Unanimous Board Approval in Delaware C Corporations: What You Need to Know

In the context of a typical Delaware C corporation, determining the actions that require unanimous board approval can often be murky. While it may seem straightforward that some actions only need a simple majority, a deeper understanding of the legal and bylaws provisions can prevent potential missteps that could lead to serious legal troubles.

Understanding the Default Scenario

By default, unless otherwise specified in the company's bylaws, no actions require unanimous approval. This is a crucial point to remember as it aligns with the typical governance structure of a Delaware C corporation, where a simple majority vote serves as the standard for many decision-making processes.

Majority Vote vs. Unanimous Approval

A majority vote, which simply means more than half of the voting parties agree, is generally the norm in decision-making. However, there are certain actions that may require the agreement of all members of the board, particularly when it comes to protections for minority shareholders, self-dealing transactions, and misappropriation issues.

Key Legal Considerations

1. Shareholder Votes: Shareholder votes on significant matters, such as amendments to the bylaws, mergers, or acquisitions, typically require a higher quorum and, in some cases, a unanimous decision.

2. Self-Dealing Transactions: Actions that can provide a personal benefit to a board member or officer, such as a sale of company assets to a related party, may require disclosure and agreement from all board members to prevent conflicts of interest.

3. Minority Rights: Deliberate actions that adversely affect the rights of minority shareholders, such as the dilution of voting rights, may need unanimous consent to protect minority shareholders from exploitation.

Fallacies and Pitfalls

While a simple majority often suffices, attempting to bypass unanimous approval for significant actions can lead to legal and reputational risks. For instance, trying to pass a resolution without the necessary consent could result in shareholder lawsuits, damaging the company's reputation, and potentially leading to legal sanctions.

Best Practices and Advice

1. Review Bylaws Regularly: Ensure that your bylaws clearly outline the roles and responsibilities of the board and shareholders, and specifically address situations that may require unanimous approval.

2. Seek Legal Advice: Consult with legal experts to understand the implications of varying actions and their compliance with Delaware laws and regulatory requirements.

3. Document Decisions: Keep thorough records of all board meetings and voting processes to provide transparency and accountability.

Conclusion

While a simple majority is the default for many decisions in a Delaware C corporation, it is crucial to understand the specific actions that may require unanimous board approval. By staying informed about legal requirements and best practices, you can ensure that your company operates within the bounds of the law and protects the interests of all stakeholders.