I have a confession. I know there have been times in my twenty-five years in practice as a Delaware lawyer where I have lapsed or gotten lazy and used the terms “stockholder list” (or “stocklist” for short) and “stock ledger” interchangeably. A short, letter decision by Chancellor McCormick ruling on motions for summary judgment in the matter of Mitchell Partners, L.P. v. AMFI Corp., et al., C.A. No. 2020-0985-KSJM (July 3, 2024) provides a crisp reminder–both to me and to other professionals advising Delaware corporations–that they are not the same thing given the clear language of Section 219(c) of the DGCL.
The letter decision is a quick-read at eight pages, so I commend it to the reader in its entirety. That said, three lessons emerge from this decision.
First, Section 219(c) is specific in its command that a Delaware corporation keep a stock ledger and enumerates the small list of information required to be including on the ledger. The Chancellor quotes from a 1956 decision of the Delaware Supreme Court noting that a stock ledger is “a continuing record of stockholdings, reflecting entries drawn from the transfer books, and including (in modern times) nonvoting as well as voting stock.”
That leads directly to the second lesson: the Chancellor notes that the stock ledger must record “all issuances and transfers of stock of the corporation” (emphasis in original). This includes non-voting shares of stock. The stock ledger in the matter being decided was found deficient because it excluded a class of stock that had been issued but was nonvoting in nature.
Finally, the third lesson–what information must a company record on a compliant stock ledger? The court, in a footnote, provides guidance to practitioners from a variety of sources, whose lists of required information differ slightly. That said, the following types of data should be recorded by corporations on their stock ledger: (1) the stock certificate number, (2) the name of the stockholder, (3) the stockholder’s full address, (4) the class of shares, (5) the date of purchase or transfer, and (6) the price or value of the shares. Other types of information that might be considered for inclusion are: the date shares were cancelled, and the date the board approved the stock issuance.
Given the court’s citation to an opinion from 1956, this does not appear to be an issue that has resulted in litigation with any frequency. But with the issuance of this letter decision, the matter is likely now front and center with stockholders (and their counsel) as a potential source for litigation going forward. Thus, this decision is a perfect catalyst for Delaware corporations, and those that advise them on a regular basis, to dust off the ol’ ledger and make sure it is up to snuff!