CORPORATIONS - PRE-EMPTIVE RIGHTS OF SHAREHOLDERS IN ORIGINALLY AUTHORIZED BUT UNISSUED CAPITAL STOCK

Plaintiff, a minority stockholder, brought an action to cancel 58,400 shares of originally authorized but unissued stock which the directors had issued to defendant general manager in payment of his services. Plaintiff contended this violated his pre-emptive right to subscribe to the shares and alleged the transaction was fraudulent in that defendant and the directors conspired to gain voting control. Held, the issue was proper because the stock was part of the first offering of original authorized capital stock to which plaintiff's pre-emptive right did not attach, and plaintiff failed to show collusion between directors and defendant to gain voting control and therefore did not state a case of fraud. Yasik v. Wachtel, (Del. Ch. 1941) 17 A. (2d) 309.