Delaware Expands Emergency Board Powers in Response to Pandemic

On July 16, 2020, Delaware’s lawmakers enacted House Bill 341, which amended Delaware’s General Corporation Law (DGCL) to add “pandemics” to the list of “catastrophes” giving rise to emergency board powers. With this amendment, the state’s corporations may relax quorum, voting and other governance requirements in the event of a pandemic or epidemic.

Section 110 of DGCL had already allowed bylaws to include emergency provisions that spring into effect upon the occurrence of a “catastrophe” (which contemplated the disruption of a nuclear attack when it was first implemented). House Bill 341 clarifies that a “catastrophe” now includes epidemics and pandemics.

The purpose of the amendment is that if a catastrophe makes it difficult to call a meeting or gather a quorum for voting purposes, in each case in accordance with the non-emergency bylaws and DGCL provisions, these amendments are intended to give corporations flexibility to continue operations while weathering the storm.

Under the DGCL, emergency bylaws may include any provision that “may be practical and necessary for the circumstances of the emergency”, including provisions that allow for the following:

• Calling of Meetings: Directors and officers can call a meeting of the board in such manner and under such conditions as prescribed in the emergency bylaws. For example, emergency provisions may allow for notice of a board meeting during an emergency to be given only to the directors whom it may be practical to reach and may also allow for notice to be given by such means as may be feasible at the time.
• Quorum: A quorum may be deemed to be constituted by a majority of the directors present.
• Alternate Emergency Directors: The board may pre-approve a prioritized list of alternate temporary directors who will be deemed directors to the extent required to provide a quorum at any board meeting.
• Stockholder Meetings: The board may postpone the date and/or location of stockholder meetings or hold a virtual meeting.
• Dividends: The board may change record and payment dates of dividends.
• Indemnification: The right of a director and officer to indemnification may be extended to any other person that stepped into such a roll who successfully defended claims against them.

As part of your disaster continuity planning, you may want to consider the implementation of emergency bylaws to ensure minimal disruption to your business and operations. The Corporate Team at Levenfeld Pearlstein would be happy to review your current bylaws with you and discuss any possible revisions.

The complete House Bill 341 can be viewed here.