Ratification

Ratification is the act by which a corporation, through its board of directors, shareholders, or both, retroactively approves a defective or unauthorized corporate act, curing the defect and giving the act binding effect. Texas codified a comprehensive ratification regime in 2014, modeled on Delaware's similar provisions.

What may be ratified

Under § 21.901, a "defective corporate act" includes any act that would have been within the power of the corporation but was, at the time, void or voidable due to a failure of authorization. Examples: shares issued without sufficient authorized capital, board action without quorum, shareholder votes without proper notice.

Procedure (§§ 21.904–21.907)

The board of directors must adopt resolutions stating the defective act, the date of the act, the nature of the defect, and the proposed ratification. If shareholder approval would have been required for the original act, shareholder approval is also required for the ratification. Notice must be given to all shareholders.

Effect of ratification (§ 21.910)

The defective act, as ratified, is treated as having been authorized as of the date of the original act, retroactively to the date of the act. The ratification cures the defect for all purposes, including litigation and contract enforcement.

Court action (§ 21.912)

Where ratification under the statute is impractical or contested, the corporation, a director, an officer, or a shareholder may petition the district court for an order validating the defective corporate act. The court has broad discretion to fashion appropriate relief.