A board of directors of a Delaware company may delegate its authority to grant equity awards if certain requirements enumerated in the Delaware General Corporation Law (DGCL) are met. Effective August 1, 2023, updates were made to these DGCL requirements.
Under §§ 157(c) and 152(b) of the DGCL, a board must establish the delegation through authorizing resolutions that meet the following requirements:
|Options, Stock Appreciation Rights, Restricted Stock Units||Restricted Stock|
|Share Cap||• Fixes cap on shares issuable pursuant to delegation||• Fixes cap on shares issuable pursuant to delegation|
|Time Limit||• Fixes time period during which awards may be granted, and|
• Fixes time period during which shares underlying awards may be issued
|• Fixes time period during which shares may be issued|
|Minimum Consideration||• Fixes minimum consideration (if any) for grant of awards, and|
• Fixes minimum consideration for issuance of shares underlying awards
|• Fixes minimum consideration for issuance of shares|
The consideration described above need not be paid in cash; any benefit to the company that the board approves is acceptable (e.g. the value of services provided by a grantee to the company).
In addition, the authorizing resolutions may not permit delegates to grant equity awards to themselves.
For a more fulsome discussion of these requirements and their application in practice, please see our recent client alert.