On June 24, 2015, Delaware Governor Jack Markell signed Senate Bill 75 which will amend the Delaware General Corporate Law (the “DGCL”) effective August 1, 2015, as follows:
Exclusive Forum Provisions
- A new Section 115 will be added to authorize the inclusion of a forum selection provision in the certificate of incorporation or bylaws of a corporation that designates the Delaware courts as the exclusive forum in which “internal corporate claims” may be brought.
- “Internal corporate claims” are defined as claims in the right of the corporation, (i) that are based upon a violation of a duty by a current or former director or officer or stockholder in such capacity, or (ii) as to which the DGCL confers jurisdiction upon the Court of Chancery.
- Section 115 provides further that no provision in the certificate of incorporation or bylaws of a corporation may prohibit bringing internal corporate claims in the Delaware courts; however, Section 115 does not expressly prohibit a provision in the certificate of incorporation or bylaws of a corporation that selects a forum other than the Delaware courts as an additional forum in which internal corporate claims may be brought.
- Section 115 is not intended to prevent the application of an exclusive forum provision pursuant to a stockholders agreement or other writing signed by the stockholder against whom the provision is to be enforced.
- The Court of Chancery previously upheld a forum selection provision in City of Providence v. First Citizens BancShares, Inc., discussed here, which designated the courts of North Carolina as the exclusive forum for intra-corporate disputes. After Section 115 becomes effective such an exclusive forum provision would be impermissible; however, it remains to be seen whether a forum selection provision that selects a forum in addition to the Delaware courts may be valid.
- The revised Sections 102 and 109 will invalidate any provision in the certificate of incorporation or bylaws of a stock corporation that “would impose liability on a stockholder for the attorneys’ fees or expenses of the corporation or any other party in connection with an internal corporate claim.”
- The revised Sections 102 and 109 are not intended to prevent the application of a fee-shifting provision pursuant to a stockholders agreement or other writing signed by the stockholder against whom the provision is to be enforced.
- The amendments to the DGCL do not disturb the validity of fee-shifting provisions in respect of nonstock corporations, and thus do not disturb the decision of the Delaware Supreme Court in ATP Tour, Inc. v. Deutscher Tennis Bund, discussed here.