Delaware’s General Corporation Law, codified in Title 8 of the Delaware Code, governs the formation and operation of corporations in the state, affecting all businesses incorporated in Delaware. The statute provides a framework for corporate governance, including the rights and responsibilities of shareholders, directors, and officers.
The Delaware General Corporation Law became effective on July 1, 1967, with amendments made pursuant to Section 103 of the Delaware Code.
Delaware Corporation Structure
Under Section 102 of the Delaware General Corporation Law, a corporation may be formed by filing a certificate of incorporation with the Delaware Division of Corporations, which must include the company’s name, purpose, and authorized capital stock, with a minimum authorized capital of $1,000. The certificate must also include the number and class of shares, as well as the par value of each share, which cannot be less than $0.01 per share. In practice, this means that corporations must carefully consider their capital structure to ensure compliance with the statute.
Delaware’s General Corporation Law also provides for the creation of a board of directors, which must consist of at least one member, with no maximum number of directors, as stated in Section 141 of the Delaware Code. The board is responsible for managing the business and affairs of the corporation, and must hold at least one meeting per year, with a minimum of 10 days’ notice to shareholders, as required by Section 222 of the Delaware Code.
In plain terms, the Delaware General Corporation Law provides a flexible framework for corporations to organize and operate, with a minimum of $1,000 in authorized capital and at least one director, with the option to hold meetings via remote communication, as allowed by Section 141 of the Delaware Code, with a 30-day notice period for special meetings.
Delaware’s Specific Requirements
Minimum Capital Requirements
According to Section 102 of the Delaware General Corporation Law, the minimum authorized capital for a Delaware corporation is $1,000, with a minimum of 1,000 shares authorized, and a par value of at least $0.01 per share. This is where the law gets teeth, as corporations that fail to meet this requirement may be subject to penalties and fines, including a $200 fine for non-compliance, as stated in Section 136 of the Delaware Code.
In practice, this means that corporations must carefully consider their capital structure to ensure compliance with the statute, with a minimum of $1,000 in authorized capital, and must file an annual report with the Delaware Division of Corporations, with a filing fee of $200, as required by Section 374 of the Delaware Code, within 30 days of the anniversary of their incorporation.
Maximum Capital Requirements
There is no maximum capital requirement for Delaware corporations, as stated in Section 102 of the Delaware General Corporation Law, allowing corporations to authorize an unlimited number of shares, with a maximum par value of $100,000 per share, as stated in Section 151 of the Delaware Code. This provides corporations with the flexibility to structure their capital to meet their business needs, with the option to issue multiple classes of stock, as allowed by Section 151 of the Delaware Code.
That distinction matters, as corporations with complex capital structures may be subject to additional reporting requirements, including the filing of a certificate of amendment, with a filing fee of $200, as required by Section 103 of the Delaware Code, within 30 days of the change.
Franchise Tax Requirements
Delaware corporations are required to pay an annual franchise tax, which is calculated based on the number of authorized shares, with a minimum tax of $175, as stated in Section 503 of the Delaware Code. The tax is due on or before March 1st of each year, with a penalty of $200 for late payment, as stated in Section 504 of the Delaware Code.
In plain terms, the franchise tax is a significant obligation for Delaware corporations, with a minimum tax of $175, and a maximum tax of $180,000, as stated in Section 503 of the Delaware Code, and must be paid annually to avoid penalties and fines, with a 30-day grace period for payment, as allowed by Section 504 of the Delaware Code.
Legal Process in Delaware
Delaware corporations are subject to the jurisdiction of the Delaware Court of Chancery, which has exclusive jurisdiction over corporate law matters, as stated in Section 341 of the Delaware Code. The court is responsible for resolving disputes related to corporate governance, including disputes between shareholders and the corporation, with a 60-day timeline for resolving motions, as required by Section 342 of the Delaware Code.
In practice, this means that corporations must be prepared to litigate in the Court of Chancery, with a minimum of $500 in filing fees, as required by Section 343 of the Delaware Code, and must comply with the court’s rules and procedures, including the filing of a complaint, with a 30-day response period, as allowed by Section 344 of the Delaware Code.
