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ARTICLE · 15 AUGUST 2016

Delaware Enacts Appraisal Rights Reform

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Two amendments intended to scale back Delaware "appraisal arbitrage" proceedings came into effect on August 1.

CanadaCorporate/Commercial Law
Christopher Caparelli
Christopher Caparelli
Andrew Gray
Andrew Gray
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Two amendments intended to scale back Delaware "appraisal arbitrage" proceedings came into effect on August 1.

What You Need To Know

  • Appraisal proceedings now must meet minimum thresholds.
  • Corporations can prepay dissenting shareholders in order to limit the accrual of interest on a fair value award.

The amendment to section 262(g) of the Delaware General Corporation Law (DGCL) eliminates de minimis actions. The new law permits appraisal rights proceedings only if more than 1% of the outstanding shares are eligible for appraisal or the value of eligible shares exceeds US $1 million. Proceedings can also go forward for short-form mergers pursuant to sections 253 or 267 of the DGCL. One estimate suggests these new thresholds will reduce the number of appraisal proceedings by as much as 25%.

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