Abstract
State statutes give dissenting shareholders an appraisal right in some, but not all corporate mergers. With varying specifics, a widely adopted market-out exception denies appraisal if the shares are publicly traded. The rationale for market-out is that the public market offers a reliable valuation of the shares and a convenient exit to dissenting shareholders. A major criticism of market-out is that market prices may not reflect the full value of the shares due to information asymmetry in mergers involving conflicts of interests. Delaware’s market-out approach is drastically different from that adopted by the Model Business Corporation Act (MBCA), but both have a significant number of followers among US jurisdictions. This essay highlights the flaws in Delaware’s approach and shows that the MBCA provides better protection to dissenting shareholders. Fiduciary breach lawsuits are not adequate substitutes for appraisal due to procedural hurdles.
Recommended Citation
Lynn Bai & William A. Murphy,
Shareholder Appraisal Rights: Delaware's Flawed Market-Out Exception,
56
U. Mich. J. L. Reform Caveat
(2023).
Available at:
https://repository.law.umich.edu/mjlr_caveat/vol56/iss1/1