A recent Delaware Court of Chancery decision is noteworthy for its analysis of a claim in a summary proceeding to determine the rightful directors of a company after learning that the claim was based on fraudulent corporate documents. The court rejected the requested relief in Berg v. Bar-Lavi, C.A. No. 2025-0959-LWW (Del. Ch. March 27, 2026).

Background

The closely-held interrelated entities involved in this matter had very poorly drafted or non-existent corporate records—and those that did exist were either back-dated or not accurate. The case involves a relationship between two former close friends and business partners that deteriorated as the company that they collaborated on became more successful.

Berg tried to convert a note into shares and based on that he initially claimed majority ownership  and called a board meeting. Berg relied on two written consents that he prepared and which purported to remove two directors and replace them with himself as the sole director and sole officer.

Procedural Posture

This case was filed in August 2025, only a few days after a related suit was filed in Israel by the Defendants in Delaware. This DGCL § 225 suit sought a ruling that Berg was the only lawful director and the other two directors were lawfully removed.

The court granted expedited scheduling and imposed a status quo order. Trial was held on December 16 and 17, 2025. Post-trial briefing was completed on February 2, 2026.

Analysis

DGCL § 225 allows for a determination in summary in rem proceedings regarding the validity of the seating of any officer or director.

The first step in such a lawsuit is to make a determination of who properly owns the stock and in what quantity.

DGCL § 227 allows the court to determine the rightful owners of stock at any meeting of stockholders in connection with a § 225 action.

The court concluded that: (1) Berg presented fabricated documents in this case; (2) His course of conduct undermined his claims; and (3) His failure to prove his status as a stockholder made the written consents invalid and also resulted in his lack of standing.

Basic Corporate Principles

  • Other than for cumulative voting or staggered boards, DGCL § 141(k) provides that holders of a majority of shares entitled to vote at an election can remove directors. Slip op. at 18 and n. 108.
  • Although a stock ledger typically is the only evidence of which stockholders are entitled to vote, id. at 19 and n. 109, trial revealed that it was not authentic. Slip op. at 28.
  • Extrinsic evidence is allowed in the absence of a stock ledger, for example post-formation conduct. Slip op. at 28.
  • DGCL § 108 requires an incorporator to hold an organizational meeting to elect directors after the Certificate of Incorporation is filed—unless the initial directors are named in the Certificate of Incorporation, which was not the case here.
  • Because § 108 was not followed in this matter, the later written consent to appoint a director was not effective.

Shifting of Attorneys’ Fees

Berg’s fabrication of corporate documents was bad-faith litigation conduct.

The defendants also admitted to making false statements in a sworn affidavit, but the court placed less emphasis on this criminal behavior because it did not affect the outcome of the case, although it still was “inimical to the integrity of this court.” Slip op. at 36. As a result, the court only shifted fees in the amount of 50% in favor of the defendants.