What Is Section 242 of the Delaware General Corporation Law?

Section 242 of the Delaware General Corporation Law is the statute that governs how a Delaware corporation amends its certificate of incorporation after it has issued stock. The process has three moving parts: the board of directors adopts a resolution proposing the change, the shareholders vote on it (with narrow exceptions), and the corporation files a certificate of amendment with the Delaware Secretary of State. The details that trip people up are which amendments can skip the shareholder vote, when a class of stock gets its own separate vote, and how changing your authorized shares can quietly raise your annual franchise tax.

What You Can Change Under Section 242

Section 242(a) gives corporations broad authority to amend the certificate of incorporation, so long as the amended certificate would be valid if filed today as an original. The statute lists seven categories of permissible amendment, and the list is illustrative rather than exhaustive:

The corporate name.
The business purpose and powers (expanded, narrowed, or replaced).
Capital stock: increase or decrease authorized shares, change par value, reclassify shares, subdivide or combine issued shares, or move between par and no-par value.
Accrued dividends: cancel or modify the right to dividends that have accrued but not been declared.
New classes of stock with rights superior or subordinate to existing classes.
Corporate duration.
Obsolete provisions: the names of original incorporators, initial directors, and original subscribers, along with spent language from prior amendments.

The hard constraint is that an amendment cannot insert anything Delaware law would refuse in a brand-new certificate. If you could not file it as an original, you cannot amend your way to it.¹

The Three Steps to Amend

Board Resolution

The board starts by adopting a resolution that sets out the proposed amendment and declares it advisable. The same resolution either calls a special shareholder meeting or directs that the amendment be considered at the next annual meeting. This is a statutory prerequisite, not internal paperwork. Skipping it can invalidate the amendment.¹

Shareholder Vote

The meeting notice must include the full text of the proposed amendment or a summary of the changes, unless the notice qualifies as a notice of internet availability of proxy materials under SEC rules. The default approval threshold is a majority of the outstanding stock entitled to vote. If a class is entitled to vote separately, a majority of the outstanding shares of that class must also approve.¹

Read that threshold carefully. It is a majority of all outstanding voting shares, not a majority of shares present at the meeting. If 1,000 shares are outstanding, 501 must vote yes regardless of turnout. Corporations with scattered ownership sometimes miss the mark simply because enough shareholders fail to vote.

Filing the Certificate of Amendment

Once approved, the corporation executes a certificate of amendment that states the changes and certifies they were adopted in accordance with Section 242. The certificate is filed with the Delaware Secretary of State under Section 103. The amendment is effective on filing, or on a later date specified in the certificate up to 90 days after filing.²

The filing fee is $30 if the amendment does not increase authorized capital stock. If it does, the fee is the difference between the filing fee on the new authorized capital and the fee on the prior authorized capital, with a $30 minimum.³

When a Class of Stock Gets Its Own Vote

Section 242(b)(2) requires a separate vote by each class of stock when the proposed amendment would:

Increase or decrease the authorized shares of the class;
Increase or decrease the par value of shares of the class; or
Change the powers, preferences, or special rights of the class in a way that adversely affects those shareholders.

This class vote exists whether or not the certificate otherwise gives the class voting rights, and the certificate cannot override it. If the adverse effect falls on one or more series within a class rather than the whole class, only the affected series votes separately.¹

What counts as a protected “power, preference, or special right” has been litigated heavily. In the 2024 Fox Corporation and Snap Inc. matter, the Delaware Supreme Court held that Section 242(b)(2) protects only attributes specific to a class of stock as expressed in the charter, not general rights that come with stock ownership. An amendment adding officer exculpation did not trigger a class vote for non-voting shares because exculpation is not a class-specific attribute. Companies with dual-class or multi-class structures should run proposed governance amendments against this line before filing.

When the Board Can Act Without a Shareholder Vote

Section 242(d) carves out two situations where the board may amend on its own, unless the certificate says otherwise:

Housekeeping amendments limited to changing the corporate name or deleting obsolete provisions (original incorporators, initial board, original subscribers, spent amendment language) need no shareholder vote.
If the corporation has only one class of stock outstanding and it is not divided into series, the board can subdivide issued shares into a greater number and can simultaneously increase authorized shares proportionally, all without a shareholder vote.

