Bylaw Reforms for Delaware's Corporation Law

Abstract:     
Written as part of a symposium on the Delaware General Corporation Law in the twenty-first century, this paper suggests four reforms to the DGCL. Each of these reforms would help solidify the ability of shareholders to effectively adopt bylaws that regulate decisionmaking procedure and corporate governance. The four reforms are:

* Amend section 109(b), and perhaps 141(a), to clarify that bylaws may set procedural and governance rules, but may not be used to make substantive business decisions;
* Amend section 141(a) to provide that shareholder bylaw or certificate provisions which limit board discretion thereby shield the board from fiduciary duty liability for actions required or prohibited by the provisions;
* Amend section 157(a) to clarify that bylaws may limit or regulate the ability of boards to adopt poison pills; and
* Amend section 109 to clarify that if a shareholder bylaw so specifies, the board may not amend or repeal that bylaw.

The first, third, and fourth changes are arguably already the rule under existing law, but there is much uncertainty under that law, and these changes would bring more clarity. The second change responds to the Delaware Supreme Court's recent decision in CA, Inc. v. AFSCME Employees Pension Plan.

Keywords: Delaware, Journal, Corporate, Law, bylaws, corporate governance, shareholder, CA, Inc. v. AFSCME Employees Pension Plan, 109(b), 141(a), 157(a), 109, poison pills

JEL Classifications: G30, K22

Accepted Paper Series