Delaware General Corporation Law, abbreviated as DGCL, is the statute governing corporate law in the U.S. state of Delaware. It was originally adopted in 1899 and since the early 20th century has grown to become the most important jurisdiction in United States corporate law. At the end of the 19th century, following New Jersey’s example of enacting corporate-friendly laws to attract businesses from New York, Delaware adopted its own general incorporation act on March 10, 1899, aimed at attracting more businesses to the state. Since that time, the extensive experience of the Delaware courts and the accumulated body of case law gives corporations and their counsel greater guidance than other states on matters such as corporate governance.
References to DGCL are often made in various SEC filings such as the treatment of appraisal rights or dissenters rights during a takeover. For a discussion of the filings and how they relate to merger arbitrage please refer to our article SEC Filings – Mergers & Acquisitions.
Scope of the DGCL
The DGCL governs the internal affairs of the corporation. Specifically, the relationship between the owners or shareholders and those who manage the firm such as managers and the board of directors. Therefore, the DGCL is a specialized contract law governing the respective roles, duties, and relationships of those who manage corporations and those who invest in them. It is important to note that the DGCL does not address other aspects of business law, such as competition law, labor law, or securities disclosure law.
However, that does not exclude corporate compliance with state and federal law where they operate. Simply, Delaware does not mix these areas of the law with corporate governance. The law in Delaware which governs regulatory issues apply to corporations conducting business in the State. For example, Delaware’s labor and environmental laws only apply to business activity within the physical borders of Delaware. However, the corporate law of Delaware applies to all Delaware corporations regardless of location such as being headquartered in a different state or even a different country.
