New Amendments to Delaware General Corporation Law Will Make It Easier for Companies to Become Public Benefit Corporations.

• Position: [LEGAL] ELIZABETH K. LANGE & ELIZABETH A. DIFFLEY

On July 16, 2020, Delaware adopted new amendments to its public benefit corporation statute, continuing a trend to make this relatively new corporate form more accessible. The amendments, among other things, (i) reduce impediments to use of the public benefit corporation form by eliminating supermajority voting requirements and appraisal rights in connection with converting to, or merging with, a public benefit corporation, (ii) clarify the conflict of interest rules and provide statutory default protection for directors in connection with their duty to balance interests and (iii) clarify shareholder ownership requirements for bringing a lawsuit to enforce the balancing requirements required of public benefit corporations.

Public benefit corporations (PBCs) are for-profit corporations that are intended to produce one or more public benefits and to operate in a responsible and sustainable manner. A key distinction between a public benefit corporation and a conventional corporation is that a board of directors must manage a PBC in a manner that balances (1) the stockholders' pecuniary interests, (2) the best interests of those materially affected by the corporation's conduct (e.g., employees, customers, suppliers, local communities, etc.), and (3) the public benefit or public benefits identified in the public benefit corporation's certificate of incorporation. The amendments to Sections 363, 365 and 367 of the Delaware General Corporation Law (DGCL) are described in more detail below:

* Elimination of Super-Majority Voting Rights. The amendments to Section 363 of the DGCL reduce from two-thirds to a simple majority the stockholder vote required for (1) amendments to a certificate of incorporation to effect a conversion of a conventional corporation into a public benefit corporation (and vice versa) and (2) mergers that result in the conversion of shares of a conventional corporation into shares of a public benefit corporation (and vice versa).

*Elimination of Appraisal Rights. The amendments to Section 363(b)(2) of the DGCL eliminate appraisal rights for (1) amendments to a certificate of incorporation to effect a conversion of a conventional corporation into a public benefit corporation (and vice versa) and (2) mergers that result in the conversion of shares of a conventional corporation into shares of a public benefit corporation (and vice versa).

*Clarification of Interested Director Provisions. The amendments to Section 365(c) clarify...