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Defective Stock Issuances Under Delaware Law

Stephen Bigler and Seth Tillman have posted a new article, Void or Voidable?—Curing Defects in Stock Issuances Under Delaware Law:

It is not unusual for practitioners reviewing a Delaware corporation’s stock records to find omissions or procedural defects raising questions as to the valid authorization of some of the outstanding stock. Examples of such omissions and defects are limitless, but not infrequently found examples include the absence of board resolutions authorizing the issuance of stock shown by the transfer books as having been issued, the absence of evidence that issuances were properly authorized by the requisite votes of the board or, if required, by the stockholders, the absence of evidence that the consideration to have been received by the corporation in exchange for the stock was in fact received, the issuance of more shares than were authorized by the certificate of incorporation at the time, the issuance of stock prior to the filing of the charter amendment or certificate of designations authorizing or creating the stock, and similar procedural and substantive irregularities. Not infrequently, these defects occurred some time ago, and the stock in question may have changed hands multiple times since issuance.

They analyze how most lawyers would respond to these problems and suggest a statutory fix.