By: Alexa DeAnnuntis

In Manti Holdings, LLC v. Authentix Acquisition Co., Inc., the Delaware Supreme Court affirmed the use of stockholders’ agreements to waive stockholders’ rights of appraisal under Section 262 of the Delaware General Corporation Law.[1] The decision in this case reinforces Delaware’s strong freedom of contract preference and provides an example of appraisal rights that Delaware corporations have their stockholders waive.[2] This case does not provide that every appraisal waiver will be valid, but rather, in certain cases the waiver may be valid.[3]

Authentix is a Delaware corporation.[4] In 2007, Authentix, Inc. was researching its financial options.[5] During this time, the petitioners each owned stock in Authentix, Inc. and Manting Holdings, LLC owned the majority of the remaining shares.[6] Carlyle gained majority of Authentix in a bidding war.[7] The petitioners then became minority stockholders in the post-merger corporation.[8] In 2008, Carlyle required all of the stockholders, including petitioners, to enter into a stockholder agreement.[9] All parties to the agreement were represented by counsel and each party ultimately signed the agreement.[10] In 2017, the Authentix board rerecommended a merger with a third-party entity and Carlyle approved the merger with written consent.[11] The petitioners were unable to vote on the merger.[12] After the merger, the petitioners were provided with notice of the merger that included summaries of various details including a consent to waive appraisal rights.[13] In the merger agreement the Petitioners’ stocks were cancelled and used as consideration for the merger. The consideration from the merger was to trickle down and prioritize preferred stockholders, which would leave common stockholders with little to nothing.[14] This resulted in the common stockholders, the petitioners, to demand appraisal which the Court of Chancery denied and held that the petitioners waived their appraisal rights.[15] The petitioners appealed but the majority of the Delaware Supreme Court affirmed the Court of Chancery’s ruling.[16]

In the majority opinion, two arguments were discussed. The first being a contractual argument that the Delaware Supreme Court ruled that the petitioners waived their Section 262 rights in the Stockholder agreement.[17] In rejecting the petitioners’ argument, the Court explained that the stockholders signing of the agreement was clear and unambiguous evidence of the waiver of their appraisal rights.[18] Additionally, the court held that the agreement could be enforced post-merger contrary to the petitioners’ argument. Petitioners additionally argued, post-sale of Authentix, they should be allowed to pursue appraisal claims because the sale ultimately terminated the agreement.[19] However, the Court held that the stockholder agreement was not terminated at the time of sale and the post-merger company is an entity capable of forming a contract; therefore, the post-merger company could enforce the agreement.[20] The surviving company in this instance would be the intended beneficiary.[21]

The next argument was one of Delaware public policy. The majority opinion stated that the DGCL is a “broad and enabling statute” that encourages contractual freedoms and that right is only limited by public policy and certain mandatory terms.[22] The Court noted that the Petitioners were

“sophisticated and informed investors, represented by counsel, that used their bargaining power to negotiate for funding from Carlyle in exchange for waiving their appraisal rights . . . [a]nd the [appraisal waiver] was not a ‘midstream amendment’ that was forced upon the Petitioners without their express consent.”[23]

The appraisal statute in the DGCL does not contain express prohibitions against waiver as it does in some of the other provisions.[24]

Thus, while stating that ‘there are contexts where an ex ante waiver of appraisal rights would be unenforceable for public policy reasons,’ the majority held that ‘sophisticated and informed stockholders, who were represented by counsel and had bargaining power,’ could preemptively relinquish their appraisal rights for ‘valuable consideration,’ and held that such waiver did not contravene Delaware public policy.[25]

In the dissenting opinion, Justice Valihura disagreed with the majority and found that this type of waiver is impermissible as appraisal rights are one of the mandatory provisions of the DCGL.[26] There was no language in the agreement permitting such a waiver; so even if this type of waiver were to be allowed under the DCGL, it was not in the language of the agreement so as to be ambiguous.[27] In the case of ambiguous language, the dissent argues the language should have been read in favor of the petitioner.[28]

There are a few key takeaways and impacts on Delaware Corporate Law as a result of this case. First, stockholders of Delaware Corporations may use the stockholder agreement to waive their right to statutory appraisal. Next, the ruling does not determine whether other statutory rights under Section 220 can be waived in the same manner. Also, this case does not conclude that every appraisal waiver is a valid one. Nor does it supply a list of sections in the DCGL that are deemed non-waivable. This will be a case-by-case analysis where the presence of counsel and the sophistication of the parties are expected to be factors considered by the Court. Additionally, the case is an example to corporate entities on how meticulous they must be when drafting stockholder agreements.

About the Author

Alexa DeAnnuntis is third year J.D Student at Widener University Delaware Law. She is the recipient of the Philadelphia Bar Association Public Service Award and the Joanne Ross Wilder Law Student Scholarship. Alexa worked in the Delaware Civil Clinic where she represented indigent domestic abuse victims in Delaware Family Court to obtain protection from abuse orders. Alexa is working towards a career post-graduation in child advocacy and family law.

[1] Eugene Choi & John Stigi III, Delaware Supreme Court Affirms the Use of Stockholders Agreements to Waive Appraisal Rights, Sheppard Mullin Richter & Hampton LLP (Sept, 29, 2021),

[2] Id.

[3] Id.

[4] Manti Holdings, LLC v. Authentix Acquisition Co., Inc., 261 A.3d 1199, 1204–07 (Del. 2021).

[5] Id.

[6] Id.

[7] Id.

[8] Manti Holdings, LLC, 261 A.3d at 1204-07.

[9] Id.

[10] Id.

[11] Id.

[12] Manti Holdings, LLC, 261 A.3d at 1204–07.

[13] Id.

[14] Id.

[15] Id.

[16] Manti Holdings, LLC, 261 A.3d at 1204–07.

[17] Choi, supra note 1.

[18] Arthur R. Bookout, Peyton V. Carper, & Eric M. Holleran, Waiver of Appraisal Rights Upheld by Split Delaware Supreme Court, Skadden, Arps, Slate, Meagher & Flom LLP (Dec. 15, 2021)

[19] Id.

[20] Choi, supra note 1.

[21] Id.

[22] Bookout, supra note 18.

[23] Manti Holdings, LLC, 261 A.3d at 1221–22.

[24] Bookout, supra note 18.

[25] Id.

[26] Choi, supra note 1.

[27] Bookout, supra note 18.

[28] Id.