TheCorporateCounsel.net

Back in May, I blogged about the 2023 proposed amendments to the DGCL. The governor of Delaware signed those amendments into law on July 17, 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

This Venable alert discusses the amendments related to stockholder approval for stock splits and changes to authorized shares, which will be of particular interest to any companies who have struggled with these votes in recent years:

– Forward Stock Splits – The amendments eliminate the stockholder approval requirement for amendments to a Delaware corporation’s certificate of incorporation to affect forward stock splits (i.e., subdivisions of issued shares) and related increases in authorized shares (up to an amount proportionate to the forward stock split), provided that the corporation has only one class of stock outstanding and such class is not divided into series.

– Reverse Stock Splits and Changes in the Number of Authorized Shares – The amendments reduce the stockholder vote required to amend the certificate of incorporation to affect a reverse stock split, or to increase or decrease the number of authorized shares of a class (other than in connection with forward stock splits) from a majority of the outstanding shares to a majority of the votes cast. The reduced vote will apply only if the class of stock is listed on a national securities exchange and would continue to meet the listing requirements of the exchange immediately after giving effect to such amendment.

– Meredith Ervine