The Delaware Supreme Court chamber in Dover, Delaware. (Photo: Nagel Photography/Shutterstock)
The Delaware Supreme Court recently issued a decision that has the potential to significantly limit the availability of directors and officers (D&O) coverage for actions brought under Section 262 of Delaware General Corporation Law. Section 262 actions allow minority shareholders who opposed a merger — but were outvoted by a majority of other shareholders — to invoke a statutory appraisal process if they believe the merger price undervalued the company. By doing so, such minority shareholders can obtain a judicial ruling establishing the "fair value" of their shares as of the date of the merger.
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