National Law Review: Delaware General Company Law Assessments “Block Chain Amendments”


nnnnIn the event of a riot: Two block chain amendments were submitted to the Delaware General Company Law, which would allow companies to use the block chain database for billing. But the legal field of technological innovation has been slowly lagging behind. In the mid-1990s, law firms were reluctant to adopt technological innovation, including the distribution of documents through the Internet. Despite the active use of e-mail and attachments to the instant messaging system, the entire law firm in the 1990s still use fax technology. Because the fear of “hackers” will intercept important customer communications. But it is also such an experience to the current participants in the field to actively deal with the block chain technology.n
nnTranslation: Annie_Xun
nThe two amendments (Blockchain Amendments) are submitted to the Delaware General Corporation Law (DGCL, Delaware General Corporation Law), allowing enterprises to use the block chain database for accounting. In particular, DGCL Section 219 extends the definition of shareholder register to “enterprise management or enterprise management”, with the aim of allowing the use of the block chain database for records. DGCL Section 224 will also make a similar modification, and all business records may be stored in “one or more electronic networks or databases (including one or more distributed electronic networks or databases)”.n
nIn the mid-1990s, law firms were reluctant to adopt technological innovation, including the distribution of documents through the Internet. Despite the active use of e-mail and attachments to the instant messaging system, the entire law firm in the 1990s still use fax technology. Because the fear of “hackers” will intercept important customer communications.n
nPerhaps based on this experience, do not want to appear inappropriate, the law firm quickly published articles describing the amendment and praise block. However, many articles clearly do not understand the underlying technology of the block chain database, because the technology is very complex, difficult to explain and understand. And these articles usually fail to list the issue of the register of shareholders controlled by the central authorities (such as company secretaries or stock transfer companies), which may solve problems with the block-chain database. To make up for these gaps, we recently posted a blog about the benefits that can be gained from the use of the chain of chain members and the ownership structure table.n
nExpected benefits first do not say that the use of block-chain database maintenance business records are not suitable for all Delaware companies, or no need to use, many are still cumbersome or expensive. Newly established companies, such as those who have just released shares to the two founders, do not need to build a decentralized distributed network to record, or pay a high fee to the Nasdaq companies for block-chain products. With the block-based enterprise accounting service providers entering the market, the cost and effort required will be reduced.n
nSo we will focus on the area where the chain chain database can provide a better solution: equity transfer. At the beginning of the year, the Securities and Exchange Commission voted unanimously to shorten the settlement time for two trading days. Modern technology allows securities transfer to take place in milliseconds, but in fact the settlement can not be completed within two business days, because the current verification of the securities owner’s system is very inefficient (especially involving physical securities), buy also need cash. It is therefore surprising that most transactions are not settled because the securities are re-traded during the settlement period. Accenture and other companies said that the settlement time of these transactions if the use of block-chain database, can be shortened to seconds (also in the securities before the transaction, the settlement of almost all transactions).n
nAs a result, the newly established Delaware company may want to use a certificateless stake because the company can not obtain a physical stock certificate in order to provide high-speed settlement using the block chain. If the company holds any cumbersome physical stock certificate, the chain chain can not provide a complete record of all stock transactions, because physical stock transfer is a block chain can not be touched. At present, DGCL does not authorize enterprises to require all shareholders to convert the physical stock certificate into a certificateless share. However, once these certificates expire, it is assumed that the board of directors of the company has adopted a resolution that is converted into a certificateless share (the specific operation is in accordance with the laws of Delaware).n
nTherefore, even if the start-up company may not need to register or pay to enter the chain of chain database, it is best to have been using a certificate-free stock before they can use the right time to provide the advantages of block-chain technology.n

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