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The legislation (HB 371) will require the Delaware Chancery Court to dismiss certain de minimis appraisal proceedings. It also allows companies to make payments to appraisal claimants to prevent the accrual of interest.
The appraisal amendments—which were recommended by the Delaware State Bar Association's Corporation Law Section and primarily sponsored by Rep. Melanie George Smith (D-Bear/Newark)—will be effective for deals completed under agreements entered into on, or after, Aug. 1.
Both Delaware's House and Senate unanimously passed the bill before it reached the governor's desk (111 CARE, 6/9/16).
Under Delaware's appraisal statute, investors that choose not to participate in a merger can ask the chancery court to appraise the value of their shares.
The number of petitions filed by shareholders asking for their shares to be valued by the chancery court may decrease as a result of the legislative changes, a recent study suggested (103 CARE, 5/27/16).
HB 371 also included other changes to the DGCL that clarify Section 251(h)—the preferred mechanism for completing a type of transaction known as a “two-step merger” under Delaware law in which the target company becomes a wholly owned subsidiary of the purchaser through a tender offer.
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