Several amendments to the Delaware General Corporation Law (DGCL) related to corporate governance, stockholder rights, and merger agreements went into effect on August 1, 2024. The amendments will apply proactively as well as retroactively to agreements a corporation has entered into prior to the effective date, but will not apply to any completed or pending civil actions or proceedings that have commenced before the effective date.

The amendments to the DGCL are intended to address the potential inconsistencies and issues created by several recent rulings by the Delaware Court of Chancery that deviated from current market practices and created uncertainty as to the validity of agreements entered into by corporations. The changes implemented by the amendments realign the DGCL with current practices and provide corporations with greater flexibility in transactions and governance.

The key changes implemented by the DGCL amendments include the following:

· A corporation is now permitted to enter into an agreement with its stockholders that provide its stockholders with additional consent and governance rights, including providing for specific stockholder approval requirements for actions by the board of directors.

· The articles of incorporation of a corporation no longer have to specify the corporation’s power to contract with its stockholders in order for the contract to be enforceable.

· The board of directors and stockholders are not required to approve the disclosure schedules or similar documents that are delivered in connection with a merger agreement as these are not deemed part of the merger agreement. Additionally, the amendments allow documents that require the approval of the board of directors to be approved in substantially final form in recognition that these documents are often being revised up until the closing.

· Parties to a merger agreement are now permitted to expressly provide for penalties in the event a party’s breach of the merger agreement or failure to consummate the proposed merger. The penalty for the failure to consummate the proposed merger may include damages based on the loss of premium payable to the stockholders of the target corporation.

If you would like more information on the amendments to the DGCL or any related matter, please do not hesitate to contact an attorney in GCT’s Corporate Team.