The Advisors' Blog

Under newly effective amendments to Sections 152, 153 and 157 of the Delaware General Corporation Law, companies now have greater flexibility in equity grant procedures. The amendments – as set forth in proposed form in this Skadden markup – clarify the ability of the board to delegate authority for stock issuances (Section 152) and for options and other rights (Section 157) – and harmonize these sections so that they’re finally consistent with each other. Under both sections, the delegating resolution needs to include:

– A maximum number of shares, rights or options that may be issued (including the maximum number of shares that can be issued pursuant to the rights or options);

– A time period during which the shares, rights or options may be issued (including the time period for issuing shares upon exercise of the rights or options); and

– A minimum amount of consideration for which the shares, rights or options may be issued (including the shares issuable upon exercise of the rights or options) – which may be based on a formula or other “facts ascertainable” that are set forth in the resolution – e.g., trading price on a particular date.

The person or group receiving the delegated authority also can’t grant equity to themselves. Check out this Troutman Pepper memo for more details. Even though the newly consistent treatment and flexibility is a welcome change, anyone drafting minutes and documenting equity awards still needs to be careful to observe the technical requirements, since foot-faults can invalidate grants.

This is one of the many practical topics that we’ll be covering at our “19th Annual Executive Compensation Conference” – which is happening virtually on October 14th. Here are the full agendas for the “Proxy Disclosure & 19th Annual Executive Compensation Conferences.” To register, you can sign up online, email sales@ccrcorp.com, or call 1-800-737-1271.

– Liz Dunshee