Effective August 1, 2015, the Delaware General Corporation Law (DGCL) has been amended to:
- authorize forum selection clauses in the charters or bylaws of Delaware corporations specifying Delaware as an exclusive forum for litigating internal corporate claims;
- prohibit clauses designating only courts outside of Delaware as the exclusive forum for internal corporate claims; and
- invalidate provisions in the charters or bylaws of Delaware stock corporations that shift fees for internal corporate claims.
The Governor of Delaware signed the amendments into law on June 24, 2015. What to do in light of the amendments:
- Consider adopting a Delaware forum selection clause (if not previously adopted) because multiple forum litigation is expensive, distracting and frequently the result of jockeying among plaintiffs’ lawyers to obtain a “seat at the table” in lawsuits challenging mergers. Note that Delaware corporations that have unilaterally adopted forum selection clauses in recent years generally have not faced significant adverse reaction from ISS or large institutional investors. However, under its current policies, Glass Lewis will consider recommending against the governance committee chair where the board adopted a forum selection bylaw in the past year without shareholder approval (and explicitly will recommend voting against the governance committee chair at companies that completed an IPO within the past year if the board unilaterally adopted a forum selection clause in the charter or bylaws prior to the IPO).
- If a Delaware corporation has adopted a forum selection clause that would prohibit litigation of internal corporate claims in the Delaware courts, it should amend the clause to make clear that such claims may be brought in Delaware in addition to, or instead of, the forum currently specified.
- If a Delaware stock corporation has adopted a fee-shifting provision with respect to internal corporate claims, it should consider amending its charter and/or bylaws, as applicable, to remove such provision because it will no longer be enforceable.