Drafting Drag along Triggers in International Shareholders Agreements
Drafting cross-border drag-along triggers requires verifiable voting thresholds, explicit cash valuation floors, and deeded power-of-attorney execution clamp mechanics.
DGCL Section 262
Meaning
Delaware statute providing stockholders the right to skip a merger payment and instead ask the Court of Chancery to determine the fair value of their shares. The dgcl section 262 applies to specific mergers and consolidations where stockholders are forced to give up their equity for cash.
Stockholder Appraisal
The holder must not vote in favor of the merger and must deliver a written demand for appraisal before the vote is taken. This perfection of rights is a technical process where even small errors in timing or delivery can result in the loss of the appraisal claim.
Interest Award
The court typically grants interest on the final fair value amount at a rate five percent above the Federal Reserve discount rate. This interest accrues from the date the merger closes until the date the judgement is paid to the stockholder. The court has the discretion to adjust this rate or withhold interest if the petitioner causes unnecessary delays in the litigation process.
This compounding interest provides a significant incentive for the company to settle the claim rather than prolonging the court case. The final award is paid in cash and includes the base value plus the accumulated interest.
Fair Value
Valuation is determined by the court using all relevant factors to find the value of the shares as a going concern. Judges frequently look to the deal price as a primary indicator of value when the merger resulted from an arms length process and a broad market check.