Cadwalader, Wickersham & Taft LLP
MONTH-IN-BRIEF (Feb 2023)
Business Litigation
Lordstown Motors: Applying Section 205 of the Delaware General Corporation Law, the Delaware Court of Chancery Validates Shares Issued Without a Separate Class Vote
By K. Tyler O’Connell of Morris James LLP
Adopted in 2013, 8 Del. C. § 205 permits a corporation to petition the Delaware Court of Chancery to validate corporate actions that are defective for lack of authorization when ratification is not feasible or when a ratification attempt is subject to challenge. Section 205 was enacted to address challenges to the validity of stock issuances, among other problems. In the recent case of In re Lordstown Motors Corp., 2023 WL 2155651 (Del. Ch. Feb. 21, 2023), Vice Chancellor Lori W. Will approved Lordstown Motors’ petition to declare valid shares of stock issued pursuant to an amendment of the certificate of incorporation increasing the number of Class A common shares, which had been adopted without a separate class vote.