Corporations are operated by humans, at least until the rise of Skynet (infamous as a primary antagonist in the Terminator movie franchise). As humans are prone to err, corporate acts may also be executed in error. In 2014, Delaware’s legislature amended its General Corporation Law to include new Sections 204 and 205 that provide Delaware corporations the ability to cure certain defective corporate acts. Among other things, the new sections allow the Court of Chancery to determine the validity of any corporate act or transaction and any stock, rights or options to acquire stock. To date, only a handful of cases have generated written decisions concerning Sections 204 and 205. The Court of Chancery’s Aug. 31 decision in In re Certisign Holding, C.A. No. 9989-VCN (Aug. 31, 2015), is one of the select cases dealing with the new sections.
In Certisign, Certisign Holding Inc. filed a petition pursuant to Section 205 of the DGCL seeking an order (1) declaring that shares of putative stock of the company are shares of valid stock and (2) approving a corresponding stock ledger. The origin of Certisign’s claims arose in 2005 when the company’s board of directors approved an amendment to the company’s certificate of incorporation. The amendment authorized several classes and series of stock. Only several days later, the company purported to issue by unanimous written consent of the board of directors certain shares of the newly authorized classes and series of stock. While the new share issuance occurred after the company amended its charter, the amended and restated certificate of incorporation was not filed with the Delaware secretary of state until several days after the new share issuance. This technical defect was not discovered until 2012 when the company was performing due diligence for another potential transaction.
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