March 17, 2017

Blockchain & Corporate Records: DGCL Amendments Would Open the Door

Posted in our “Blockchain” Practice Area, this Cooley memo notes that this year’s proposed DGCL amendments would grant statutory authority for the use of “blockchain” or “distributed ledger” technology for the administration of corporate records. Last year, Broc blogged about a possible move by Delaware in this direction.

Blockchain technology allows for the creation of an “open ledger” shared among a network of participants, instead of relying on a single, central ledger. Information is stored in “blocks” that record all network transactions and permit the ownership and existence of assets to be independently validated. Advocates of the technology see great potential for using it to address the shortcomings of the current stock transfer and record-keeping process.

The amendments would allow a Delaware corporation to rely on the contents of a distributed ledger as its stock ledger.  But the memo points out that the distributed ledger must meet several requirements:

As amended, Section 219(c) would define “stock ledger” to include “one or more records administered by or on behalf of the corporation.” As amended, Section 224 will provide that any records “administered by or on behalf of the corporation” may be “one or more distributed electronic networks or databases.”

Not just any ledger will suffice however. The amendments would require that the ledger:

– Be convertible into clearly legible paper form within a reasonable time;

– Be able to be used to prepare the list of stockholders specified in Section 219 as well as in Section 220, dealing with stockholder demands to inspect the corporations books and records;

– Records the information specified in Section 156 for consideration for partly paid shares, Section 159 for the transfer of shares for collateral security, Section 217(a) for pledged shares, and Section 218 for voting trusts; and

– Records transfers of stock as governed by Article 8 of the Delaware Uniform Commercial Code.

Board Trends: Directors are Older, But a Little More Diverse

This MoFo blog reviews a recent IRRC & ISS report on board refreshment trends at S&P 1500 companies.  Here are some of the highlights:

– Board tenure continues to rise, with average and median director tenures of 8.7 years & 7 years, respectively.
– Directors are getting older, with the average age of directors reaching 62.5 years 2016 – was the highest recorded during the study period.
– More than 50% of S&P 1500 added at least one new director to their boards in 2015. From 2012 to 2016, the prevalence of “zero change” boards steadily decreased.
– From 2008 to 2016, women and persons aged 50 to 59 years old made up the majority of the incoming class of “new” directors.
– Women are gradually gaining ground. Among S&P companies the number of female directors increased from 11.9% (in 2008) to 17.8% (in 2016). In 2008, 33% of all boards were all male—however, this number dropped to 13.8% in 2016.
– Minority representation remains low, with minority directors occupying slightly more than 10% of all board seats. Larger cap companies typically had at least one minority director, but smaller cap companies in the group typically did not.

Transcript: “Hot Tabulation Issues for Your Annual Meeting”

We have posted the transcript for the recent webcast: “Hot Tabulation Issues for Your Annual Meeting.”

John Jenkins