top of page
2023 Proposed Amendments to Section 204 of the DGCL

June 19, 2023

The Delaware Senate recently passed a bill proposing significant amendments to the General Corporation Law of the State of Delaware (DGCL), including amendments to Section 204 that are intended to simplify and streamline the process of ratifying defective corporate acts. If approved by the Delaware House of Representatives and signed into law by the governor of Delaware, these amendments will become effective on August 1, 2023.
Under the current DGCL, corporations have the option to rectify defective corporate acts, including invalid stock issuances, through the self-help ratification process under Section 204.  Section 204 currently provides that corporations must file a certificate of validation to ratify defective corporate acts, regardless of whether a certificate required under another section of the DGCL has already been filed.  
The proposed amendments, if adopted, will significantly narrow the circumstances in which a certificate of validation must be filed to only those where a certificate required to be filed under any section of the DGCL either (i) has been filed but requires an amendment to give effect to the defective corporate act (including changes to the date and time of effectiveness of the certificate), or (ii) has not previously been filed under any section of the DGCL.
Furthermore, the amendments aim to simplify the content requirements for a certificate of validation, eliminating the need for certificates of validation to describe the underlying defective corporate acts and the nature of the failure of authorization associated with them. The amendments also clarify that the time at which the board adopts the resolutions approving the defective corporate act would be the time for determining which shares constitute valid stock and which shares constitute putative stock entitled to vote on the adoption of the ratification of a defective corporate act requiring a vote of the holders of valid stock.
By streamlining the process and removing certain complexities, these proposed amendments are expected to encourage more corporations to ratify defective corporate acts through the Section 204 self-help ratification process rather than through the judicial process.

bottom of page