Posted by Allison L. Land and Edward P. Welch, Skadden, Arps, Slate, Meagher & Flom LLP, on
Monday, May 1, 2017
On March 27, 2017, the Corporation Law Section of the Delaware State Bar Association (DSBA) approved proposed amendments to the Delaware General Corporation Law (DGCL) that had been proposed by the DSBA Corporation Law Council. This year’s amendments are intended to address blockchain maintenance of corporate records, the date of effectiveness of Section 203(b) opt-outs, mergers with non-U.S. entities and the effectiveness of written consents, among other changes.
Blockchain Maintenance of Corporate Records
The proposed amendments, if adopted, are intended to provide specific statutory authority for Delaware corporations to use networks of electronic databases, known as blockchains or distributed ledgers, to create and maintain corporate records, including stock ledgers. The proposed amendments are the result of a Corporation Law Council study of the use of blockchain technology by Delaware corporations, following an initiative to embrace the technology announced in 2015 by then-Gov. Jack Markell. Under this technology, a corporation’s records, including its stock ledger, would be maintained electronically by thousands of trusted users on a shared system to record stock issuances and transfers, to maintain a list of record holders and other matters. Section 224 would be amended to permit corporations to rely on the contents of an electronic network as the corporate records, provided the records so kept can be converted into clearly legible paper form within a reasonable time. The amendments would require any stock ledger (including one maintained on an electronic network) to serve three functions: (i) enable the corporation to prepare the list of stockholders entitled to vote; (ii) record the information required by the DGCL to be maintained in a stock ledger; and, (iii) record transfers of stock.
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