In the State of Delaware, a corporation is formed when it files its Certificate of Incorporation (COI) with the Secretary of State (see http://www.corp.delaware.gov/incstk.pdf). In addition to required disclosures, the COI outlines a corporation’s fundamental corporate governance policies with respect to corporate formation and purpose, and details the rights, preferences and restrictions granted to and imposed upon its board of directors, officers, and stockholders.
Delaware General Corporation Law (DGCL) §102 (see http://delcode.delaware.gov/title8/c001/sc01/) provides a detailed list of the required and permitted provisions of a COI. Below are the required provisions every COI must have:
- Name of the corporation;
- Name and address of the Registered Agent;
- Statement of general business purpose (Note, it is enough to state that the purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL);
- The type and number of capital stock the corporation is authorized to issue and the par value, if any, assigned to such shares (e. common stock, preferred stock, etc.)
- The rights, powers, preferences and privileges of each class of capital stock (to include voting rights, dividends, distribution of proceeds in connection with the sale of the company or other liquidation, composition of the board of directors, etc.); and
- Name and mailing address of the Incorporator.
In addition to the required provisions, companies should consider adding additional provisions to the COI, such as, among other options, (i) a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, subject to the limitations set forth in §102(b)(7) of the DGCL; (ii) forum selection for stockholder litigation involving the company; and (iii) authorization to provide indemnification to directors and officers of the company.
Other optional provisions include founder-protective provisions, such as dual-class common stock and/or super voting rights for the founder directors. These topics will be further discussed in a separate entry.
Disclaimer: This article discusses general legal issues, but it does not constitute legal advice in any respect. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Helen E. Quinn expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.