Peer-Reviewed Journal Details
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Bigler, C. Stephen & Tillman, Seth Barrett
Business Lawyer
Void or Voidable? -- Curing Defects in Stock Issuances Under Delaware Law
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This article was cited 69 times (as of October 4, 2019). The journal that this article appeared in is Elsever/SCOPUS/SJR ranked. This journal was ranked by JCR (in its year of publication). This journal is ranked by Heinonline as a top-100 law journal. This journal has an A ranking from Deakin. It is ranked as a top-100 law journal by HeinOnline. 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.
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