Void or Voidable? — Curing Defects in Stock Issuances Under Delaware Law

It is not unusual for a Delaware corporation’s stock records to have omissions or procedural defects raising questions as to the valid authorization of some of the outstanding stock. Confronted with such irregularities, most corporate lawyers would likely attempt to cure the defect through board and, if necessary, stockholder ratification. However, in a number of leading cases, the Delaware Supreme Court has treated the statutory formalities for the issuance of stock as substantive prerequisites to the validity of the stock being issued, and the court has determined that failure to comply with such formalities renders the stock in question void, i.e., not curable by ratification. Unfortunately, the decisions issued by the Delaware courts have not afforded the necessary certainty to allow practitioners to decide whether a particular defect in stock issuance is a substantive defect that renders stock void or a mere technical defect that renders stock voidable. This Article analyzes the cases giving rise to this lack of clarity and proposes that the Delaware courts apply the policy underlying Article 8 of the Delaware Uniform Commercial Code to validate stock in the hands of innocent purchasers for value in determining whether stock is void or voidable

Void or Voidable?—Curing Defects in Stock Issuances Under Delaware Law

It is not unusual for practitioners reviewing a Delaware corporation's stock records to find omissions or procedural defects raising questions as to the valid authorization of some of the outstanding stock. Examples of such omissions and defects are limitless, but not infrequently found examples include the absence of board resolutions authorizing the issuance of stock shown by the transfer books as having been issued, the absence of evidence that issuances were properly authorized by the requisite votes of the board or, if required, by the stockholders, the absence of evidence that the consideration to have been received by the corporation in exchange for the stock was in fact received, the issuance of more shares than were authorized by the certificate of incorporation at the time, the issuance of stock prior to the filing of the charter amendment or certificate of designations authorizing or creating the stock, and similar procedural and substantive irregularities. Not infrequently, these defects occurred some time ago, and the stock in question may have changed hands multiple times since issuance. Confronted with such irregularities, most corporate lawyers' first instinct would be to attempt to correct the defect through board and, if necessary, stockholder, ratification of the defective issuance, with the intent of putting the parties in the positions they thought they were in prior to discovering the irregularity. However, Delaware courts have not always viewed defects in stock issuances as being curable by ratification. In a number of leading cases, the Delaware Supreme Court has treated the statutory formalities for the issuance of stock as substantive prerequisites to the validity of the stock being issued, and has determined that failure to comply with such formalities renders the stock in question void. A finding that stock is void means that defects in it cannot be cured, whether by ratification or otherwise. Thus, practitioners finding defects in stock issuances are put in the uncomfortable position of having to make a judgment whether the defect is one that renders the stock void, in which case ratification is not an option, or voidable, in which case ratification is an option. Unfortunately, the decisions issued by the Delaware courts have not afforded certainty in this critical area. Indeed, a recent decision of the Court of Chancery acknowledges that although "Delaware law is replete with cases" discussing the void-voidable distinction, the law as to when and whether a defective stock issuance can be cured "is not as clear as it could be." This article analyzes the reasons for this lack of clarity, and proposes some solutions which would benefit buyers and sellers of corporate stock. We begin by examining the legal requirements applicable to stock issuances. Next, we discuss the foundation of the doctrinal distinction between void and voidable stock. We then discuss the cases where courts have found stock to have not been issued in accordance with these legal requirements, and whether such finding has resulted in the stock being found void or voidable. We also consider the purposes, principles and policies of certain provisions of Article 8 of the Uniform Commercial Code, designed to validate, in most circumstances, certain defects in stock in the hands of innocent purchasers for value. Interestingly, these provisions of the UCC have not been frequently discussed in the court cases that have considered whether stock is void or voidable, and the cases that have discussed them refer to them as setting forth an equitable rather than a legal principle - which is ultimately not helpful to corporate lawyers who opine on legal, not equitable, matters. In conclusion, we suggest that the policy underlying Article 8 of the Uniform Commercial Code to validate stock in the hands of innocent purchasers for value, notwithstanding technical defects in its issuance, should be recognized as a principle of law, not solely as a principle of equity, and should be applied by the Delaware courts as such. As a result, technical defects relating to statutory formalities should not lead to a finding of void stock, but at worst to voidable stock. Cure or ratification should be permitted except in cases where the issuance violates the directors' duty of loyalty or otherwise would be inequitable. Such a rule would allow practitioners to opine as to the validity of a corporation's outstanding stock where the stock was issued defectively but the defect cured, subject to a standard exception for fiduciary duties and other equitable matters, and would eliminate the risk that stock held in the trading markets or otherwise held by innocent purchasers for value might be deemed void