Section 242(d) also relaxes the voting standard for corporations whose shares are listed on a national securities exchange. For those companies, amendments that increase or decrease authorized shares of a class, or combine issued shares into fewer shares (a reverse split), can be approved by a majority of votes cast rather than a majority of all outstanding shares. This recognizes the practical problem publicly traded companies face when a large share of their float simply does not vote.⁴

Approving an Amendment by Written Consent

Shareholders do not always need to meet in person. Section 228 of the DGCL allows shareholders to approve any action, including a certificate amendment, by written consent, without a meeting, prior notice, or a formal vote. The consent must be signed by holders of at least the number of shares that would have been needed to approve the amendment at a meeting where every share was present and voting.⁵

One caveat matters: the certificate of incorporation can restrict or eliminate written consent entirely. Many publicly traded Delaware corporations do exactly that. If your charter blocks written consent, no number of signatures will substitute for a meeting.

Franchise Tax Consequences of Changing Authorized Shares

This is where routine stock amendments get expensive. Delaware calculates annual franchise tax using either the authorized shares method or the assumed par value capital method, whichever is lower. When you amend to add authorized shares, you can move yourself into a much higher tier under the authorized shares method.

Under that method, the tiers are:

5,000 shares or fewer: $175 (the minimum).
5,001 to 10,000 shares: $250.
Each additional 10,000 shares or fraction thereof: add $85.
Maximum annual tax: $200,000.

A startup that authorizes 10 million shares to create an option pool could face roughly $85,000 under the authorized shares method before earning its first dollar. The assumed par value capital method often produces a lower number for companies with large authorized counts and limited assets, so running both calculations before filing is worth the time.⁶

If you file an amendment mid-year that changes your stock or par value, Delaware requires you to report your issued shares and total gross assets within 30 days. The year’s tax is prorated: the old authorization applies for the days before the amendment, the new one for the days after, each segment calculated by dividing the days in effect by 365 (or 366 in a leap year) and multiplying by the tax for that segment.⁶

Related Statutes You May Actually Need

Two neighboring provisions handle situations Section 242 does not. Section 241 governs amendments made before the corporation has received any payment for its stock; at that stage a majority of directors (or incorporators, if no directors have been named) adopts the amendment, and there is no shareholder vote because there are no shareholders. Section 245 lets a corporation consolidate the original certificate and all prior amendments into a single restated certificate; a pure restatement with no new changes can be adopted by the board alone, but any new substantive amendments bundled into the restatement still require the full Section 242 process.⁷

What Happens If You Get the Process Wrong

An amendment that fails to comply with Section 242 is vulnerable to being declared void. The problem cascades. Corporate actions taken in reliance on the invalid amendment, such as issuing shares under a new authorization, become potentially defective, and unwinding them is expensive and disruptive.

Directors and officers who oversee a flawed process can face personal liability for breach of fiduciary duty. The Court of Chancery evaluates whether the board acted within its fiduciary duties when proposing the amendment and whether shareholder rights were respected throughout. The common failures are procedural: inadequate notice, missing the required class vote, or filing a certificate that does not match what was actually approved. Each step of Section 242 exists for a reason, and the cheapest way to handle an amendment is to work through those steps carefully the first time.

1
Justia. Delaware Code Title 8 – Section 242
2
Delaware Code Online. Delaware Code Title 8 – Chapter 1 Subchapter I
3
Justia. Delaware Code Title 8 – Section 391
4
Delaware Code Online. Delaware Code Title 8 – Chapter 1 Subchapter VIII – Section 242
5
Delaware Code Online. Delaware Code Title 8 – Chapter 1 Subchapter VII – Section 228
6
Delaware Division of Corporations. How to Calculate Franchise Taxes
7
Delaware Code Online. Delaware Code Title 8 – Chapter 1 Subchapter VIII – Section 245