Delaware General Corporation Law

Since the early 1900s known for the flexibility and freedom with which it allows businesses that incorporate here, Delaware’s General Corporation Law lays out the requirements that govern all companies in the state. Also known as DGCL, Delaware’s General Corporation Law focuses on the contractual interconnections between the roles, duties and relationships of the corporation’s managers and its investors. Due to its leniency, Delaware General Corporation Law attracts many business owners from across the country and around the world.

Key Features of Delaware General Corporation Law

The DGCL is recognized as one of the most advanced and flexible corporate legal frameworks in the United States. This comprehensive set of rules is designed to protect the interests of shareholders, directors, and officers working at corporations from around the world. Flexibility, strong legal protections make Delaware one of the most advantageous states to start a business.

Disputes within corporations and limited liability companies (LLCs) are usually heard in the Delaware Court of Chancery. Delaware sets itself apart from the general corporation laws of other states because its court uses judges (called chancellors), not juries, which typically allows for rulings based on issues of fact and law. Combined with its business-friendly corporate laws, the Court of Chancery is one of the most appealing advantages of incorporating in Delaware.

Delaware General Corporation Law Summary

Below is a brief summary of the key elements of the Delaware General Corporation Law’s 18 subchapters. Learn more about who can start a Delaware corporation, changing entity types, and what actions require shareholder approval under Delaware law. This is informational and should not be misconstrued as legal advice. For legal assistance with Delaware General Corporation Law, please consult an attorney.

• §101(a)(b): Any person, partnership, or association can form a corporation as long as their business is lawful

• §102: Defines what is required on the Certificate of Incorporation

• §102(b)(6): Shareholders are not liable for a corporation's debts

• §106: A corporation is considered to be in existence after its Certificate of Incorporation is filed with the Secretary of State

• §109(a): Shareholders have the right to change the corporate bylaws

• §122: Specific powers of the corporation are defined

• §126: Corporations cannot act as banks

• §132(a): Every corporation must maintain a Registered Agent in the state

• §133: A corporation has the right to change its Registered Agent

• §141(a): Corporations shall be governed by a Board of Directors or comparable body

• §142(a)(d): Corporations shall have officers, but failure to elect officers will not dissolve the corporation

• §151(a): Corporations may issue stock

• §202(b): Restrictions on transferability of stock cannot be imposed without the shareholder's consent on shares previously issued

• §211(a)(b): Unless Directors are elected by written consent in lieu of an annual meeting, there shall be an annual meeting of shareholders to elect Directors as determined by the corporation bylaws. If a shareholder is unable to be present, the shareholder may vote remotely or by proxy

• §216: At least one-third of shareholders allowed to vote must be present at shareholder meetings in order for the meeting to be considered valid

• §219(a): Stockholders have the right to inspect the stockholder register within 10 days of a stockholder meeting

• §220(b): Shareholders have the right to inspect their corporation's books and record during normal business hours after submitting a written request

• §241(a): A corporation may amend its Certificate of Incorporation before receiving payment for its stock, as long as the amendments are lawful

• §242(b)(1): In order to amend a corporation's Certificate of Incorporation after receiving payment for its stock, a resolution by the Directors must be made. It must then be approved by a majority vote of shareholders

• §251(a): Any two or more corporations may merge

• §262: Shareholders who dissent on a merger have the right to be bought out at a fair market value

• §265(a): Other types of entities (LLCs, statutory trusts, business trusts or associations, partnerships, limited partnerships, etc.) may convert into a Delaware corporation if proper compliance is followed

• §266: Delaware corporations may convert into other types of entities

• §271(a): The sale of a corporation requires majority shareholder approval. If the corporation is non-stock, the sale requires majority member approval

• §275(b): Dissolution of a corporation requires majority shareholder approval

• §277: Corporations may not be dissolved until all Franchise Taxes, including the Franchise Tax for the current year, are paid

• §321(a): Service of legal process upon a corporation will be made by delivering a copy to an officer or Director of the corporation, or its Registered Agent

• §342(a)(3): Close corporations may not have a public offering of stock

• §361-368: Defines the rights and structure of a public benefit corporation

• §371: "Foreign corporation" is defined as a corporation organized under the laws of another state

• §388(b): Non-U.S. entities may become incorporated in the state of Delaware if the proper procedure is followed

Delaware General Corporation Law applies to all corporations formed in Delaware and governs corporate matters regardless of where the corporation conducts business or where its shareholders reside. From small startups to multinational corporations, the DGCL brings in companies of all shapes and sizes under the Delaware're corporate umbrella.

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