Certificate of Incorporation Clause: Opt Out Provision Section 203 of the Delaware General Corporation Law
(DE Corporation)

Summary

This Certificate of Incorporation Clause: Opt Out Provision Section 203 of the Delaware General Corporation Law (DE Corporation) may be included in the certificate of incorporation of a Delaware corporation to opt out of the statutory anti-takeover defenses of Section 203 of the Delaware General Corporation Law. This clause includes practical guidance and drafting notes. Section 203 of the Delaware General Corporation Law (DGCL) provides a statutory anti-takeover defense. It prohibits a Delaware corporation, whose voting stock is traded on a national securities exchange, from engaging in a business combination with any person who owns at least 15% of the corporation's common stock (an "interested stockholder") for a period of three years following the time that such stockholder became an interested stockholder. Del. Code Ann. tit. 8, § 203. However, the proposed business combination may proceed provided that the Board of Directors approves beforehand the proposed business combination transactions which resulted in the stockholder becoming an interested stockholder. Alternatively, a business combination may follow the singular acquisition by a person of at least 85% of the common stock of a corporation if such proposed business combination (by such person who thereby becomes an interested stockholder) is later approved by the Board of Directors and two-thirds of the shareholders of the common stock of the corporation. However, a Delaware corporation may explicitly, by a provision in its Certificate of Incorporation, opt out of Section 203's application so as to facilitate rapid corporate strategic transactions in future. For a full listing of key content covering Delaware corporate formation, organization, maintenance, ownership, management, and dissolution, see Corporation Resource Kit (DE). For more information, see Formation and Qualification (DE Corporation).