New provisions designed to curtail the use of the appraisal remedy by dissenting shareholders in Delaware will apply to all M&A agreements entered into on or after Aug. 1, 2016. Appraisal rights will be limited to holders of $1 million or more of a company’s stock or 1% of the outstanding shares, whichever is less. Also, companies will be able to prepay the acquisition amount to dissenters and stop the interest accrual clock.
Will it work? Research reveals that the new $1 million/1% limit could reduce appraisal actions “by about one-quarter.” The new prepayment provision “is also likely to greatly reduce appraisal filings.” However, some observers believe that the new prepayments will actually spark more appraisal actions because it will solve the liquidity problems of investors who weren’t able to bring such actions before.
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