Ratification of Defective Corporate Acts - H.B. 20-1013

Abstract

A number of changes to the Colorado Business Corporation Act and the Colorado Corporations and Associations Act became effective July 1, 2020 as a result of S.B. 2019-086. One change planned for 2019 but which was delayed until H.B. 2020-1013, was a provision for “ratification of defective corporate acts,” which became effective September 14, 2020.

The Colorado provision follows similar provisions in a number of other states, including Delaware, and provides that defects in authorizations of share issuances and other corporate actions shall not be void or voidable solely as a result of a failure of authorization if a prescribed statutory ratification process is followed. Colorado established this process in C.R.S. § 7 103 106 which is now effective for all Colorado corporations.

This paper provides a discussion for practitioners when they recognize that several corporate acts may need to be ratified and provides a procedure to determine which corporate acts should be ratified first, and how the ratification process should occur.