Excerpt from Current Issues and Rulemaking Projects Outline (November 14, 2000)
Section VIII.A.14. Current Disclosure, Legal and Processing Issues – Disclosure, Legal and Processing Issues – Legality Opinion Issues
It is customary practice for counsel drafting legality opinions regarding securities whose issuer is incorporated in Delaware to limit their opinion to “the Delaware General Corporation Law.” In these situations, we ask that counsel revise its opinion to make clear that the law covered by the opinion includes not only the Delaware General Corporation Law, but also the applicable provisions of the Delaware Constitution and reported judicial decisions interpreting these laws.
Recently, we discussed this limitation with the Ad Hoc Committee on Legal Opinions in SEC Filings of the Federal Regulation of Securities Committee of the Business Law Section of the American Bar Association. In those discussion, the Ad Hoc Committee emphasized that the reference to the “Delaware General Corporations Law” was an opinion drafting convention and that the practicing bar understood this phrase to mean the Delaware General Corporation Law, the applicable provisions of the Delaware Constitution, and reported judicial decisions interpreting these laws.
Based on these discussions, we have revised our procedures for reviewing a legality opinion filed as an exhibit to a registration that includes a statement that it is “limited to the Delaware General Corporation Law.” Our new procedures are as follows:
• We will issue a comment asking counsel to confirm to us in writing that it concurs with our understanding that the reference and limitation to “Delaware General Corporate Law” includes the statutory provisions and also all applicable provisions of the Delaware Constitution and reported judicial decisions interpreting these laws. As part of this standard comment, we will ask that counsel file this written confirmation as correspondence on the EDGAR system. As such, it will be part of the Commission’s official file regarding the related registration statement.
• Once we receive this written confirmation from counsel, we will not comment further on the inclusion of this language in the opinion for that registration statement.