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Court Of Chancery Invalidates Stock Issuance

Boris v Schaheen, C.A. 8160-VCN (December 2, 2013)

This is an example of a corporate nightmare for failing to follow the requirements to validly issue stock.  Delaware law  requires that the stock issuance be reflected by a "written instrument," not just some oral agreement.  Moreover, the Court of Chancery will not use its equitable powers to cure a void stock issuance.  Hence, the stock will be held to not exist and all the corporate acts taken in reliance of that stock being issued will be called into question.


Court of Chancery Rejects Challenge To Stockholder Consent

B.F. Rich Co., Inc v. Gray,  C.A. No. 1896-N (Del. Ch. November 9, 2006) refused to consider the defense in Section 225 case that the plaintiff would hurt the corporation if he took it over. As the Court noted, the issues in Section 225 cases are tightly confined to the validity of the stockholder consent.  Any abuse of the power gained by use of those consents is for a later proceeding. More › Share
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