Delaware General Corporation Law
The Delaware General Corporation Law (DGCL) is the principal statute governing the formation, operation, and dissolution of corporations incorporated in the State of Delaware. Contained in Title 8 of the Delaware Code, the DGCL provides the foundational legal framework that has made Delaware the preferred jurisdiction for corporate formation in the United States. The law governs everything from the rights of stockholders and directors to the mechanics of mergers, acquisitions, and other significant business transactions. Because of its comprehensive scope and ongoing refinement by the Delaware legislature and courts, the DGCL is frequently amended to address emerging business realities and judicial developments, most recently through a significant package of reforms enacted in March 2025.[1]
Historical Background
The origins of the Delaware General Corporation Law trace back to the late nineteenth century, a period during which American states competed aggressively to attract corporate charters and the accompanying filing revenues. Delaware enacted its foundational general corporation law in 1899, positioning itself as a business-friendly jurisdiction at a time when neighboring New Jersey had established itself as the dominant state for large corporate formations.[2]
The Delaware General Corporation Law of 1899 was modeled in significant part on the New Jersey corporation law of that era, but Delaware's legislature structured its statute with an eye toward flexibility and adaptability. Over time, as New Jersey tightened its corporate regulations in the early twentieth century, corporations and their legal advisors increasingly turned to Delaware, whose law remained comparatively permissive and predictable. This shift established a trajectory that would define Delaware's economic and legal identity for more than a century.
Throughout the twentieth century, the DGCL was periodically revised to reflect changes in business practice, judicial interpretation, and legislative policy. The Delaware General Assembly maintained an active role in amending the statute, often in direct response to rulings from the Delaware Court of Chancery and the Delaware Supreme Court. This iterative relationship between the legislature and the judiciary has been a defining feature of Delaware corporate law, enabling the DGCL to evolve in tandem with the practical needs of corporations and their stakeholders.
Structure and Scope
The Delaware General Corporation Law is codified in Title 8 of the Delaware Code and encompasses a broad range of subjects relevant to corporate governance and operation.[3] The statute addresses the procedures for incorporating a new entity in Delaware, the required contents of a certificate of incorporation, the rights and responsibilities of the board of directors, the rights of stockholders, and the rules governing fundamental corporate transactions such as mergers, consolidations, and asset sales.
The DGCL's treatment of the board of directors is particularly notable. The statute establishes the board as the central governing body of a Delaware corporation and defines the scope of director authority, the standards of conduct expected of directors, and the circumstances under which directors may be held personally liable for their decisions. The law also provides mechanisms through which corporations can limit or eliminate director liability for certain breaches of the duty of care, a feature that has made Delaware an attractive jurisdiction for directors and officers.
Stockholder rights under the DGCL include the right to vote on fundamental transactions, the right to receive dividends when declared, and the right to access certain corporate records. Section 220 of the DGCL governs stockholder inspection rights, specifying the conditions under which a stockholder may demand access to a corporation's books and records. This section has been the subject of significant litigation and legislative attention over the years, as courts and legislators have debated the appropriate scope of stockholder access to corporate information.[4]
Key Provisions
Director and Officer Liability
The DGCL sets out the fiduciary duties owed by directors and officers to the corporation and its stockholders. Directors are generally subject to duties of care and loyalty, and the statute provides safe harbors and exculpation provisions that can limit personal exposure under certain circumstances. The law permits corporations to adopt charter provisions that eliminate or limit the personal liability of directors for monetary damages arising from breaches of the duty of care, though no such protection extends to breaches of the duty of loyalty, acts of bad faith, or transactions from which the director derived an improper personal benefit.
Interested Director Transactions — Section 144
Section 144 of the DGCL addresses transactions in which one or more directors have a financial interest. The provision establishes conditions under which an otherwise potentially voidable transaction involving an interested director may be validated, typically through approval by disinterested directors or stockholders after full disclosure of the material facts. The application of Section 144 has generated substantial litigation in the Delaware Court of Chancery, and the legislature has periodically revisited the provision to clarify its scope and application.[5]
Section 203 — Business Combinations
Section 203 of the DGCL restricts certain business combinations between a corporation and an "interested stockholder," generally defined as a person who acquires 15 percent or more of the corporation's voting stock. Under Section 203, a corporation is prohibited from engaging in a business combination with an interested stockholder for a period of three years following the acquisition, unless certain conditions are met. These conditions include prior board approval of the transaction or the acquisition of stock, approval by the holders of at least two-thirds of the outstanding shares not owned by the interested stockholder, or the interested stockholder's acquisition of at least 85 percent of the voting stock in the transaction that crossed the threshold.[6] Section 203 functions as an anti-takeover provision and is a significant consideration for companies incorporated in Delaware that are evaluating potential acquisition scenarios.
