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 UnitsRestricted 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.

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Photo of Sheri Adler Sheri Adler

Sheri advises boards, compensation committees, and companies on executive compensation matters. She designs and documents equity incentives, cash bonus arrangements, employee stock purchase plans, and deferred compensation plans. Sheri also negotiates individual contractual arrangements with C-suite executives, including employment, retention, change in control…

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