Well, okay, that’s not exactly a direct quote from Vice Chancellor Laster’s  recent decision to modify the terms of the Dole Food appraisal settlement, but it certainly captures the spirit of it.  To make a long story short, the T+3 settlement cycle – combined with huge short interest & obsolete record-keeping practices – resulted in more than 12 million additional shares having the right to make a claim to the appraisal settlement proceeds than should’ve been the case.

In determining to modify the settlement, the Vice Chancellor shared his thoughts about how this mess came to be:

This problem is an unintended consequence of the top-down federal solution to the paperwork crisis that threatened Wall Street in the 1970s. Through the policy of share immobilization, Congress and the Securities and Exchange Commission addressed the crisis using the 1970s-era technologies of depository institutions, jumbo paper certificates, and a centralized ledger. See generally In re Appraisal of Dell Inc.(Dell Ownership), 2015 WL 4313206, at *3–7 (Del. Ch. July 30, 2015).

It was an incomplete solution at the time. Since then, despite laudable and largely successful efforts by the incumbent intermediaries to keep the system working, the problems have grown. See, e.g., In re Appraisal of Dell Inc., 143 A.3d 20, 59 (Del. Ch. 2016) (holding that under current Delaware law, beneficial owners forfeited their appraisal rights by inadvertently voting in favor of the merger due to complexities created by depository system); Dell Ownership, 2015 WL 4313206, at *9–10 (holding that under current Delaware law, beneficial owners forfeited their appraisal rights due to administrative change in the name of the nominee on the share certificate necessitated by depository system).

So what’s the fix?  The Vice Chancellor points to “distributed ledger technologies” – aka blockchain – which could provide a solution by “maintaining multiple, current copies of a single and comprehensive stock ownership ledger.”

– John Jenkins

We have posted the transcript for our recent webcast: “Activist Profiles & Playbooks.”

– John Jenkins

This March-April issue of the Deal Lawyers print newsletter was just posted – & also mailed – and includes articles on (try a no-risk trial):

– The Corwin Effect: Stockholder Approval of M&A Transactions
– Disclosure in Appraisal Notices
– How to Deal with Equity Holdings During Spin-Offs
– Standards of Review: 2016 Delaware Decisions
– Special Supplement: Stock Options in M&A – Select 409A & Drafting Issues

Remember that – as a “thank you” to those that subscribe to both DealLawyers.com & our Deal Lawyers print newsletter – we are making all issues of the Deal Lawyers print newsletter available online. There is a big blue tab called “Back Issues” near the top of DealLawyers.com – 2nd from the end of the row of tabs. This tab leads to all of our issues, including the most recent one.

And a bonus is that even if only one person in your firm is a subscriber to the Deal Lawyers print newsletter, anyone who has access to DealLawyers.com will be able to gain access to the Deal Lawyers print newsletter. For example, if your firm has a firmwide license to DealLawyers.com – and only one person subscribes to the print newsletter – everybody in your firm will be able to access the online issues of the print newsletter. That is real value. Here are FAQs about the Deal Lawyers print newsletter including how to access the issues online.

– Broc Romanek