August 5, 2022

Appraisal Rights: 2022 DGCL Amendments

As part of the 2022 DGCL amendments, important changes were made to Section 262, which governs appraisal rights. A recent Hunton Andrews Kurth memo says that companies need to appropriately address those changes in merger agreements entered into on or after August 1st. Here’s an excerpt:

The amendments implement broad changes to the appraisal provisions in Section 262. Three important and substantive changes are: (1) allowing beneficial owners to exercise appraisal rights directly in their own names instead of through the record owner (e.g., a broker or DTC), subject to specified procedures and requirements, (2) establishing appraisal rights for stockholders in a Delaware corporation in connection with the conversion of such entity to a foreign corporation or to any other entity (except if the market-out exception contained in Section 262(b) applies), and (3) eliminating appraisal rights in a merger, consolidation or conversion authorized by a plan of domestication under Section 388.

For any merger agreements entered into on or after August 1, 2022, notices of appraisal rights will be required to reference the amended version of Section 262. These amendments also permit the corporation to include a reference to a publicly available electronic resource for information on Section 262 appraisal rights, including the website maintained on behalf of the State of Delaware on which those statutes are posted, instead of having to include a copy of the applicable appraisal statute in the appraisal rights notice.

John Jenkins