COMMENT

Source: Del. Code Ann. tit. 8, § 203, as added by Del. Laws 1988, Ch. 204. This succeeds the identical provisions of the former Code, O.C.G.A. § 14-2-238 (Supp. 1988).

One major difference between the Code provisions and those of Delaware is that Delaware's provisions apply automatically to all covered Delaware corporations unless they elected not to be covered by a specified date, while the Code requires affirmative action to elect coverage, under subsection (a). A bylaw electing coverage will not restrict business combinations with interested shareholders who became such prior to the effective date of the bylaw.

Subsection (a) contains its own exculpatory provision for director action adopting or failing to adopt such a bylaw. This resolves any doubts about whether the exculpatory language permitted in articles of incorporation under § 14-2-202(b)(4) would preclude director liability.

Once adopted as a bylaw, subsection (b) provides that it may only be repealed by a vote of the holder of a majority of the shares other than shares owned by an interested shareholder. Any repeal shall not be effective for 18 months and the repeal shall not apply to any business combination with any person who became an interested shareholder prior to such repeal.

Subsection (c) provides that nothing in this article precludes other corporate action regarding approval of business combinations. Thus, articles of incorporation or a bylaw adopted pursuant to Code Section 14-2-1021 may provide similar protections, whether or not a bylaw has been adopted pursuant to this section. And adoption of a bylaw electing the coverage of the fair price provisions should not be interpreted as repeal of any provisions of articles or bylaws setting higher voting or quorum requirements for business combinations.

Subsection (d) provides that adoption of a bylaw electing coverage under this article is not exclusive. The article complements the Fair Price statute, found in Article 11, Part 2. These provisions have independent legal significance. Stock acquisitions by an interested shareholder, for instance, are not prohibited by this article. Such acquisitions may be subject to the provisions of the fair price statute, however. Additionally, after the expiration of the five-year period, an interested shareholder could engage in a business combination with a resident domestic corporation, but only if all other requirements are met, including, if applicable, the requirements of the fair price statute.

Subsection (e) preserves the right of the corporation to adopt a bylaw electing to be covered by this article. Thus, the provisions of § 14-2-1021(b), prohibiting directors from adopting bylaws fixing greater quorum or voting requirements for shareholders do not limit the authority of the board to adopt a bylaw under this article.

Note to 1989 Amendment References throughout the section to "article" were replaced with references to "part".

Cross-References Articles of incorporation, amendment, see § 14-2-1001 et seq. Approval of business combinations, see §§ 14-2-1111 &14-2-1112. Bylaws, amendment by board of directors or shareholders, see § 14-2-1020. Bylaws governing approval of business combinations, see § 14-2-1113. Directors' duties generally, see § 14-2-830. "Continuing Directors" defined, see § 14-2-1110.