Topic: Defective Corporate Act

Chancery Court Finds that Its Broad Authority to Validate Defective Corporate Acts Could Conceivably Compel a Corporation to Sell $5 Million of Stock Without Board Authorization or a Written Agreement

By Shoshannah Katz and B. Ashby Hardesty, Jr.

Citing the Chancery Court’s broad discretionary authority to validate defective corporate acts, Vice Chancellor Noble denied a defendant corporation’s motion to dismiss, ruling that it was “reasonably conceivable” that a plaintiff hedge fund could successfully compel the corporation to sell to it approximately $5 million worth of stock, despite the board of directors’ failure to authorize the transaction or to memorialize it in writing.

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