Archive: January 7, 2015

Chancery Court Confirms Standing of Record Holder as of Appraisal Demand Date to Pursue Appraisal

By David Bernstein and Meredith Laitner

In Merion Capital LP v. BMC Software, Inc., the Chancery Court held that a person who became the record owner of shares after the record date for voting on a merger could seek appraisal with regard to those shares so long as that person did not vote the shares in favor of the merger, without having to demonstrate that the shares had not been voted in favor of the merger by a prior record owner.

On January 5, 2015, the Delaware Chancery Court issued its ruling in Merion Capital LP v. BMC Software, Inc., C.A. No. 8900-VCG (Del. Ch. January 5, 2015) (Glasscock, V.C.), finding that petitioner Merion Capital LP had standing to seek an appraisal with regard to shares of which it became the record owner after the record date for voting on a merger without having to prove that those shares had not been voted in favor or the merger.

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DGCL §220 Does Not Limit Court’s Ability to Restrict Shareholder Inspection Rights

By Eric Freedman and Eric Taylor

In an en banc decision, the Delaware Supreme Court reversed a decision of the Delaware Court of Chancery holding that the court lacked the authority to impose a specific restriction on a shareholder’s inspection of a corporation’s books and records under section 220(c) of the Delaware General Corporation Law (the “DGCL”). United Technologies Corp. (“UnitedTechnologies”) had sought to restrict the use of information obtained in an inspection of the company’s books and recordsby its shareholder Lawrence Treppel (“Treppel”). Specifically, United Technologies asked Treppel to sign a confidentiality agreement that would require Treppel to bring any legal action “arising out of” the inspection in a Delaware court. Treppel refused to sign the agreement and filed a section 220 action seeking access to United Technologies’ books and records without any such restriction. United Technologies challenged whether Treppel had a “proper purpose” for the information request (as required by section 220(b) of the DGCL), but also asked the Court of Chancery to use its legal authority under section 220(c) to limit the use of information gained from Treppel’s books and records inspection to action in a Delaware court. Section 220(c) grants the court the discretion to “prescribe any limitations or conditions with respect to [an] inspection,” or award such further relief as the court deems proper.

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