Delaware Court of Chancery Rejects Corporate Takeover Attempt Based on Fabricated Documents

Overview

On March 27, 2026, Vice Chancellor Will of the Delaware Court of Chancery issued a post-trial memorandum opinion in Berg v. Bar-Lavi, rejecting the plaintiff's attempt to seize control of Tracki, Inc. through a Section 225 action after finding that the corporate documents underlying his ownership claim were fabricated. The decision is a striking illustration of the consequences of document forgery in corporate governance disputes and a reminder that Delaware courts take corporate formalities seriously, even when all sides fall short.

The Dispute

Tracki, Inc. is a Delaware corporation formed in February 2019 as a vehicle for a successful GPS tracking device brand. The plaintiff, Ami Shafrir Berg, claimed to be Tracki's sole stockholder, relying on a purported 2019 written consent and stock ledger (the "2019 Documents") that he said were transmitted to him via Skype by defendant Shai Bar-Lavi. Berg alleged that a "secret pact" between him and Bar-Lavi concealed Berg's ownership to protect the company's reputation in connection with a potential IPO. In August 2025, Berg used the 2019 Documents to issue written consents purporting to remove the defendants (Bar-Lavi and Saul Bienenfeld) from Tracki's board and install himself as Tracki's sole director.

The Court's Findings

The Court found, based on expert forensic testimony, that the 2019 Documents were fabricated and Berg never owned or controlled Tracki. A forensic analysis revealed that the 2019 written consent was created using a later-drafted 2020 written consent as a template. The two documents were identical in all respects except for provisions in the 2019 written consent granting power to Berg, which were overlaid in a different font type commonly associated with Asian-language character sets. Berg resides in Thailand.

Beyond the forensic evidence, the Court found Berg's "secret pact" narrative implausible. Berg consistently represented Tracki as a subsidiary of Vestigo Technologies Ltd. for years after Tracki's formation, including in financial materials, legal documents, purported board minutes, and filings in Israeli litigation.

The Court also identified a fatal corporate process defect: Tracki's certificate of incorporation did not name any initial directors, and Tracki's incorporator never met or acted by written consent to elect directors following the filing of Tracki's certificate of incorporation as required by 8 Del. C. § 108. Because no directors were ever validly elected, the 2019 written consent—purportedly executed by Bar-Lavi as "sole director"—was without legal effect, and any stock issuance thereunder was invalid.

Fee-Shifting—Split to Reflect Mutual Misconduct

The Court shifted fees to the defendants under the bad faith exception to the American Rule, finding that Berg's reliance on fabricated documents constituted a fraud on the Court. However, the Court reduced the award by 50% to account for the defendants' own misconduct, including defendant Bienenfeld's admitted perjury in sworn affidavits. The Court emphasized that Bienenfeld, as an attorney, was obligated to "exercise the highest standard of ethical conduct so as not to reflect adversely on the legal profession … and … undermine public confidence."

Key Highlights

• Fabricated documents are fatal. The Court relied on expert forensic evidence—including font analysis and template matching—to determine that the plaintiff's corporate documents were fabricated, underscoring the sophistication of modern forensic tools and their importance to corporate litigation.

• Corporate formalities matter. The incorporator's failure to hold a post-incorporation organizational meeting or act by written consent to elect directors under 8 Del. C. § 108 rendered the purported stock issuance accompanying the 2019 written consent a legal nullity, independent of the Court's forgery finding.

• Conduct speaks louder than paper. Where a stock ledger is fabricated or nonexistent, Delaware courts will look to extrinsic evidence, including a party's years-long pattern of conduct, to resolve ownership disputes.

• Bad faith cuts both ways. The Court's 50% reduction in fee-shifting demonstrates that even a prevailing party's litigation misconduct—including perjury—will be penalized.

• Section 225 has limits. Although the Court resolved the ownership question, it declined to issue a declaration preserving the status quo ante because no lawful board was ever properly constituted, leaving Tracki's governance in limbo.