What Is Section 141 F of Delaware General Corporation Law?
Section 141 F of the Delaware General Corporation Law is an important part of the code of laws affecting business within the state.3 min read
Section 141 F of the Delaware General Corporation Law is an important part of the code of laws affecting business within the state. This particular section addresses the actions of the board of directors, permitting them to provide written consent representing voting decisions to be held in escrow rather than requiring them to all appear in person.
In 2014, several amendments to the Delaware General Corporation Law (DGCL) were proposed. Most of these amendments addressed the process for mergers and the voting by shareholders and the board of directors. They were effective on August 1, 2014.
Amendments included Section 251(h), which stated that stockholders do not need to vote on certain mergers. Section 204 governed defective corporate acts and issuances of stock which were not authorized properly; such issuances could be validated retroactively by the board of directors.
Section 141(f) also governs issues requiring board of director voting, specifically the way this voting is allowed to be carried out.
Written Consent of Directors in Escrow
A meeting between board of directors or committee members is not always convenient, and occasionally there are complex or time-sensitive matters that come up between regular meetings. Therefore, Section 141(f) was drafted so that board members could conduct business without holding an in-person meeting.
As of July 1, 2014, an amendment to this section became effective, allowing directors to provide signed written consent that is not effective until a future event takes place. It also allows an individual who is not currently a director, but will be a director at the effective date, to sign the consent document.
This amendment simplifies the process of documenting transactions involving voting by directors, particularly when they need to take place at specific times, in a specific order.
Written Consent of Stockholders in Escrow
Similarly, Section 228 addresses voting by stockholders. It permits stockholders to conduct business outside of a regularly scheduled meeting, as long as a minimum number of stockholders are available to sign a written consent. The new amendment is effective July 1, 2014, and allows this written consent to be placed in escrow so that it becomes effective at a future date or when another event takes place.
Summary of Section 141(f)
Section 141(f) of the DGCL contains the following components:
- Every corporation's business will be managed by a board of directors unless otherwise specified in its certificate of incorporation.
- The board of directors will consist of the number of people indicated in the corporate bylaws. The bylaws also contain qualifications for directors and the process for their election and removal.
- A quorum is necessary for the transaction of business; this may be no less than one-third of the total number of members.
- The board of directors may designate committees and alternate committee members. Committees are permitted to conduct corporation business but are not allowed to amend the certificate of incorporation, with the exception of issues affecting the shares of stock and their distribution.
- Directors may be divided into different classes which have varying expiration dates for their term of office. They may also be elected to have greater or lesser voting powers than the other directors.
- Members of the board of directors must perform their duties according to the corporation's records, reports, or statements which are provided by professionals who are competent and trustworthy.
- Actions by the board of directors may be completed without an official meeting as long as all board or committee members consent in writing to do so; these must be filed along with the boards meeting minutes.
- The board of directors may hold meetings and have offices outside of the state.
- The board of directors is allowed to determine directors' compensation.
- The board of directors may hold a meeting by telephone conferences as long as all members can hear each other. Participating in such a meeting constitutes attendance at the official meeting.
- A corporation that does not issue stock may have different rules than those provided in this section.
- Any member of the board of directors may be removed for any reason if the shareholders vote to remove them, except in certain situations.
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