In Almond et al. v. Glenhill Advisors LLC, C.A. No. 10477-CB, the Chancery Court denied post-trial claims challenging a series of transactions leading to the acquisition of a company. Prior to the acquisition, the certificate of incorporation was amended to implement a reverse stock split. After the reverse stock split, the acquiror had sufficient shares to move forward with a short-form merger. After the merger closed, it was discovered that the reverse split was mistakenly structured to reduce by a factor of 2500-to-1, instead of 50-to-1. The sole stockholder of the company remaining after the merger approved a DGCL Section 204 resolution to ratify the actions taken to cure the mistake. The former minority stockholders of the company argued that as a result of the mistake, the acquiror did not have enough shares to affect a short term merger. The Court disagreed and granted judicial ratification under DGCL Section 205 given the mistakes were unintended and the acquiror took prompt action to fix the mistakes after its discovery.
BOTTOM LINE: Acknowledge and cure mistakes promptly to reap the benefits of DGCL section 205.