The Delaware General Assembly, by means of Senate Bill 75, has enacted a number of revisions and additions to the Delaware General Corporation Law. As previously noted
(HERE IS A LINK TO THAT POSTING), Senate Bill 75 has precluded stock corporations, either in their
certificate of incorporation
or bylaws, from imposing requirements upon
shareholders and
other stakeholders
to pay all defense cost in the event a derivative or similar action is not successful. That was not, however, the sole
import of Senate Bill 75.
Another provision added to the DGCL addresses forum selection provisions in either the certificate of incorporation
or the bylaws. Under the new provisions, it is clear that either the certificate
or the bylaws may provide that
(a) the Delaware courts are the exclusive jurisdiction for
consideration of
internal corporate
claims or, in the alternative (b) the courts of a foreign jurisdiction
or a permissible venue
for the resolution of disputes over internal affairs
provided that
the Delaware
courts as well remain an available venue. At the same time, and this is made express in the official comment
released with
the statute, neither the
certificate nor the bylaws may purport
to identify the courts
of a jurisdiction
outside of Delaware as the exclusive venue for the
resolution of internal corporate claims: the statute “invalidates such a provision selecting
the courts in
a different
State, or an arbitral forum, if it would preclude litigating
such claims
in the Delaware courts.”
The referenced definition of
“internal corporate claims” of section 115 is to “claims, including claims in
the right of the corporation, (i) that are based upon a violation of the duty
by a current or former director or officer or stockholder in such capacity, or
(ii) as to which this title confers jurisdiction upon the Court of Chancery.”
It should
be noted that, while such provisions may not be set forth in the certificate of
incorporation or the
bylaws, they may still be set forth in a shareholder agreement that
has been “signed by the stockholder against
whom the provision is to be enforced.”
The 2015 Kentucky General
Assembly, through sections
of 6 and 7 of House Bill 440 (2015 Ky. Acts, ch. 34), have enabled a corporation to identify the “appropriate court,” that being the circuit court of
the county in which the corporation
has its principal office
address or,
if the principal
office address
is not in Kentucky, its registered office, as that in which derivative
actions or actions to compel the production of books and records, may or must be
brought. However,
the Kentucky Act requires that the venue election be
in the articles of incorporation;
a venue provision in the bylaws has not been statutorily
sanctioned.
Further, in that the statute has defined where such a provision may be adopted, namely in the articles of incorporation,
by implication
the adoption
elsewhere is
in effective.
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