Business lawyers frequently face mistakes their clients make in documenting what they want to accomplish in terms of corporate actions, such as issuing stock. Clients will ask for advice years after they have delivered stock certificates to investors, but without actually authorizing that stock in any formal way. That stock is not valid. What to do about that and similar miscues has long been a problem.
In 2014, Delaware adopted two new provisions to the Delaware General Corporation Law, Sections 204-205. These new statutes permit invalid past corporate actions to be cured by the board of directors and stockholders or the Court of Chancery. Exactly what mistakes may be “cured,” however, has not been entirely clear. Thus, the Court of Chancery’s recent decision in In re Numoda Shareholders Litigation, Consol. C.A. No. 9163-VCN (Jan. 30, 2015), is helpful.
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