The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Last week, Delaware enacted amendments to its corporation law – effective August 1st – that will permit grants of restricted stock to be made by a corporate officer who has been delegated that authority by the board (within parameters). Prior to this change, the granting of options could be delegated to officers pursuant to DGCL Section 157(c), but not so for stock. Under the old law, some companies worked around this limitation by creating a board committee of one person (typically, the CEO-director). The law change presents the opportunity for delegation without using a “committee of one,” allowing the CEO (in a non-director capacity) or other delegated officers to make grants of stock. Of course, accurate and timely records must be kept and plans also would need to permit such administration.

Here’s the news from this Richards Layton memo:

The 2015 legislation amends Section 152 of the DGCL to clarify that the board of directors may authorize stock to be issued in one or more transactions in such numbers and at such times as is determined by a person or body other than the board of directors or a committee of the board, so long as the resolution of the board or committee, as applicable, authorizing the issuance fixes the maximum number of shares that may be issued as well as the time frame during which such shares may be issued and establishes a minimum amount of consideration for which such shares may be issued.

The minimum amount of consideration cannot be less than the consideration required pursuant to Section 153 of the DGCL, which, as a general matter, means that shares with par value may not be issued for consideration having a value less than the par value of the shares. The legislation clarifies that a formula by which the consideration for stock is determined may include reference to or be made dependent upon the operation of extrinsic facts, thereby confirming that the consideration may be based on, among other things, market prices on one or more dates or averages of market prices on one or more dates.

Among other things, the legislation clarifies that the board (or duly empowered committee) may authorize stock to be issued pursuant to “at the market” programs without separately authorizing each individual stock issuance pursuant to the program. In addition, the legislation allows the board to delegate to officers the ability to issue restricted stock on the same basis that the board may delegate to officers the ability to issue rights or options under Section 157(c) of the DGCL.