Advance Waivers of Dissenters’ Rights

Corporate partner Doug Raymond and business litigation partner Todd Schiltz coauthored an article for Directors & Boards titled “Advance Waivers of Dissenters’ Rights.”

The article highlights that, to reduce the risk that small shareholders will seek a holdout price for their vote, boards often ask shareholders to agree to vote in favor of any transaction approved by the board and majority stakeholders, and to not assert dissenters’ rights.

The authors explain how, in a privately held company, the board of directors may consider a waiver of dissenters’ rights before a potential acquirer enters the scene. They address how this provision been subject to question under Delaware law and that in a recent case the Delaware Supreme Court affirmed the legality of these provisions and provided guidance as to when such waivers might not be enforceable.