Identify the seller and the property being sold
A controlling founder may negotiate a sale of the operating company’s assets and expect personal approval to be enough. Before signing, identify the corporation’s actual authorization route. Selling corporate property is a company transaction, and the relevant approvals can differ from those for a founder selling personally owned shares.
Section 271 of Delaware’s corporate statute addresses sales, leases, and exchanges of all or substantially all corporate property and assets. It provides a board and stockholder authorization framework, subject to the applicable documents and statutory exceptions. Counsel must determine whether the proposed transaction falls within that scope; a percentage of book assets is not a universal substitute for the legal analysis.
Give counsel the asset inventory, operating divisions, subsidiaries, proposed retained business, agreements, charter, bylaws, and capitalization. Explain what the corporation will actually do after closing. A transaction labeled division sale can still require a broader analysis when the retained property does not represent the continuing operation suggested by the label.
Reconcile voting power and the authorization method
The statute describes authorization by holders of a majority of outstanding stock entitled to vote in the stated meeting procedure, including specified notice. The company’s charter and other applicable provisions can affect the actual process. Have counsel identify voting classes, outstanding shares, notice, meeting or consent method, and any additional requirements before calculating that the founder controls approval.
Consider a hypothetical corporation with 1,000 voting shares outstanding and a founder holding 480. Under an assumed ordinary majority-of-outstanding requirement, those 480 shares alone do not provide more than 500 votes. If another holder supports 60 shares, the combined 540 represent 54%. The arithmetic does not determine whether all shares vote together, whether a greater threshold applies, or whether the selected procedure is legally available.
Do not substitute a majority of votes actually cast for a majority of outstanding shares when the applicable standard uses the latter. Abstentions, absent holders, disputed ownership, and class rights can affect the supported approval plan. Reconcile the stock ledger and governing documents before the transaction calendar treats the vote as routine.
Review subsidiary and secured-sale circumstances separately
Section 271 addresses property held through specified wholly owned and controlled subsidiaries and includes an exception for certain transfers to a subsidiary, subject to the charter. Section 272 separately addresses mortgages, pledges, and specified secured-party sale circumstances. An owner should not assume that every subsidiary asset sale or distressed disposition follows the same ordinary stockholder-vote route.
Have counsel identify the precise exception or special rule and the facts supporting it. A lender’s involvement alone does not establish the required secured-sale conditions. Similarly, inserting a subsidiary into a proposed sequence should not be treated as a general method for avoiding every stockholder approval question.
Prepare a transaction diagram showing legal sellers, buyers, subsidiary relationships, collateral, and steps. Link each required approval or supported exception to that diagram. If negotiations change the assets or entities, update the analysis before reusing earlier resolutions. An approval for one defined transaction does not automatically authorize materially different terms simply because the same founder remains in charge.
Keep approval distinct from closing and owner distributions
The statutory framework permits abandonment of a proposed transaction in the stated circumstances, subject to third-party contract rights. A successful authorization therefore should not be confused with completed closing, satisfaction of conditions, or freedom from contractual liability. Review the purchase agreement and corporate resolutions together so management understands which decisions remain open.
Assume a hypothetical approved $4,000,000 asset sale later requires $500,000 of taxes and expenses and $1,200,000 of debt repayment under the supported model. The remaining arithmetic balance is $2,300,000 before other company obligations and any shareholder-level consequences. Stockholder approval of the sale does not itself establish authority or tax treatment for distributing that entire balance to owners.
Retain the scope memorandum, asset and subsidiary schedules, voting records, notices, resolutions, consents, agreement, final closing documents, and proceeds analysis together. This guide does not determine whether an asset package is substantially all or approve a particular corporate procedure. Its practical exit decision is to establish the correct company authorization before promising a closing, while keeping the later proceeds and distribution decisions separately supported.
Sources & further reading
Consult the original guidance and its effective dates. These references support the educational discussion; their application depends on the specific facts.