Page 186 - מיזוגים ורכישות - פרופ' אהוד קמר 2022
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pay a fair price in a short-form merger, and a minority stockholder’s only recourse is to
seek appraisal. Consequently, the only obligation of a company effecting a short-form
merger is to provide minority shareholders with all information material to the decision
of whether or not to seek appraisal.2
The Court of Chancery in Berger found several inadequacies in the parent’s
disclosure notice, including that it had failed to provide any information about the
method used to determine the consideration offered. Because the merger had already
been effected and consideration had already been paid, the Court of Chancery ordered a
"quasi appraisal," which would replicate a statutory appraisal action by requiring minority
shareholders to "opt-in" to the proceeding and place in escrow a portion of the
consideration they had already received.
Reversing, the Supreme Court held that principles of "fairness" dictated that
"majority stockholders that deprive their minority shareholders of material information
should forfeit their statutory right to retain the merger proceeds payable to shareholder
who, if fully informed, would have elected appraisal.” Consequently, the Court held that
the proper remedy for disclosure violations in a short-form merger is a quasi appraisal
action on behalf of an automatic class of all minority stockholders with no escrow
requirement.
Because the Supreme Court’s remedy removes the ordinary downside risks of an
appraisal action and facilitates class action-style proceedings, this decision may
encourage increased litigation following short-form mergers. At the same time, however,
Berger reemphasizes the limited fiduciary remedies available to minority stockholders in
a short-form merger, and its holding applies only in circumstances where the merger was
accompanied by material disclosure violations. The decision thus serves as a useful
reminder to Boards and controlling shareholders pursuing short-form mergers that
appropriately complete disclosure is critical to obtaining the statutory benefits to
acquirors of the Delaware short-form merger and appraisal provisions.
2 Glassman v. Unocal Exploration Corp., 777 A.2d 242, 248 (Del. 2001).
182
seek appraisal. Consequently, the only obligation of a company effecting a short-form
merger is to provide minority shareholders with all information material to the decision
of whether or not to seek appraisal.2
The Court of Chancery in Berger found several inadequacies in the parent’s
disclosure notice, including that it had failed to provide any information about the
method used to determine the consideration offered. Because the merger had already
been effected and consideration had already been paid, the Court of Chancery ordered a
"quasi appraisal," which would replicate a statutory appraisal action by requiring minority
shareholders to "opt-in" to the proceeding and place in escrow a portion of the
consideration they had already received.
Reversing, the Supreme Court held that principles of "fairness" dictated that
"majority stockholders that deprive their minority shareholders of material information
should forfeit their statutory right to retain the merger proceeds payable to shareholder
who, if fully informed, would have elected appraisal.” Consequently, the Court held that
the proper remedy for disclosure violations in a short-form merger is a quasi appraisal
action on behalf of an automatic class of all minority stockholders with no escrow
requirement.
Because the Supreme Court’s remedy removes the ordinary downside risks of an
appraisal action and facilitates class action-style proceedings, this decision may
encourage increased litigation following short-form mergers. At the same time, however,
Berger reemphasizes the limited fiduciary remedies available to minority stockholders in
a short-form merger, and its holding applies only in circumstances where the merger was
accompanied by material disclosure violations. The decision thus serves as a useful
reminder to Boards and controlling shareholders pursuing short-form mergers that
appropriately complete disclosure is critical to obtaining the statutory benefits to
acquirors of the Delaware short-form merger and appraisal provisions.
2 Glassman v. Unocal Exploration Corp., 777 A.2d 242, 248 (Del. 2001).
182
