Shareholder Appraisal Process In Delaware

When certain corporate transactions, such as a merger and consolidation, deprive the shareholders of their ownership interests in a corporation against their will, the shareholders can use the appraisal statutes to obtain the "fair value" of the shares that have been taken.¹ As more than half of U.S. public companies are incorporated in Delaware, the Delaware General Corporation Law (the DGCL) is likely to govern most shareholders seeking appraisal^.2 Section 262 of the DGCL provides appraisal rights to dissenting shareholders who own shares in a corporation that is the subject of a merger or consolidation effected pursuant to the DGCL. Such rights are typically available only in a merger in which the holders of the shares of the merged entity receive cash in return for their shares.³ This alert provides an overview of the appraisal process under Delaware law and explains a number of recent developments that have contributed to the increasing use of appraisal rights.