“Shareholder” and “stockholder” are synonyms. This post explains how most states came to use the former term in their laws, while Delaware consistently has used the latter.
Before Delaware had a general corporation law, Delaware’s legislature created each corporation. The Constitution of Delaware – 1831 so provided in Article II, Section 17, but made no mention of stockholders (or shareholders).
Following a constitutional amendment, Delaware adopted its first general corporation law in 1875. (See Laws of the State of Delaware, Vol. 15 – Part 1, beginning at page 181.) That law includes a few references to “stockholder”, none to “shareholder”. (more…)
People typically think about corporate board members having equal voting rights: One director, one vote. However, for Delaware corporations, that is not always the case.
Delaware Statute – Board Members
This unusual situation is the result of a Delaware statute. (more…)
Several years ago, I wrote about stockholder inspection rights. (See Which Financial Information Must a Corporation Provide to its Shareholders? ) This post explains how stockholders of a Delaware corporation can waive inspection rights.
Delaware General Corporation Law Section 220 gives stockholders a right to “inspect for any proper purpose, and to make copies and extracts from…[t]he corporation’s stock ledger, a list of its stockholders, and its other books and records”. Furthermore, “proper purpose” means “a purpose reasonably related to such person’s interest as a stockholder.” (more…)
In an earlier post, In Delaware, No Par Value Can Cost a Bundle, I discussed the two methods by which Delaware’s franchise tax for a corporation may be calculated. This post discusses the history of those two methods.
To some extent, this post is educated guesswork. It is based on a Quora question that I answered. Please see What is the rationale/reason (not math) behind the two methods of calculation for Delaware’s domestic franchise tax fee?
This post explains how Delaware became the incorporation capital of the U.S. It is based on a Quora question that I answered recently. Please see How did Delaware acquire its status as a corporate haven?
There are a number of law review articles about the history of Delaware corporate law and how Delaware became the home to so many U.S. corporations.
In my opinion, one of the most informative articles is Arsht, “(more…)”, Delaware Journal of Corporate Law (1976).
This post discusses how to dissolve a Delaware corporation or LLC (limited liability company) – i.e., how to terminate the entity’s existence.
For information about dissolving California entities, see How to Kill Your Company when that’s the Only Choice. (more…)
This post about entity conversion is an expanded version of an answer that I provided on Quora yesterday. (How do I convert a Delaware LLC to a California LLC?)
In my experience, entity conversion typically occurs for either, or both, of the following reasons.
- The need to convert a limited liability company (LLC) to a corporation to accept an investment from an institutional investor, such as a venture capitalist.
- The need to move an entity from one state to another. This typically occurs because the founder relocates, or because an investor prefers to invest in a Delaware corporation.
Several weeks ago, I wrote about how to issue LLC membership interests. In this post, I am addressing how a small corporation should issue corporate shares.
To start, one must examine the Certificate of Incorporation (Delaware) or Articles of Incorporation (California) to determine the maximum number of shares that may be issued. (To simplify this discussion, I will assume that only one class of common shares has been authorized.) A corporation may not issue more shares than are authorized. (more…)
This post addresses a generalized version of a question that I answered on Quora concerning committees of corporate boards of directors. Q. Who appoints the members of a board committee?
A. Appointment of board committee members is governed by the corporation’s bylaws, or by applicable statutes if there are no bylaws. In my experience, bylaws (or statutes) state that a board committee is appointed by a majority of the board members. Committees are not appointed by the CEO or the Chair of the Board. (more…)