Form or Substance? The Past, Present, and Future of the Doctrine of Independent Legal Significance
The “bedrock” doctrine of independent legal signifi cance provides that, if a transaction is effected in compliance with the requirements of one section of the Delaware General Corporation Law (“DGCL”), Delaware courts will not invalidate the transaction for failing to comply with the requirements of another section of the DGCL—even if the substance of the transaction is such that it could have been structured under the other section. Two recent decisions of the Delaware courts have caused commentators to question the doctrine’s status. This Article looks to the foundation of the doctrine and the Delaware courts’ use of equitable review (and the substance-over-form doctrine) to clarify when the doctrine of independent legal signifi cance does and does not apply and when it may be relied on with confi dence by corporate practitioners. The doctrine as applied by the courts is narrower than sometimes assumed by corporate practitioners, and the Delaware courts may use their equitable powers to look through a transaction’s form to its substance even if the doctrine does apply.