In 2020, GlobalTech Corporation, a Nevada corporation, filed an amendment to its articles of incorporation increasing its authorized number of shares of common stock from 10 million to 500 million. The amendment was approved by 2/3 of GlobalTech's directors pursuant to NRS 78.380. Unfortunately, there is a fly in the ointment. See Ecclesiastes 10:1. NRS 78.380 permits amendments by 2/3 of the directors (or incorporators) if no voting stock has been issued and at the time of the amendment GlobalTech had voting stock outstanding.
Fortunately for GlobalTech, the Nevada legislature in 2015 enacted NRS 78.0296 to permit Nevada corporations to ratify or validate defective corporate acts. 2015 Nev. Stats. Ch. 514, § 1. According to a preliminary proxy statement filed with the Securities and Exchange Commission last week, GlobalTech is now proposing to take advantage of the lenity afforded by NRS 78.0296. According to Globaltech, the stakes are high:
The failure to approve the 1st Ratification Proposal may leave us exposed to potential claims that (i) the 2020 Share Increase Amendment did not receive requisite stockholder approval, (ii) the 2020 Share Increase Amendment therefore was not validly adopted, and (iii) as a result, (a) the Company would not have sufficient authorized but unissued shares of common stock to permit future sales and issuances of common stock, including pursuant to outstanding warrants and stock options, (b) past issuances of common stock may not be valid, and (c) the Company would not be able to validate our total outstanding shares of common stock in connection with any strategic transaction that our Board may determine is advisable. Any inability to issue common stock in the future and any invalidity of past issuances of common stock could expose us to significant claims and have a material adverse effect on our liquidity.
The share increase is not the only fly in the ointment. GlobalTech's preliminary proxy statement also includes a proposal to ratify a defective amendment of its articles of incorporation purporting to change its name.
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