By Paula Valencia-Galbraith

Has your corporation sold stock before having a sufficient number of shares authorized under its Certificate of Incorporation?  The DGCL requires that the authorized capital be increased before the sale is consummated because the Corporation needs to create the stock it is going to sell.  Without the stock’s creation there is nothing to sell to the investors and failure to increase the authorized capital could deem the sale and issuance void or voidable due to the Corporation’s failure to comply with the technicalities of the DGCL. Before 2014 there was no mechanism that could retroactively fix issuing equity with an insufficient number of authorized capital or any other type of transaction that required certain technical requirements by the DGCL.  These types of mistakes led to potentially embarrassing conversations with a corporation’s investors but in 2014 this all changed.