Effective August 1, 2022, the Delaware General Corporation Law (“DGCL”) has been amended resulting in several significant changes. The amendments, among other things, will allow Delaware corporations to adopt exculpatory provisions in their certificate of incorporation (“COI”) to exculpate officers from personal liability in certain context, and provide corporations with more flexibility in delegating authority to officers and others to grant stock options and other rights to acquire stock.

Personal Liability of Corporate Officers
Previously, Section 102(b)(7) of DGCL allows a corporation’s COI to exculpate directors from personal liability for breaches of their fiduciary duty of care but did not authorize such exculpation for officers. This discrepancy between directors and officers liability often created issues in litigation involving individuals serving as both directors and officers. In such instances, an individual could be exempt from liability in his or her capacity as a director but still liable in his or her capacity as an officer.

Now, effective August 1, 2022, Delaware corporations can adopt exculpatory provisions in their COI that will allow officers to be exempted from claims for breach of fiduciary duty of care brought directly by stockholders (which commonly arise in the merger and acquisition context) and remain liable for such claims brought directly by the corporation or derivatively by stockholders, as well as for breaches of the duty of loyalty and for intentional acts or omissions.

Notwithstanding the foregoing, the exculpation of liability under Section 102(b)(7) is available only for officers deemed to have consented to service of process to the registered agent of the corporation as contemplated by Delaware law. Generally, executive officers, officers identified in the corporation’s SEC filings as one of the corporation’s most highly compensated executive officers at the time of alleged wrongdoing, and officers that have agreed in writing to constitute an officer for the aforementioned purpose.

Authority to Grant Stock Options and Other Rights
Previously, the DGCL permits the board of directors and board committees (collectively, the “Board”) to delegate limited authority to officers to grant stock options or other rights to acquire stock but let the responsibility to set the terms of the grants to the Board. The amendments expand the aforementioned authority, including to select a broader universe of recipients and to vary the terms of the grants. Particularly, that delegation to officers or others must set forth certain parameters, such as:

• the maximum number of shares, rights, or options (including the maximum number of shares that can be issued pursuant to such rights or options) that can be granted;

• the time period during which the issuance of shares, rights, or options (including the shares issuable upon exercise pursuant to such rights or options) may take place; 

• the minimum amount of consideration to be received for the issuance of shares, rights, or options (and the shares issuable upon exercise pursuant to such rights or options).