2025 Amendments to Delaware’s General Corporation Law and Alternative Entity Statutes

In its current session, the Delaware legislature is considering a number of amendments to the Delaware General Corporation Law (the “DGCL”), the Delaware Limited Liability Company Act (the “DLLCA”), the Delaware Revised Uniform Limited Partnership Act (“DRULPA”), and the Delaware Revised Uniform Partnership Act (“DRUPA” and, together with the DLLCA and DRULPA, the “alternative entity statutes”).  Details regarding certain of the more substantive amendments are discussed below.  These are in addition to other clarifying, confirming and technical changes which we have not included in this discussion.

Delaware Governor Matt Meyer recently signed into law the bill that includes the changes discussed below to Sections 144 and 220 of the DGCL, and those amendments go into immediate effect.  The balance of the changes discussed below have not yet been voted upon by the legislature, but, if passed in the form recommended by the Delaware State Bar Association’s Corporation Law Council, would (other than the changes to DGCL Section 503(h) described below) become effective on August 1, 2025.

Amendments to the DGCL

Contents of Certificate of Incorporation (DGCL Section 102); Bylaws (Section 109).  Section 102(f) and 109(b) prohibit provisions in a certificate of incorporation or bylaws that shift to the stockholders the fees and expenses incurred by the corporation or any other party in the defense of any internal corporate claims.  Sections 102(f) and 109(b) would be amended to now also prohibit provisions in a certificate of incorporation or bylaws that impose such “fee-shifting” against stockholders with respect to any other claim that a stockholder, acting in its capacity as a stockholder or in the right of the corporation, has brought in an action, suit or proceeding.  The changes are not intended to prevent provisions on fee-shifting if the provision is included in a stockholder agreement or other writing signed by the stockholder against whom the provision is to be enforced.

Forum Selection Provisions (DGCL Section 115).   Section 115 authorizes the inclusion of a provision in the certificate of incorporation or bylaws designating courts in the State of Delaware as the exclusive forum for internal corporate claims, and it prohibits the inclusion of a provision in the certificate of incorporation or bylaws precluding the bringing of such claims in the courts of the State of Delaware.

In concert with the changes summarized above with respect to Sections 102 and 109, a new Section 115(c) would be added which provides that, with respect to claims that are not internal corporate claims, the certificate of incorporation or bylaws may require stockholders, when acting in their capacity as stockholders or in the right of the corporation, to bring any or all such claims only in one or more prescribed forums or venues, if such claims relate to the business of the corporation, the conduct of its affairs, or the rights or powers of the corporation or its stockholders, directors or officers; provided that such requirement is consistent with applicable jurisdictional requirements and allows a stockholder to bring such claims in at least one court in the State of Delaware that has jurisdiction over such claims. The United States District Court for the District of Delaware is a court “in” the State for purposes of amended Section 115.  Amended Section 115 is not intended to prevent the application of a provision on the selection of a forum other than a court in the State of Delaware, if the provision is included in a stockholder agreement or other writing signed by the stockholder against whom the provision is to be enforced.

Interested Directors; Quorum (DGCL Section 144).  Significant amendments have been made to Section 144 of the DGCL to essentially provide a safe harbor procedure for transactions in which a director, officer, or controlling stockholder has a conflict of interest.  Under revised Section 144, certain acts or transactions involving such directors or officers are protected if approved or recommended in good faith and without gross negligence by a majority of the disinterested directors or approved or ratified by the uncoerced affirmative vote of a majority of the votes cast by the disinterested stockholders entitled to vote thereon, in each case upon disclosure or with full knowledge of the material facts giving rise to the conflict or potential conflict. If a majority of the directors are not disinterested directors, any such disinterested director approval or recommendation must be provided through a disinterested director committee. 

Under the revised statute, a controlling stockholder transaction that does not constitute a “going private transaction” may be entitled to safe harbor protection if it is negotiated and approved or recommended, as applicable, in good faith and without gross negligence by a majority of the disinterested directors then serving on a board committee expressly authorized to negotiate and to reject the transaction or if the transaction is conditioned by its terms on the approval of or ratification by disinterested stockholders and is approved or ratified by uncoerced affirmative vote of a majority of the votes cast by the disinterested stockholders. A controlling stockholder transaction that constitutes a “going private transaction” may be entitled to the statutory safe harbor protection if it is negotiated and approved or recommended, as applicable, in good faith and without gross negligence by a majority of the disinterested directors then serving on a board committee expressly authorized to negotiate and to reject the transaction and is conditioned on the approval of or ratification by disinterested stockholders and is approved or ratified by uncoerced affirmative vote of a majority of the votes cast by the disinterested stockholders.

With respect to any approval or recommendation by a committee, the safe harbor only applies if the act or transaction or controlling stockholder transaction, as applicable, was approved by a committee consisting of at least two directors, all of whom have been determined by the board of directors to be disinterested directors.  

As the foregoing procedural protections are obtained through disinterested director or disinterested stockholder approval, revised Section 144 provides statutory definitions of those and other terms necessary to implement and uniformly apply the statute.

