Delaware General Corporate Law Amended to Prohibit Fee-Shifting Clauses; Permit Forum Selection Provisions

Although the federal government and FINRA have become increasingly active in matters of corporate governance, the states still remain the primary authority and regulator of corporate law.  State corporation law is generally based on the Delaware Model Act and offers corporations a degree of flexibility from a menu of reasonable alternatives that can be tailored to companies’ business sectors, markets and corporate culture.  Moreover, state judiciaries review and rule upon corporate governance matters, considering the facts and circumstances of each case and setting factual precedence based on such individual circumstances. 

On June 24, 2015, Delaware amended the Delaware General Corporation Law (“DGCL”) to prohibit fee shifting provisions.  The DGCL amendments also allow Delaware corporations to adopt exclusive (and non-exclusive) forum selection provisions in their corporate charters.  The amendments went into effect August 1, 2015.

Fee Shifting Provisions

As a result of increasing shareholder activism and filed or threatened shareholder lawsuits, corporations have started adding provisions in their corporate charters (articles