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An Introduction to the Law of Corporations: Cases and Materials, Fall 2017

DGCL Sec. 101 - Formation

Headnote

A certificate of incorporation is the functional equivalent of a corporation's constitution. The certificate goes by different names in different states. In other states it is known as the articles of incorporation or the corporate charter, or the articles of organization. All of these refer to the same document.

As the corporation's constitution, the certificate may limit or define the power of the corporation and the corporation's board of directors. Drafter's of certificates have a great deal of flexibility when drafting these documents. Although most certificates are “plain vanilla” certificates that rely almost entirely on the state corporate law default rules for limiting the power of the corporation and its directors, such a minimal approach to drafting corporate documents is not required.

For example, some corporations, like the Green Bay Packers professional football team, have highly tailored certificates of incorporation. The Green Bay Packers' certificate is available on the course website. Promoters of the Green Bay Packers corporation tailored the rights of shareholders so that no shareholder can expect to receive any portion of the profits of the Packers – those have to be donated to a charity – and that no shareholder can expect their shares of the Packers to have any resale value on a stock exchange – any attempt to transfer shares to someone other than a family member will result in the corporation redeeming the shares for pennies. 

Section 101 makes it clear that the filing of  a certificate of incorproation is sufficient to form a corporation. This is the essence of an enabling statute. Rather than require the state to provide permission, enabling statutes like Delaware's General Corporation Law require only a ministerial filing in order to establish a corporation and permit the corporation's promoters a high degree of freedom in the design of their internal governance mechanisms.

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TITLE 8

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Corporations

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CHAPTER 1. GENERAL CORPORATION LAW

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Subchapter I. Formation

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(a) Any person, partnership, association or corporation, singly or jointly with others, and without regard to such person's or entity's residence, domicile or state of incorporation, may incorporate or organize a corporation under this chapter by filing with the Division of Corporations in the Department of State a certificate of incorporation which shall be executed, acknowledged and filed in accordance with § 103 of this title.

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(b) A corporation may be incorporated or organized under this chapter to conduct or promote any lawful business or purposes, except as may otherwise be provided by the Constitution or other law of this State.

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(c) Corporations for constructing, maintaining and operating public utilities, whether in or outside of this State, may be organized under this chapter, but corporations for constructing, maintaining and operating public utilities within this State shall be subject to, in addition to this chapter, the special provisions and requirements of Title 26 applicable to such corporations.

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8 Del. C. 1953, § 101; 56 Del. Laws, c. 5070 Del. Laws, c. 186, § 170 Del. Laws, c. 587, § 171 Del. Laws, c. 339, § 1.;