Joseph M. McLaughlin and Shannon K. McGovern
Under the common law, the Delaware Supreme Court held that the Court of Chancery’s equitable powers did not reach so far as to permit ratification of corporate action, including stock issuances, found to be legally “void” under the governing organizational documents or the Delaware General Corporation Law (DGCL). This rule often carried harsh consequences, particularly in the case of technical violations of statutory requirements. In 2014, the Delaware legislature superseded these rulings by enacting DGCL Sections 204 and 205, which authorize the directors of a corporation, its shareholders, and/or the Court of Chancery to remedy defective corporate acts if certain procedures are followed.
