Gov. Phil Murphy recently signed legislation into law authorizing corporations to utilize electronic networks, including distributed electronic networks or databases that utilize blockchain technology…
Gov. Phil Murphy recently signed legislation into law authorizing corporations to utilize electronic networks, including distributed electronic networks or databases that utilize blockchain technology, administered by or on the behalf of the corporation, in order to meet recordkeeping requirements. The provisions of the legislation (A-1178/S-898) took effect immediately.
“We need to use the technology at our disposal to ensure our information is safe,” said Assemblyman Christopher DePhillips (R-40), a co-sponsor of the legislation. “Permitting companies to use blockchain not only helps protect the company’s data but allows for full transparency of that data. Large companies like Microsoft and Walmart have embraced this technology and we need to make this available to all companies, not just big box stores.”
Blockchain 101
In basic terms, blockchain is a type of database that maintains a continuously-growing list of transactions. Due to the method in which a blockchain is structured when operated in a decentralized nature, the system creates an irreversible timeline of data. Thus, it is protected against revision by publicly-verifiable open-source cryptographic algorithms and immune to data loss through distributed records sharing.
While blockchain gained notoriety as the backbone of Bitcoin, its potential uses extend to numerous financial and commercial transactions. Proponents of blockchain technology maintain that, compared to a traditional, centralized database, it can result in lower risk, decreased operational costs, and greater efficiency.
Using Blockchain to Store Corporate Records
With regard to corporate records, blockchain technology can simplify the process of storing records and managing revisions, while also protecting against the hacking of sensitive information. It also establishes a clear audit trail without the need for any intermediaries.
New Jersey is not the first state to allow corporations to take advantage of blockchain technology. Delaware was one of the first states in the country to adopt blockchain-friendly corporate laws. The state authorizes corporations to use the technology to maintain shareholder lists, as well as other corporate records. Delaware has also launched several pilot projects that are testing how to use blockchain to collect, record, and store corporate and government filings.
New Jersey’s Blockchain Law
Under New Jersey law, corporations are required to keep records containing the names and addresses of all shareholders, the number, class and series of shares held by each and the dates when they respectively became the owners of the shares. The new law provides that these corporate records of shares may be kept on an electronic network, which is defined 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.” A-1178/S-898 also provides that corporations may use electronic transmissions from electronic networks to meet with certain notice provisions of existing law.
Key Takeaway
States like New Jersey are beginning to recognize that blockchain’s utility is not restricted to cryptocurrency. However, before utilizing blockchain technology for business purposes, we encourage corporations to consult with experienced legal counsel who can help weigh all of the potential risks and benefits and legal requirements.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Zachary Klein, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public
Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]
Understanding Chattel Paper: A Key Component in Secured Transactions
Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]
For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]
Supreme Court and Title VII: Implications for Reverse Discrimination
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
Special purpose acquisition companies (better known as SPACs) appear to be making a comeback. SPAC offerings for 2025 have already nearly surpassed last year’s totals, with additional transactions in the pipeline. SPACs last experienced a boom between 2020–2021, with approximately 600 U.S. companies raising a record $163 billion in 2021. Notable companies that went public […]
Short Form Merger: Streamlining the Process for Businesses
Merging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