Fractions of Shares (DGCL Section 155).   Section 155 would be amended to eliminate the ability of a corporation to issue scrip or warrants in bearer form in lieu of issuing fractional shares of stock (but not the ability to issue scrip or warrants in registered form).  The amendment is intended to bring the section in line with the Corporate Transparency Act, 31 U.S.C. § 5336(f), which prohibits corporations from issuing certificates in bearer form for either a whole or fractional interest in an entity. 

Inspection of Books and Records (DGCL Section 220).  Section 220 of the DGCL governs stockholders’ and directors’ statutory rights to inspect books and records.  It has been amended to specify the core corporate documents that are required to be produced in a books and records action.  Those core corporate documents are (i) the certificate of incorporation, including any agreement or other instrument incorporated by reference therein, (ii) the bylaws, including any agreement or other instrument incorporated by reference therein, (iii) minutes of meetings of stockholders and signed consents evidencing actions taken by stockholders without a meeting, in each case for three years preceding the date of the books and records demand, (iv) communications in writing or by electronic transmission to stockholders generally within the past three years preceding the date of the books and records demand, (v) minutes of meetings of the board of directors or any committee of the board of directors and records of any action of the board of directors or any such committee; (vi) materials provided to the board of directors or any committee of the board of directors in connection with actions taken by the board of directors or any such committee, (vii) annual financial statements of the corporation for the three years preceding the date of the books and records demand, (viii) agreement with stockholders entered into under Section 122(18) of the DGCL; and (ix) director and officer independence questionnaires.

Additional specific records may be obtained if the demanding stockholder has made a showing of a compelling need to further a proper purpose for the inspection and has demonstrated by clear and convincing evidence that such specific records are necessary and essential to further such purpose.  The amendments also permit a corporation to impose reasonable restrictions on the confidentiality, use, or distribution of books and records, to require that the stockholder agree that any information included in the corporation’s books and records is deemed incorporated by reference in any complaint filed by or at the direction of the stockholder in relation to the subject matter referenced in the demand, and to redact portions of any books and records produced not specifically related to the stockholder’s purpose. 

Revival of Certificate of Incorporation (DGCL Section 312).   Section 312 enables a corporation to revive its certificate of incorporation after the certificate has become forfeited or void.  Amended Section 312(g) would address circumstances where a corporation has been revived and later files a certificate of validation under Section 204 to ratify one or more defective corporate acts.  If the certificate of validation relates to a time during which the corporation was forfeited or void, amended Section 312(g) would require the corporation to file the annual franchise tax reports, and pay the annual franchise taxes, that would have been required to be filed, and paid, during the period that the certificate of incorporation had been forfeited or void.

Annual Franchise Tax Report; Contents; Failure to File and Pay Tax; Duties of Secretary of State (DGCL Section 502).  Section 502 requires a corporation to file an annual report with the Secretary of State.  It would be amended to require that the report disclose the nature of the business of the corporation.

Rates and Computation of Franchise Tax (DGCL Section 503).  Section 503, which provides the rates and means of computing franchise taxes, would be amended to provide that the filing of a certificate of validation to ratify one or more defective corporate acts pursuant to Section 204 of the DGCL will not reduce the interest owed on the franchise taxes owed for prior periods and specifies that a corporation is not entitled to a franchise tax refund for any period prior to the filing of the certificate of validation.  The amendments would also repeal Section 503(h), which specified an alternative franchise tax rate for regulated investment companies.  The change to Section 503(h) would take effect for tax years beginning on or after January 1, 2026. 

Amendments to the DLLCA

            Registered Office; Registered Agent (DLLCA Section 18-104).  Section 18-104, relating to registered offices and registered agents, would be amended to specify that a registered agent may not perform its duties or functions solely through the use of a virtual office (solely through the internet or other means of remote communication), the retention by the agent of a mail forwarding service, or both.    

            Nature of Business Permitted; Powers (DLLCA Section 18-106). Section 18-106(e) of the DLLCA allows for the ratification by a limited liability company of void or voidable acts.  The section would be amended to allow for ratification of void or voidable acts by any member, manager, or other person in respect of a limited liability company, in addition to acts by a limited liability company itself.  The section would also be amended to allow for implied ratification, and to provide that, where notice of the ratification is required by the statute, the giving of such notice is not a condition to the effectiveness of the ratification.

Amendments to DRULPA

Registered Office; Registered Agent (DRULPA Section 17-104) and Nature of Business Permitted; Powers (DRULPA Section 17-106).  These provisions would be amended in a manner parallel to the amendments discussed above to Sections 18-104 and 18-106 of the DLLCA.

Amendments to DRUPA

Registered Office; Registered Agent (DRUPA Section 15-111) and Formation of Partnership; Powers (DRUPA Section 15-202).  These provisions would be amended in a manner parallel to the amendments discussed above to Sections 18-104 and 18-106 of the DLLCA.

Messrs. Conway and Kelly are partners at Connolly Gallagher LLP in Wilmington, Delaware.  Mr. Conway serves on the committee of the Delaware State Bar Association that considers and drafts annual updates to Delaware’s alternative entity statutes, and his practice focuses on structuring mergers, acquisitions and other transactions under Delaware corporate and alternative entity law. Mr. Kelly’s practice focuses on litigation in the Delaware courts involving matters of Delaware law governing corporations, alternative entities, and commercial matters.