Venture capital and private equity arrangements often include contractual provisions limiting the rights of investors, including drag-along provisions in connection with future transactions approved by controlling stockholders and sometimes express waivers of the right to assert appraisal rights. There has been some uncertainty as to the validity of advance waivers of statutory appraisal rights. Thus, both the National Venture Capital Association form of closing opinion and the California venture capital opinion form have included exceptions for provisions waiving appraisal rights.
The Delaware Court of Chancery has now directly addressed the issue of the validity of a contractual advance waiver of appraisal rights under §262 of the Delaware General Corporation Law (the “DGCL”) in Manti Holdings, LLC v. Authentix Acquisition Company, Inc., 2019 WL 3814453 (Del. Ch. Aug. 14, 2019). In response to a motion for re-argument by a stockholder seeking to assert appraisal rights in connection with the sale through merger of Authentix, the Court upheld the validity of the waiver of appraisal rights in a stockholder agreement entered into by the stockholder, a sophisticated investor, in connection with obtaining its common stock interest in Authentix, a private company, as part of an earlier merger of the stockholder’s wholly-owned corporation into Authentix.
The Authentix decision validates a clear and unambiguous waiver of appraisal rights under the DGCL. The decision is limited to the facts of this case and does not address other situations such as blanket waivers of appraisal rights in the certificate of incorporation or bylaws (the validity of which may still be questionable) or drag along provisions without an express waiver of appraisal rights (for which the agreement to vote in favor, sometimes accompanied by a proxy, may be sufficient to foreclose assertion of appraisal rights). Nevertheless, the decision provides a pathway for addressing waiver of appraisal rights through express contractual provisions that are likely to be upheld.
 In its earlier opinion (2018 WL 4698255 (Del. Ch. Oct. 1, 2018)) the Court interpreted the stockholder agreement as constituting a waiver of appraisal rights but did not directly address the waiver’s validity under the DGCL.
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