DE SB236 | 2013-2014 | 147th General Assembly
Status
Spectrum: Partisan Bill (Democrat 5-0)
Status: Introduced on June 3 2014 - 25% progression, died in chamber
Action: 2014-06-04 - Reported Out of Committee (JUDICIARY) in Senate with 5 On Its Merits
Text: Latest bill text (Draft #1) [HTML]
Status: Introduced on June 3 2014 - 25% progression, died in chamber
Action: 2014-06-04 - Reported Out of Committee (JUDICIARY) in Senate with 5 On Its Merits
Text: Latest bill text (Draft #1) [HTML]
Summary
New Section 331 is intended to confirm and codify the limited liability nature of corporations by expressly stating that provisions in a certificate of incorporation or bylaw may not impose monetary liability on stockholders, except in the very limited circumstances already provided for in the Delaware General Corporation Law. In ATP Tours, Inc. v. Deutscher Tennis Bund (No. 534, 2013, May 8, 2014), the Delaware Supreme Court upheld as facially valid a bylaw imposing liability for legal fees on certain members of a non-stock corporation who participated in the litigation. Together with the amendments to Section 114, new Section 331 is intended to limit applicability of that holding to non-stock corporations, and to make clear that such liability may not be imposed on holders of stock in stock corporations. The change to Section 102(b)(6) is intended to clarify that any certificate of incorporation provision that imposes stockholder liability for the debts of the corporation must impose such liability based on status as a stockholder, and not on any other status or action of the stockholder. The change to Section 102(b)(6) does not, however, modify or limit the possibility of liability not arising from a charter or bylaw provision, but based instead on a specific act or omission of a stockholder, such as guaranteeing debt of the corporation or engaging in tortious conduct affecting a third person. Under new Section 331 and Section 102(b)(6) as amended, a provision of the certificate of incorporation or bylaws that would purport to require a holder of stock in a stock corporation to pay expenses incurred by the corporation, its directors, officers, employees, agents or controlling stockholders in connection with litigation initiated or claims prosecuted by the stockholder would be facially invalid. New Section 331 would not prohibit bylaw provisions permitted by Section 112(5), inasmuch as such provisions do not contemplate personal liability of a stockholder in the absence of the stockholder’s explicit affirmative consent (providing an undertaking to indemnify the corporation). Nothing in these amendments is intended to limit the power of a court to impose sanctions under applicable law or the enforceability of any provision included in the certificate of incorporation or bylaws that binds any person pursuant to any separate contract, agreement, deed or other instrument.
Title
An Act To Amend Title 8 Of The Delaware Code Relating To General Corporation Law.
Sponsors
| Sen. Bryan Townsend [D] | Sen. Margaret Henry [D] | Sen. Patricia Blevins [D] | Rep. Rebecca Walker [D] |
| Rep. Melanie Smith [D] |
History
| Date | Chamber | Action |
|---|---|---|
| 2014-06-04 | Senate | Reported Out of Committee (JUDICIARY) in Senate with 5 On Its Merits |
| 2014-06-03 | Senate | Assigned to Judiciary Committee in Senate |
