Lesson 7 of 7
Voting no and asking a court
A Delaware shareholder who follows the steps can ask the Court of Chancery to set the fair value of their shares instead of taking the merger price.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
Who writes thisEditorial processLinkedIn (opens in a new tab)X (opens in a new tab)
In one minute
- Delaware's appraisal statute lets a dissenting shareholder ask the Court of Chancery to determine the fair value of their shares.
- The steps are strict: a written demand before the vote, no vote in favour, and a petition within 120 days of the effective date.
- Fair value excludes any value arising from the accomplishment or expectation of the merger itself, so it is not the deal price by definition.
Most shareholders in a merger take the price. Delaware law gives an alternative to holders who follow a specific procedure, and the procedure is unforgiving about dates and forms.
The statutory steps, in order
- Before the voteWritten demandThe holder delivers a written demand for appraisal. A proxy or a vote against the merger does not count as a demand.
- At the voteDo not vote in favourA holder who votes for the merger loses the right.
- Within 120 daysPetitionA petition is filed in the Court of Chancery demanding a determination of the value of the stock.
- AfterDeterminationThe court determines fair value, exclusive of any element of value arising from the accomplishment or expectation of the merger, with interest.
When the right is available at all
The statute makes appraisal available for mergers effected under the sections it lists, and then removes it again for most listed companies. Under the market-out in subsection (b)(1), no appraisal rights are available for a class of stock that was listed on a national securities exchange or held of record by more than 2,000 holders at the record date.
Subsection (b)(2) puts them back where the holders are required to accept anything other than stock: broadly, where the consideration is cash rather than shares of the surviving or another listed corporation. So the live cases are mostly cash mergers, which is also where a disagreement about value is most likely.
What the court is asked to decide
Fair value, in the words of subsection (h), is determined exclusive of any element of value arising from the accomplishment or expectation of the merger, and the court takes into account all relevant factors. Interest accrues from the effective date through payment, compounded quarterly, at five percent over the Federal Reserve discount rate unless the court determines otherwise for good cause.
The one sentence that catches people
A proxy or a vote against the merger does not constitute a demand. The statute says it directly, and it requires a separate written demand delivered before the vote is taken. A holder who mails back a proxy card marked against, and does nothing else, has not perfected anything.
What a reader should take from it
The value of understanding appraisal is not that you will use it. It is that the existence of the remedy shapes cash mergers: boards and their advisers price deals knowing a dissenting holder can ask a court to value the company on its own footing, and the statute's exclusion of merger-related value is the reason that valuation is a different exercise from the deal price.
That is a fact about the law, and what any particular holder may or should do about it in their own situation is a question for their own lawyer.
Check yourself
Does a vote against a merger perfect an appraisal claim?
- Yes, voting against is sufficient
- No, the statute requires a separate written demand delivered before the vote
- Only if the holder owns more than five percent
Show the answer
Answer: B.
Section 262 states that a proxy or a vote against does not constitute a demand, and that a shareholder must act by separate written demand.What does the court exclude when determining fair value?
- The company's debt
- Any element of value arising from the accomplishment or expectation of the merger
- All intangible assets
Show the answer
Answer: B.
Subsection (h) excludes merger-related value, which is why an appraised value is not simply the deal price.How long does a holder have to file a petition in the Court of Chancery?
- 30 days after the vote
- 120 days after the effective date of the merger
- One year after closing
Show the answer
Answer: B.
Subsection (e) sets 120 days after the effective date for commencing an appraisal proceeding.Sources
- Delaware General Corporation Law, title 8, chapter 1, section 262, read from the Delaware Code on 2026-09-13: subsection (b) on availability and the market-out, subsection (d) on written demand, subsection (e) on the 120 day petition, subsection (g) on the one percent and one million dollar conditions, and subsection (h) on fair value and interest.
What this leaves out
- This describes the Delaware statute as read on the date shown. Other states and other countries have different rules, and statutes change.
- It is a summary of what the law says, not advice about any reader's rights or situation. Anyone considering this needs their own lawyer.
- Court decisions interpret each of these provisions and are not covered here.
- Nothing here is advice about any security.