Blockchain Has Come To New Jersey Corporations – Corporate/Commercial Law

On September 28, 2021, Governor Phil Murphy signed into law a
bill allowing New Jersey business corporations to maintain certain
records, particularly records regarding stock ownership, using
electronic networks or databases, including networks or databases
that rely on blockchain technology.

While blockchain technology is often associated with digital
currencies, it can be used to record any type of financial or
proprietary transaction. The advantage of blockchain
technology is that, unlike traditional records or networks that are
stored or based in one place (e.g., a bank vault, or a computer
server), making them susceptible to casualty, records on a
blockchain are distributed among numerous computer systems in far
reaching places. As a result, damage to or an attack on one of
those computer systems does not compromise the quality of the
records.

New Jersey is hardly the first state to dive into the world of
blockchain. Delaware amended its General Corporation Law in
2017 to permit records to be kept on “distributed electronic
networks or databases.”

The New Jersey legislation, P.L. 2021, c. 238, defines an
“electronic network” as one or more electronic networks
or databases, including one or more distributed electronic networks
or databases that utilize blockchain technology, administered by or
on the behalf of the corporation. It amends the New Jersey
Business Corporation Act to explicitly allow records containing the
names and addresses of shareholders, the number, class, and series
of the shares of the corporation’s stock that they own, and the
dates on which they acquired those shares to be kept on such an
electronic network. Prior to this amendment, such records had
to be physically located at the corporation’s registered
office, or alternatively the office of its transfer agent.

Upon the written request of anyone entitled to access the
corporation’s records (typically shareholders and their
agents), the new law requires that a corporation must convert any
records kept on such an electronic network “into a clearly
legible form” within five days of the request.

In addition, the new law expands the definition of
“electronic transmission” to include the use of, or
participation in, an electronic network as defined
above. Thus, certain notices to shareholders that could
previously be delivered electronically may now be transmitted using
blockchain-enabled technology.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.