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Court of Chancery Decides When Stock Is Void

Posted In Securities

MBKS Company Limited v. Reddy, C.A. 1853-VCL (May 1, 2007).

It is occasionally important to distinguish between stock that is voidable and stock that is void. One reason is that voidable stock may be voted while it is still outstanding. In this decision, the Court of Chancery did an exhaustive review of the case law, applied the new statutory standard for consideration of  "any benefit to the corporation" and concluded the stock in question was void.

On MArch 3, 2008, the Delaware Supreme Court affirmed this decision in an opinion that is worth reading as well.



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