On August 1, 2016, the latest amendments to the Delaware General Corporation Law became effective (amendments available here).
Two sets of amendments are summarized below. One set limits the availability and extent of the appraisal remedy, while another expands the Court of Chancery’s jurisdiction over disputes involving certain corporation stock or asset sale agreements.
Appraisal amendments – One amendment prohibits certain appraisals of shares of public corporations. It has three exceptions:
- It does not apply to short-form mergers (i.e. the parent owned at least 90% of the subsidiary’s shares before the merger).
- It does not apply if the shares entitled to appraisal (their holders have perfected their appraisal rights) exceed 1% of those eligible.
- It does not apply if the merger consideration for the shares entitled to appraisal is greater than $1M.
Another amendment allows corporations to avoid paying interest on appraisal awards if and to the extent they prepay the amount to those entitled to appraisal. This amendment was adopted due to a concern that some appraisal proceedings were at least partly motivated by the difference between low current interest rates and the high legal interest rate available in appraisal actions.
Chancery jurisdictional amendment – Section 111 has been amended to expand the Court of Chancery’s subject-matter jurisdiction. The Court may now hear cases involving agreements between a corporation and one or more stockholders in which stockholders sell or offer to sell their stock. It also has nonexclusive jurisdiction over cases involving agreements by corporations to sell, lease or exchange assets pursuant to stockholder consent. This amendment expands the Court of Chancery’s jurisdiction to contractual disputes typically involving many of the same issues the Court of Chancery already dealt with in its preexisting jurisdiction.
Sandra Feldman of CT Corporation summarizes other 2016 amendments to Delaware’s various business entity laws here.
Filed under: Appraisal, Court of Chancery, Subject-matter jurisdiction
Delaware Corporate Law Update 