This summer the Delaware legislature passed several amendments to the Delaware General Corporation Law (DGCL) which impact public and private companies incorporated in Delaware, and elsewhere, as many states follow the DGCL.
Mergers Using DGCL Section 251(h)
Section 251(h) was first enacted in 2013. Section 251(h) eliminates the need for shareholder approval to complete a merger, where such merger is completed following a tender or exchange offer and the acquirer owns at least the percentage amount of the target that is needed to approve the merger. That is, Section 251(h) eliminates unnecessary time and expense related to a vote on a merger when certain preconditions have been satisfied. These preconditions include:
- The merger must be consummated as soon as practicable following the tender offer or exchange offer;
- The underlying tender or exchange offer must be for all of the outstanding stock of the target, except for the stock owned by the acquirer or any person that directly or
Delaware corporate and alternative entity law has long been the model for other states in drafting statutes and for practitioners in advising clients and preparing limited partnership agreements and limited liability company membership agreements.
In 2005 the Delaware legislature amended its Limited Liability Company Act and Revised Uniform Limited Partnership Act to provide drafters of LP and LLC agreements with broad flexibility to modify default fiduciary duties. Both Acts now provide that default fiduciary obligations mat be restricted or eliminated, provided that the implied covenant of fair dealing and good faith may not be eliminated. Many states have followed suit.
Delaware Corporate Law
Under Delaware law, the purpose of the implied covenant of fair dealing and good faith is to enforce the reasonable expectations of parties to a contract where situations arise that are not expressly contemplated and provided for in the language of the contract itself. Although the covenant of good faith and fair dealing itself cannot be waived,