Archive: November 19, 2015

In Related Actions, Chancery Court Orders Advancement of Expenses and Confirms that New DGCL Section 205 Provides Limited Authority for the Court to Invalidate Corporate Acts

By Lisa Stark and John Sun

In In re Genelux Corp., C.A. Nos. 10612, 10042-VCP (Del. Ch. Oct. 22, 2015), the Delaware Court of Chancery held that Dr. Aladar Szalay, a former director and officer of Genelux Corporation (“Genelux”), was entitled to advancement of his fees and expenses incurred as an intervenor in an action brought by Genelux to invalidate Szalay’s Genelux stock and the election of two Genelux directors (the “Section 205/225 Action”).  The Court also awarded Szalay his fees in prosecuting the advancement action.  In the Section 205/225 Action, the Court held that new Section 205 of the Delaware General Corporation Law (the “DGCL”) does not authorize the Court of Chancery to invalidate any defective corporate act, including putative stock, other than defective corporate acts ratified pursuant to Section 204 of the DGCL.  The Court also held that Szalay’s election of two Genelux directors based on the disputed stockholdings to be valid under Section 225 of the DGCL.

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