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Delaware Embraces Blockchain Technology

Business Law Today
September 2017, Michael K. Reilly and David B. DiDonato

On August 1, 2017, Delaware adopted amendments to its corporate statute to enable Delaware corporations to utilize blockchain technology to create and administer corporate records, including a corporation’s stock ledger. Corporations can use blockchain technology to reduce the costs and delays inherently resulting from the involvement of intermediaries and to maintain a real-time, secure, traceable, and authenticated list of their stockholders of record. Blockchain technology also offers a solution for simplifying the complexities of the nominee system under which most shares in publicly traded companies are legally owned by a nominee called Cede & Co. (itself a nominee of The Depository Trust Company, or DTC), and investors only indirectly own shares through DTC’s institutional participants (i.e., in “street-name”). These complexities have resulted in mistakes in the execution of voting instructions and the loss of appraisal rights for street-name stockholders, as noted by Vice Chancellor Laster of the Delaware Court of Chancery in a speech delivered to the Council of Institutional Investors in September 2016. A CLE program “How the Technology Behind Distributed Ledgers Will Impact Corporate Law and M&A Practice,” was held in September during the Annual Meeting of the ABA’s Business Law Section.