Delaware Supreme Court Upholds Contractual Waiver of Statutory Appraisal Rights

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Manti Holdings, LLC, et al. v. Authentix Acquisition Co., Inc., No. 354, 2020 (Del. Sept. 13, 2021)

This decision arose out of the acquisition of Authentix Acquisition Company, Inc. and a subsequent appraisal proceeding brought by dissenting stockholders under 8 Del. C. § 262. As a condition of an earlier merger involving the private equity firm Carlyle, the petitioners were parties to a stockholders agreement binding the corporation and all of its stockholders that purported to waive the stockholders’ statutory appraisal rights. At the trial court level, the Court of Chancery enforced the contractual waiver and granted the company’s motion to dismiss. On appeal, alongside other contentions, the petitioners argued that statutory appraisal rights are one of the fundamental features of corporate identity and should be found nonwaivable under Delaware law and public policy.

The Delaware Supreme Court disagreed and affirmed the dismissal. While the Supreme Court recognized that certain fundamental features of a corporate identity might be nonwaivable, it declined to find appraisal rights among them. According to the court, neither Section 262 of the DGCL nor Delaware public policy prohibits “sophisticated and informed stockholders, who were represented by counsel and had bargaining power, from voluntarily agreeing to waive their appraisal rights in exchange for valuable consideration.” The court’s reasoning principally rested on the nature of the DGCL as a broad enabling statute that permits “immense freedom for private ordering.” The Supreme Court clarified that upholding this particular waiver against these particular stockholders “does not mean that all ex ante waivers of appraisal rights are enforceable or that the waiver of any other stockholder right would be enforceable.”

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