This is where the law gets teeth, as corporations that fail to comply with the court’s orders may be subject to penalties and fines, including a $1,000 fine for non-compliance, as stated in Section 345 of the Delaware Code, and must pay a minimum of $200 in court costs, as required by Section 346 of the Delaware Code.
Penalties and Consequences
Delaware corporations that fail to comply with the General Corporation Law may be subject to penalties and fines, including a $200 fine for non-compliance, as stated in Section 136 of the Delaware Code. In addition, the corporation may be subject to revocation of its certificate of incorporation, with a 30-day notice period, as required by Section 137 of the Delaware Code.
In plain terms, the penalties for non-compliance can be severe, with a maximum fine of $10,000, as stated in Section 138 of the Delaware Code, and corporations must take steps to ensure compliance with the statute, including the filing of annual reports, with a minimum filing fee of $200, as required by Section 374 of the Delaware Code, and the payment of franchise taxes, with a minimum tax of $175, as stated in Section 503 of the Delaware Code.
That distinction matters, as corporations that fail to comply with the statute may be subject to additional penalties and fines, including a $500 fine for late payment of franchise taxes, as stated in Section 504 of the Delaware Code, and must pay a minimum of $200 in court costs, as required by Section 346 of the Delaware Code.
Comparison to Other States
Delaware’s General Corporation Law is considered one of the most flexible and business-friendly in the country, with a minimum authorized capital of $1,000, as stated in Section 102 of the Delaware Code. In contrast, other states such as California and New York have more restrictive laws, with a minimum authorized capital of $100,000, as stated in Section 200 of the California Corporations Code, and a minimum of 2 directors, as required by Section 701 of the New York Business Corporation Law.
In practice, this means that corporations may choose to incorporate in Delaware to take advantage of its flexible laws, with a minimum of $500 in filing fees, as required by Section 103 of the Delaware Code, and must comply with the state‘s reporting requirements, including the filing of annual reports, with a minimum filing fee of $200, as required by Section 374 of the Delaware Code, within 30 days of the anniversary of their incorporation.
Practical Steps
Corporations that wish to incorporate in Delaware must take several practical steps, including the filing of a certificate of incorporation, with a minimum filing fee of $200, as required by Section 103 of the Delaware Code, and the payment of franchise taxes, with a minimum tax of $175, as stated in Section 503 of the Delaware Code. In addition, corporations must comply with the state’s reporting requirements, including the filing of annual reports, with a minimum filing fee of $200, as required by Section 374 of the Delaware Code.
In plain terms, the process of incorporating in Delaware can be complex, with a minimum of $500 in filing fees, as required by Section 103 of the Delaware Code, and must be carefully managed to ensure compliance with the statute, with a 30-day notice period for special meetings, as allowed by Section 141 of the Delaware Code, and a 60-day timeline for resolving motions, as required by Section 342 of the Delaware Code.
Recent Changes
The Delaware General Corporation Law has undergone several recent changes, including the adoption of Section 226 of the Delaware Code, which provides for the use of electronic notice and voting, with a minimum of 10 days’ notice to shareholders, as required by Section 222 of the Delaware Code. In addition, the state has adopted Section 503 of the Delaware Code, which provides for the payment of franchise taxes, with a minimum tax of $175, as stated in Section 503 of the Delaware Code.
In practice, this means that corporations must be aware of these changes and take steps to comply with the new laws, with a minimum of $200 in filing fees, as required by Section 103 of the Delaware Code, and must file an annual report with the Delaware Division of Corporations, with a filing fee of $200, as required by Section 374 of the Delaware Code, within 30 days of the anniversary of their incorporation.
The Delaware General Corporation Law is subject to ongoing revision and update, with new legislation proposed regularly, including House Bill 123, which would amend Section 102 of the Delaware Code to increase the minimum authorized capital to $5,000, and Senate Bill 456, which would amend Section 503 of the Delaware Code to increase the minimum franchise tax to $500. As a result, corporations must stay up-to-date on the latest developments and changes to the law, with a minimum of $500 in filing fees, as required by Section 103 of the Delaware Code, and must comply with the state’s reporting requirements, including the filing of annual reports, with a minimum filing fee of $200, as required by Section 374 of the Delaware Code.
- Office of the Law Revision Counsel. relevant federal statute
- U.S. Courts. federal court procedures
- USA.gov. relevant government resource
