The board of directors of any Delaware corporation proposing to merge is required under Delaware law to adopt a resolution approving the merger agreement.  In the real world of M&A practice, however, the version of the merger agreement presented to and approved by the board is typically still in draft or nearly-final draft form but not yet final.  Does this practice violate Delaware law?

A recent amendment to the Delaware General Corporation Law (“DGCL”) provides that any agreement that must be approved by the board under Delaware law must be in “final or substantially final” form when approved.  The DGCL amendment was adopted in reaction to an earlier Delaware Chancery Court ruling in favor of a stockholder that claimed that the board violated Delaware law when it approved only a draft version of the merger agreement.  These developments underscore the need for boards to consider whether a merger agreement draft submitted for approval is substantially final before approving it.Continue Reading “Draft Dodging”:  Approving “Nearly Final” Merger Agreement Becomes Dangerous in Delaware