Recent Amendments
2024 Proposed Amendments
In 2024, Delaware's corporate law community considered a series of proposed amendments to the DGCL addressing issues that had arisen in recent decisions of the Delaware Court of Chancery. These proposed changes reflected ongoing efforts by the legislature and the corporate bar to refine the statute in response to judicial rulings that created uncertainty or practical difficulties for Delaware corporations and their advisors.[7] The proposed amendments demonstrated the legislature's continued attentiveness to the evolving needs of corporate practice and its willingness to act in response to judicial developments.
Senate Bill 21 and the March 2025 Amendments
The most consequential recent change to the DGCL came on March 25, 2025, when Delaware passed Senate Bill 21 (SB 21), a package of amendments that drew significant attention from the legal and business communities. The legislation amended several provisions of the DGCL, including Sections 144 and 220, which govern interested director transactions and stockholder inspection rights, respectively.[8]
The amendments to Section 144 established clearer safe harbors for acts or transactions involving interested directors, providing greater predictability for corporations navigating complex governance situations. By codifying conditions under which such transactions would be protected from judicial challenge, the legislature sought to reduce litigation risk and provide corporate planners with a more reliable roadmap for structuring sensitive transactions.[9]
The revisions to Section 220, addressing stockholder inspection rights, similarly reflected an effort to clarify the conditions and procedures applicable to stockholder demands for books and records. Changes in this area have significant practical implications for stockholders seeking information to evaluate potential litigation or corporate conduct, as well as for corporations managing the administrative and legal burdens associated with inspection demands.
Senate Bill 21 was described as controversial at the time of its passage, reflecting the tension inherent in balancing the interests of controlling stockholders and corporate management on one hand against the interests of minority stockholders and accountability advocates on the other. The debate surrounding SB 21 highlighted the ongoing difficulty of calibrating corporate law to serve diverse stakeholders in an environment where Delaware must also remain competitive as a jurisdiction for corporate formation.
Role of the Delaware Court of Chancery
The Delaware Court of Chancery plays an indispensable role in the administration and development of the DGCL. As the specialized court of equity with jurisdiction over corporate disputes, the Court of Chancery has developed an extensive body of case law interpreting the provisions of the statute. Decisions from the Court of Chancery, and from the Delaware Supreme Court on appeal, shape the practical meaning of the DGCL's provisions and frequently prompt legislative responses when rulings create uncertainty or outcomes that the General Assembly wishes to address.
This dynamic relationship between court and legislature means that the DGCL is not a static document but a living statute continuously shaped by an ongoing dialogue between judicial interpretation and legislative action. The Court of Chancery's familiarity with corporate law and its specialized expertise have made Delaware's judicial system a significant factor in the state's attractiveness as a domicile for corporations.
Tax Considerations
Corporations incorporated in Delaware but operating primarily in other states are subject to Delaware's corporate franchise tax, calculated based on either the number of authorized shares or the assumed par value capital method. This tax represents a cost of Delaware incorporation that companies weigh against the legal and governance benefits of the DGCL. Delaware does not impose a state corporate income tax on corporations that are incorporated in the state but do not conduct business within it, a feature that has historically been cited as a financial benefit for holding companies and certain other corporate structures.
Significance for Corporate Practice
The DGCL's combination of flexibility, predictability, and a sophisticated judicial system has made it the reference point against which other states' corporate statutes are frequently measured. Legal counsel advising on significant transactions routinely analyze DGCL provisions as part of their due diligence process, and the statute's provisions are incorporated by reference into contracts, charter documents, and stockholder agreements across a wide range of industries and transaction types.
The ongoing process of legislative amendment, illustrated most recently by the March 2025 enactment of Senate Bill 21, demonstrates that the DGCL remains an active and evolving legal instrument responsive to the changing needs of the corporate community and the decisions of the Delaware courts.