Delaware Corporation Directors Cannot Be Undisclosed
While Delaware Limited Liability companies are not required to list their members on the public record, the names and addresses of directors of Delaware corporations are required to be listed on the Delaware Annual Franchise Report, which is a public record document. This report must be updated every year by the first day of March.
The following information must be listed on the Delaware Annual Franchise Tax Report for all Delaware corporations:
- Exact Company Name
- Company Address (Actual Location)
- Names and Addresses of all Directors
- Name and Address of at least one Officer
Some companies are also required to disclose their Gross Assets and the number of issued shares of stock in order to favorably recalculate their tax. When that information is collected, it is not available for public viewing, even if a copy of the report is ordered later.
The Annual Franchise Tax Report must be signed by an officer or director of the company. If the signature is not legible, a printed or typed name of the signer must be on the document underneath the signature. Penalties exist for falsely filing this report.
While the benefits of privacy are generally respected by Delaware law, the protections are reserved for stockholders rather than directors.
Stockholders of Delaware corporations own their stock as personal property and are not required to disclose their names and/or address information to the state of Delaware. Stock Registries of Delaware corporations are the purview of the corporation itself insofar as Delaware is concerned.
Actually, Delaware corporation law does not always favor the directors, as many people believe. The drafters of the DGCL (Delaware General Corporation Law) strive to be fair to both the stockholders and the directors, rather than show bias toward either.
However, the directors are typically given latitude to manage the company, whereas the shareholders are given the absolute right to their pro-rata share of the dividends and the right to vote on who fills the director positions.
Although there are many criteria for an exemplary jurisdiction in which to form a corporation, Delaware excels in every one of them, such as fairness of judges, rules of the court, promptness of decisions and consistent case law, according to the U.S. Chamber Institute for Legal Reform, which produces an annual report on which states are most favorable to do business in.
The bottom line here is that directors of Delaware corporations are not given the right to remain anonymous but they are given protection from personal liability for company action and expenditures if they follow the tenants of the business judgement rule:
- They must make an informed, independent decision in the performance of their duties.
- They must take due care in reaching their decisions and consider all the material facts in the matter.
- They must be loyal to the company and believe they are acting in the best interests of the company.
- They must avoid self-dealing in making decisions that affect the company.
If the directors follow these basic rules, they will not be held personally liable for the consequences of their decisions.
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There is 1 comment left for Delaware Corporation Directors Cannot Be Undisclosed
William A Knochelmann CPA LLC said: Sunday, April 23, 2017WHAT ARE THE TAX IMPLICATION OF A C CORORATION CONVERTING TO AN LLC AND ELECTING TO KEEP C-CORPORATION STATUS-CORPORATION HAS A FISICAL YEAR END OF FEBRUARY
HBS Staff replied: Monday, April 24, 2017That question is best answered by a CPA, which we are not, so we recommend you seek the counsel of a licensed accountant.