A recent Delaware Court of Chancery decision addressed the obligation of a company to maintain an accurate stock ledger. In Mitchell Partners, L.P. v. AMFI Corporation, C.A. No. 2020-0985-KSJM (Del. Ch. Oct. 1, 2026), the court explained in a post-trial opinion why, based on the facts of this case, there was no remedy available for an initial breach of this duty primarily because the company fixed the problems with the stock ledger after they were brought to its attention.

Although one might not be surprised to find a stock ledger poorly maintained in a small company, the company involved in this case was formerly a publicly-traded insurance company with a transfer agent, but for almost 30 years they failed to accurately record Class B stock and who it was transferred to.

One of the most enjoyable parts of this decision are two of the words the court uses in its introductory overview of the case. The court described the indignant posture that the defendant took early in the litigation, “appearing to dismiss much of the plaintiff’s legal pursuit as quixotry.” This is an unusual version of the word quixotic and one that I hope to use in the future.The court also concluded its introduction by saying that the post-trial decision “ends the imbroglio.” That’s one of my favorite words; it is borrowed from Italian.

I only highlight the parts of this decision that I find most noteworthy or interesting, although there is much to commend this 40-page post-trial decision that deserves to be read in full to appreciate all the detailed facts and procedural history that give context to the legal highlights.

Highlights

  • In essence, the court explained that if a corporation fixes its stock ledger problems, at least based on the facts of this case, no further relief is warranted. Slip op. at 24-25.
  • The problem the plaintiff had in this case is that it was not a stockholder at the time that the Class B shares—that were only recently made known to the plaintiff—were issued. Therefore he did not have standing to challenge the issuance.
  • Lawyers should be aware that Delaware law imposes a duty on companies to maintain a proper stock ledger. Slip op. at 18. See also footnotes 95, 96 and 108 which refer to prior decisions in this case that more fully explain that duty, e.g., Mitchell Partners, L.P. v. AMFI Corporation, C.A. No. 2020-0985-KSJM, Report and Recommendation (Del. Ch., Oct. 2, 2023) (referring to definition of stock ledger in § 219(c) as different than stock list and § 224 which describes the details for maintaining a stock ledger).
  • The court explained that Delaware law requires a company stock ledger to account for all of its stock, including non-voting shares. Slip op. at 18.
  • The court discussed the important principle that a board “may not delegate board action in full to an advisor.” Slip op. at 34 (citation omitted).
  • But the court distinguished between delegation and reliance. Id.
  • The court observed that the prohibition against delegation of board action

“includes delegating a core function to someone else and agreeing to be bound by that person’s determination. But a board may rely on advisors and employ non-directors to assist them in arriving at the value to be placed on the property to be received in exchange for the corporation’s stock. Reliance assumes knowledge of the valuation.” (internal quotations and citations omitted).