation Law. Notably, the Corporate Council proposes to amend Section 228 to substitute the date of delivery for the date of the consent:

Every written consent shall bear the date of signature of each stockholder or member who signs the consent, and noNo written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this section to the corporation, written consents signed by a sufficient number of holders or members to take action are delivered to the corporation  by delivery to its registered office in this State, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders or members are recorded in the manner required by this section within 60 days of the first date on which a written consent is so delivered to the corporation. Delivery made to a corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. Any person executing a consent may provide, whether through instruction to an agent or otherwise, that such a consent will be effective at a future time (including a time determined upon the happening of an event), no later than 60 days after such instruction is given or such provision is made, and, for the purposes of this section, if evidence of such instruction or provision is provided to the corporation, such later effective time shall serve as the date of signature. Unless otherwise provided, any such consent shall be revocable prior to its becoming effective.

For more on the Corporate Council’s proposed amendments, see this memorandum from Richards, Layton & Finger.

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
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Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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