In CA, Inc. v. AFSCME, 953 A.2d 227 (Del. 2008), the Delaware Supreme Court held that shareholders can propose and adopt a bylaw regulating the process by which directors are elected. In light of this ruling, Delaware recently amended the Delaware General Corporation Law to add new Section 112, effective

August 1, 2009, clarifying that the bylaws of a Delaware corporation may provide that, if the corporation solicits proxies with respect to an election of directors, the corporation may be required to include in its solicitation materials one or more individuals nominated by a stockholder in addition to the individuals nominated by the board of directors. The obligation of the corporation to include such stockholder nominees will be subject to the procedures and conditions set forth in the bylaw adopted under Section 112. Delaware also added new Section 113, which will allow a Delaware corporation’s bylaws to include a provision that the corporation, under certain circumstances, will reimburse a stockholder for the expenses incurred in soliciting proxies in connection with an election of directors. In addition, the American Bar Association’s Committee on Corporate Laws, which is responsible for the Model Business Corporation Act, is considering similar changes to the Model Act. See American Bar Association, Section of Business Law, “Corporate Laws Committee To Address Current Governance Issues,” April 29, 2009 (noting that Delaware’s recent statutory amendments “are being actively considered by the Committee”) (available at: http://www.abanet.org/abanet/media/release/news_release.cfm?releaseid=662). Thirty states have adopted all or substantially all of the Model Act as their general corporation statute.

Alerts and Updates

2009 Amendments to the Delaware General Corporation Law Address Corporate Governance, Focus on Stockholder Rights

SUMMARY: Delaware recently enacted changes to its General Corporation Law (the "DGCL") that directly address significant issues of corporate governance. With the creation of Section 112 and Section 113, a Delaware corporation can adopt bylaw provisions that allow stockholders greater access to the corporation's proxy solicitation materials in order to nominate directors and to reimburse stockholders for proxy solicitation expenses in connection with director nominations.

Although many legal commentators have focused on new Sections 112 and 113, the amendments also include significant changes that address the problem of "empty voting" by allowing Delaware corporations to provide separate record dates for determining stockholders entitled to notice of and to vote at stockholder meetings, prohibit retroactive elimination of indemnification or advancement of expenses and permit judicial removal of directors in limited circumstances. The "corporate friendly" amendments will become effective August 1, 2009.

Please see full alert for more information.

http://www.duanemorris.com/alerts/alert3234.html