Blending State Differences and Change Operations for Metamodel Independent Merging of Software Models

A typical model merging session: requires a great deal of knowledgeable input; does not provide rapid feedback; quickly overwhelms the user with details; fails to properly match elements; performs minimal conflict detection; offers conflict resolution choices that are inadequate and without semantics; and exhibits counter-intuitive behavior. Viewing model merging as a process, this research defines a hybrid merge workflow that blends the best of the main approaches to merging, expressing its phases as algebraic operators for performing transformations on model and relationship data types. Normalization and denormalization phases decouple models from their originating tool and metamodel. State-based phases capture model differences in the model itself, establish element correspondence using multiply matching strategies, and extract change operations. Operation-based phases then partition and order the changes prior to the detection and automatic resolution of conflicts. The work has culminated in a prototype that validates the workflow, while realizing several novel model merging ideas, which are evaluated with simple and involved test cases. Combining the hybrid merge approach with the semantic expressiveness of decision tables---open to user modification---and an interactive and batch mode of operation allows the tool, named Mirador, to successfully address, to varying degrees, all of the previously cited shortcomings

Comparing Effectiveness of Top-Down and Bottom-Up Strategies in Containing Influenza

This research compares the performance of bottom-up, self-motivated behavioral interventions with top-down interventions targeted at controlling an “Influenza-like-illness”. Both types of interventions use a variant of the ring strategy. In the first case, when the fraction of a person's direct contacts who are diagnosed exceeds a threshold, that person decides to seek prophylaxis, e.g. vaccine or antivirals; in the second case, we consider two intervention protocols, denoted Block and School: when a fraction of people who are diagnosed in a Census Block (resp., School) exceeds the threshold, prophylax the entire Block (resp., School). Results show that the bottom-up strategy outperforms the top-down strategies under our parameter settings. Even in situations where the Block strategy reduces the overall attack rate well, it incurs a much higher cost. These findings lend credence to the notion that if people used antivirals effectively, making them available quickly on demand to private citizens could be a very effective way to control an outbreak

Building a Model of Collaboration Between Historically Black and Historically White Universities

Despite increases over the last two decades in the number of degrees awarded to students from underrepresented groups in science, technology, engineering, and mathematics (STEM) disciplines, enhancing diversity in these disciplines remains a challenge. This article describes a strategic approach to this challenge—the development of a collaborative partnership between two universities: the historically Black Elizabeth City State University and the historically White University of New Hampshire. The partnership, a type of learning organization built on three mutually agreed upon principles, strives to enhance opportunities for underrepresented students to pursue careers in the STEM disciplines. This article further describes six promising practices that framed the partnership, which resulted in the submission of nine proposals to federal agencies and the funding of four grants that led to the implementation, research, learning, and evaluation that followed

Transitions in the computational power of thermal states for measurement-based quantum computation

We show that the usefulness of the thermal state of a specific spin-lattice model for measurement-based quantum computing exhibits a transition between two distinct "phases" - one in which every state is a universal resource for quantum computation, and another in which any local measurement sequence can be simulated efficiently on a classical computer. Remarkably, this transition in computational power does not coincide with any phase transition, classical or quantum, in the underlying spin-lattice model.Comment: 9 pages, 2 figures, v4 published versio

Sensitivity of Household Transmission to Household Contact Structure and Size

Study the influence of household contact structure on the spread of an influenza-like illness. Examine whether changes to in-home care giving arrangements can significantly affect the household transmission counts.We simulate two different behaviors for the symptomatic person; either s/he remains at home in contact with everyone else in the household or s/he remains at home in contact with only the primary caregiver in the household. The two different cases are referred to as full mixing and single caregiver, respectively.The results show that the household's cumulative transmission count is lower in case of a single caregiver configuration than in the full mixing case. The household transmissions vary almost linearly with the household size in both single caregiver and full mixing cases. However the difference in household transmissions due to the difference in household structure grows with the household size especially in case of moderate flu.These results suggest that details about human behavior and household structure do matter in epidemiological models. The policy of home isolation of the sick has significant effect on the household transmission count depending upon the household size