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April 1, 2026 | By Patrick T. McCloskey
“Regrettably, this suit is a product of mutual deceit. Both parties treated fundamental requirements of Delaware corporations—not to mention the most basic expectations of this court—as mere suggestions. Their behavior transformed what should have been a straightforward governance dispute into a morass of forgery and perjury.”
This rebuke is a quote from the Delaware Court of Chancery’s decision in Ami Shafrir Berg v. Shai Bar-Lavi, et al. (March 27, 2026). Aside from the ethical transgressions, a fundamental corporate defect leaves both sides in the governance equivalent of no-man’s land.
The plaintiff sought a declaration he was the corporation’s sole director and stockholder. In support, he presented what purported to be (1) a written consent of the initial director issuing all 200 of the corporation’s authorized shares to the plaintiff and (2) a stock ledger reflecting plaintiff’s ownership of such shares. According to the plaintiff, these documents were sent to him by Skype chat after a Skype call that was alleged to have occurred in February 2019.
There were two named defendants. One was the president, who denied the Skype meeting occurred and claimed all stock was owned by a corporate parent. The other defendant was the company’s secretary and outside counsel, who denied creating the 2019 written consent and stock ledger.
Based on the premise he was the sole stockholder, the plaintiff also presented written consents generated in 2025. One was a written consent of the plaintiff as sole stockholder purporting to remove the existing directors and electing himself, and the other was a written consent of the plaintiff as sole director reducing the size of the board, removing the officers, and electing himself to fill the officer vacancies.
The Court ruled the 2019 written consent and stock ledger were “inauthentic.” More specifically, the Court stated “[t]he overwhelming weight of the evidence suggests that the [written consent and the stock ledger] were created for [plaintiff’s] takeover attempt and this litigation.” Based in part on forensic evidence, the Court concluded that both documents were fabricated.
In addition to its conclusion on fabrication, the Court pointed to an independent technical reason for denying the relief sought by the plaintiff: no initial directors were elected.
Even if I were to disregard the forensic evidence, the 2019 Documents fail to establish [plaintiff’s] ownership of [the company] due to fundamental defects.
[DGCL] § 108 requires that, after a certificate of incorporation is filed, the incorporator hold an organization meeting to elect directors, unless the initial directors were named in the certificate. [The company’s] certificate of incorporation did not name initial directors. Nor did the incorporator meet or act by written consent to do so.
[The company’s] failure to follow Section 108, which is a required corporate formality, renders the 2019 Written Consent and its accompanying stock issuance invalid.
[citations omitted]
This led to a bizarre result because, while it denied the relief sought by plaintiff, the Court also denied the defendants’ status quo request (i.e., that the defendants were the current directors) because of the defect. This leaves the parties in proverbial no man’s land as to the identity of the directors, officers and stockholder(s)—the opposite of what a DGCL 225 proceeding is meant to accomplish.
In addition to the outcome, the Court took swipes at both parties for their ethical shortcomings.
For the plaintiff, not only did the Court conclude that the 2019 written consent and stock ledger were fabricated, but it characterized the plaintiff’s “story [as] outlandish.” The Court wrote:
By offering the 2019 documents as genuine, [plaintiff] sought to perpetrate a fraud upon this court.
Plaintiff compounded this duplicity by insisting that I entertain a ‘secret pact’ designed to hide his ownership.
Despite the Court’s conclusion that the plaintiff acted in bad faith, the Court also called out the company’s “corporate informalities”:
‘The DGCL contemplates, in large part, a formal approach to corporate governance.’ The defendants fell short of that standard. [Outside counsel defendant] admitted at trial to routinely backdating documents, including the 2020 Written Consent that was used to retroactively establish [corporate parent’s] ownership in 2019. He also backdated multiple sets of bylaws, even leading the parties to erroneously stipulate that a set of bylaws was created in March 2019.
Yet the defendants’ corporate sloppiness and outright deceit do not win the day for [plaintiff]. . .
The defendants’ misconduct and lack of good corporate hygiene do not make [plaintiff the company’s] owner.
[citations omitted]
The Court was particularly troubled by the outside counsel defendant’s conduct, leading it to award defendants’ only 50% of their attorneys’ fees and costs:
At trial, [outside counsel defendant]—an attorney barred in New York and Florida—admitted to submitting sworn affidavits to the court that made false statements about [the company’s] governance.1 Under Delaware law, ‘[a] person is guilty of perjury in the third degree when the person swears falsely.’ This is, of course, not a criminal court. Still, the fact ‘that a party engaged in conduct which, on its face, would establish a prima facie case for violating a criminal statute provides powerful evidence that the party acted in bad faith.’ And as an attorney, [outside counsel defendant] is obligated to ‘exercise the highest standard of ethical conduct’ so as not to ‘reflect adversely on the legal profession as a whole and . . . undermine public confidence.’
Because [plaintiff] bore the burden to prove his case, [outside counsel defendant’s] false statements did not affect the outcome of this action. In fact, I have declined to accept most of [outside counsel defendant’s] testimony. That does not excuse defendants’ own deceit. [Outside counsel defendant’s] sworn mistruths are inimical to the integrity of this court. To account for the defendants’ misconduct in this suit, I will shift only 50% of the attorney’s fees and costs reasonably incurred by the defendants.
Oof.
Lessons
1. Push back forcefully when asked to backdate documents. Sloppiness is one thing, fraud and deceit are another. If done properly, there is nothing wrong with ratifying prior corporate actions. In Delaware there are now recognized procedures for curing defective corporate acts.2 On the other hand, backdating a document and presenting it as being signed or approved earlier to deceive someone, improperly gain an advantage, or distort facts is improper, unethical and fraudulent. It’s unfortunate, but lawyers are sometimes asked to draft documents and backdate them. Know where to draw the line here. As I have said from time to time throughout my legal career, “if you’re looking for a yes man you’ve got the wrong lawyer.”
2. Honor corporate formalities. In this case, the failure to properly elect the initial directors as required by DGCL § 108 had the ripple effect of invalidating the issuance of stock. That left a black hole questioning not only the identity of the directors, but the identity of the stockholders and how many shares were issued and outstanding.
3. Keep accurate corporate records. Before the digital age, corporate records were kept in a physical book containing minutes, written consents and the stock ledger. Everyone knew where to store the records and where to look for them. While paper records may be a thing of the past, the corporate statutes are not. Under DGCL § 224, corporate records may be stored electronically so long as they can be “converted into clearly legible paper form within a reasonable time.” However, DGCL § 108 (incorporator’s election of initial directors), DGCL § 152 (issuance of stock), DGCL § 158 (stock certificates or uncertificated shares) and DGCL 219(c) (stock ledger) are still operative, applicable and required. Laws governing corporate records should be reason enough to comply, but clean corporate records will also minimize the risk of an ugly dispute like the one that surfaced in this case.
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This post is for general informational purposes only and does not constitute legal advice. No one should rely on the information in this blog post without seeking appropriate legal, accounting, tax or other appropriate advice from an attorney, accountant or other professional properly licensed in the applicable jurisdiction(s).
1 According to the decision, the outside counsel defendant backdated a written consent purporting to issue 1,500 shares to the corporate parent with the co-defendant as the sole consenting director. The 1,500 shares were greater than the 200 shares that were authorized in the company’s certificate of incorporation. The written consent was evidently created in July 2020, but it was backdated to February 9, 2019.
2 See DGCL § 204 (ratification) and DGCL § 205 (court validation).
