June 25, 2018
Appraisal: Don’t Take Drag-Along Rights for Granted
If you’ve negotiated contractual drag-along rights with minority shareholders, there’s no reason to worry about the Delaware appraisal statute, right? This recent blog from Steve Hecht & Rich Bodnar says, “not so fast.” Here’s an excerpt:
Venture-backed companies should not assume an implied waiver of minority appraisal rights in a merger that utilizes a voting agreement’s drag-along rights if procedural requirements are not followed. When a waiver of appraisal rights has procedural requirements, they need to be followed or eliminated via an amendment. Alternatively, the drag-along can require minority stockholders to explicitly approve the sale, instead of having the sale be de facto valid without their signatures given the drag-along.
The blog notes that this VentureCaseLaw blog provides a detailed discussion of Delaware case law addressing the procedural issues surrounding the interplay between the appraisal statute & drag-along rights.
– John Jenkins