Proposed Amendments to the Delaware General Corporation Law

REPORT

By E-Mail: Bryan.Townsend@delaware.gov
The Honorable Bryan Townsend
Senate Majority Leader
411 Legislative Avenue
Dover, Delaware 19901

Re: Proposed Amendments to the Delaware General Corporation Law

Ladies and Gentlemen:

This letter is submitted on behalf of the Committee on Mergers, Acquisitions and Corporate Control Contests of the New York City Bar Association (the “Committee”). Our Committee is composed of experienced attorneys whose practices focus on merger and acquisition transactions and related corporate law, corporate governance, and securities regulation matters. Our Committee includes lawyers with diverse perspectives on corporate and securities law issues, including partners at law firms and in-house counsel to companies, investors and financial advisors.

The Committee supports the adoption of the proposed amendments (the “Amendments”) to the Delaware General Corporation Law (the “DGCL”) put forward by the Council of the Corporation Law Section of the Delaware State Bar Association (the “Council”) and introduced for consideration by the Delaware General Assembly as Senate Bill No. 313. The Committee believes that adoption of the Amendments is an important step towards ending the disruptive uncertainty that now hangs over Delaware-incorporated companies, and towards restoring the clarity, predictability, and practicality which has long been the hallmark of Delaware corporate law.  We reiterate our considered views in support of the Amendments that we previously expressed in a letter to the Council, which is attached to this letter for reference.

Throughout the course of our careers, we have confidently advised our clients that incorporation in Delaware affords them the benefit of the most sophisticated, efficient, and pragmatic system of corporate law rulemaking and adjudication available.  A crucial factor enabling us to give these assurances has been our understanding that Delaware corporate law evolves clearly and predictably and that any unanticipated disruptive changes would be promptly addressed, including through the adoption of amendments to the DGCL if necessary, via proposals by the Council based on the views of that body’s balanced and thoughtful membership.  It is our belief that the present situation warrants an expeditious response.

The recent events giving rise to the proposal of the Amendments were surprising to the Delaware corporate law community, and have left important questions that our clients confront on a daily basis quite unsettled.  We are aware that there have been publicly expressed notes of caution with respect to both substantive and procedural aspects of the Amendments.  While we respect these points of view, we wish to emphasize our belief that the points of any criticisms are greatly outweighed by the damage that continuing uncertainty in these areas would do to Delaware corporations and to the Delaware corporate franchise.  To choose one example, stockholder agreements of the type reviewed in the Moelis decision and subsequent opinions are routinely employed by Delaware corporations in the context of initial public offerings, venture capital investments, private investment in public equity (PIPE) capital-raising transactions, liability management exercises, stockholder activism situations, and joint ventures, among others.  The ability to enter into such transactions under a clear legal framework is vital to Delaware corporations at every stage of their life cycle.  Corporate events now of necessity move more quickly than ever before, and allowing the current lack of clarity to persist beyond the current legislative session would be unduly damaging to the functioning of Delaware corporations and to Delaware’s reputation and standing.

We accordingly encourage the General Assembly to promptly adopt the Amendments.  If you have any questions regarding the foregoing, please do not hesitate to contact Iliana Ongun, Chair of the Committee on Mergers, Acquisitions and Corporate Control Contests, at (212) 530-5571 or iongun@milbank.com.

Respectfully submitted,
Iliana Ongun
Chair, Committee on Mergers, Acquisitions and Corporate Control Contests

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