If the rule isn’t that anything goes with enough votes, what is it?

Experienced entrepreneurs and investors alike understand that equity dilution is a fundamental aspect of investing in corporations. This is especially true when companies anticipate needing additional capital prior to their prospective profitability. But investors do not always trust management to act fairly and wisely when they sell additional stock or restructure shareholder rights.

This is the first part in a series of blogs focusing on modifications to corporate capital in equity financings. In this first part, I evaluate the law applicable to charter amendments in both Texas and Delaware. As many readers know, Delaware is the leading U.S. jurisdiction for domiciling corporations and has a highly developed body of corporate decisional law. Texas does not benefit from the same depth or breadth of case law. Accordingly, Texas courts—like those of other states—frequently look to Delaware precedent when making determinations in connection with Texas corporate law. Nevertheless, both statutory and judge-made law in Texas and Delaware are different in important aspects.

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