Delaware Chancery Court

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Amid rising interest rates, tightening credit markets, geopolitical concerns in Europe and Asia, stubborn inflation and continuing supply chain issues, there is a growing sense of economic uncertainty.  This uncertainty will no doubt increase the frequency of valuation disputes in the year ahead. We generally see valuation disputes spring from four primary sources:

  1. breach of representations and warranties in purchase agreements, which raise questions as to company value absent the breach;
  2. unfair prejudice to minority investors or limited partners;
  3. disagreements about price paid at exit, including earn out disputes; and
  4. increased regulatory focus on exams, which may assess valuation policies and require recurring asset valuations.

Valuation disputes tend to be centered on disagreements about accounting practices, dates of assessed value, and valuation methodology. 

This past year, we highlighted a Delaware Chancery case adopting an expansive view in favor of parties seeking information from companies under Section 220 of the Delaware General Corporation Law.  The Delaware Supreme Court recently affirmed the Chancery Court’s ruling, providing additional appellate guidance on Section 220 and endorsing limits…

Last year, we highlighted the risks of filing a Section 220 books and records request post-litigation, citing a case where the Delaware Chancery Court found that such use was an improper attempt to “sue first, ask questions later.”

Recently, the Delaware Chancery Court opined on this issue again in Lebanon County Employees’ Retirement Fund v. AmerisourceBergen Corporation – this time, the Vice Chancellor took a more expansive view in favor of the parties seeking information under Section 220. Section 220 of the Delaware General Corporation Law allows stockholders to inspect books and records of a Delaware corporation for any proper purpose and to compel inspection if such inspection is refused.