In a Bloomberg Law article, M&A partner Suni Sreepada (New York) discussed the Delaware Chancery Court’s Zoox appraisal litigation ruling and Section 220 books and records demands.
In the case, investors in privately-held self-driving car company Zoox bringing appraisal litigation were only entitled to discovery they would have received in a proceeding under Section 220 of the Delaware General Corporation Law. The novel ruling is the first to address investor rights to use appraisal demands related to stock valuation of a private company to investigate potential fiduciary breaches tied to a merger.
Suni explains that private company directors should be mindful of the possibility that more plaintiffs may try to get private companies’ books and records through appraisal demands when Section 220 is procedurally unavailable. The decision serves as a reminder that, much like their public company counterparts, private company directors should comprehensively document the board’s decision-making process in M&A transactions in the company’s books and records.
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