The Delaware Business Corporation Act, also known as the "Delaware General Corporation Law" outlines everything a corporate business owner would possibly need to know. Covering everything from the formation of a corporation to laws surrounding stock transfers, this act is highly comprehensive and should be followed by all corporations. If a dispute does occur, these issues will be fairly handled by the Delaware Court of Chancery. 

Business Corporation Laws in Delaware: Introduction

Being an ideal state to start a business, Delaware is known for having the most pro-business laws of an American state. In fact, Delaware's litigation system has been ranked #1 by the United States Chamber of Commerce over the past decade. When it comes to incorporating your business, Delaware is recommended as a location in order to help you protect your personal assets in relation to the liability of your business. 

Due to its laws, Delaware offers the greatest level of protection out of all 50 states. In this case, the limited liability company or corporation assumes all of the risks, offering the owners greater peace-of-mind. In addition, Delaware has a separate court system to resolve business disputes. This means that the judges are carefully selected based on their qualifications. 

Since there are no jury trials in the Court of Chancery, each decision is made by the court. In fact, Delaware's Court of Chancery is known to make more quality decisions in comparison to any other state. Another benefit is that the Delaware court system often acts very quickly. In some cases, the entire legal process can be started and finished in two months. 

Judges in Delaware are sure to do their homework and read through all pleads before a trial begins. Judges then provide written decisions that are often 100 pages in length. This provides those involved with a well-reasoned thought process.

The Delaware General Corporation Law: Summary

When there is a dispute within a limited liability company or a corporation, these issues will be heard in the Delaware Court of Chancery. The court does not use a jury, but instead a judge — or in this case, a chancellor. All rulings are then made based on law and supporting facts. Although the Delaware General Corporation Law should be understood, it is not sound legal advice. Instead, you should seek the assistance of an attorney. 

Based on Delaware corporation laws, please be mindful of the following. 

  • An individual, association, or partnership can form a corporation as long as the business itself is lawful. 
  • As a corporate shareholder, you will not be liable for the company's debts. 
  • A Delaware-based corporation legally exists once the Secretary of State receives its Certificate of Incorporation.
  • As shareholders, you are able to alter corporate bylaws
  • Corporations are not allowed to operate as banks.
  • A registered agent is required for each corporation.
  • Once selected, a corporation can change who it appoints as its registered agent.
  • Corporations are governed by a Board of Directors. 
  • Once a corporation is formed, it may issue stock.
  • In order for a meeting to be considered valid, at least one-third of the shareholders must be present.
  • All shareholders have the right to inspect the company's books during regular business hours following a written request. 
  • Any two or more corporations are able to merge.
  • As a Delaware corporation, you may convert to another business structure

The list above is just the tip of the iceberg, so please review the state's corporation laws closely. You should also keep a copy handy to refer to in times of need. To go over Delaware laws in greater detail, please seek the assistance of your attorney. It is important to clarify any concerns you may have as soon as possible in order to prevent a future, potentially costly misunderstanding,

Whether you are the majority shareholder or you only own a small piece of the pie, understanding Delaware laws is imperative for all business owners operating in the state. When you understand what is expected of you both as a corporation and as a shareholder, you can practice due diligence. In turn, this will help you protect the corporation long-term, promoting sustained success. 

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