Eight years ago today, in DiRienzo v. Steel Partners Holdings L.P., No. 4506-CC (Del. Ch. Dec. 8, 2009), Chancellor Chandler reaffirmed the principle that the record holder requirements of Section 262(a) demand strict compliance.
The Chancery Court dismissed an appraisal petition on grounds that the appraisal demand was not made by a record holder listed on the company’s stock ledger. The record holder, according to the court, was neither the party seeking appraisal nor his broker, but rather the central security depository, Cede & Company. The court rejected petitioners’ argument that the company waived its right to object to the defective appraisal demand by submitting three letters to petitioners prior to the filing of the appraisal petition. The court similarly rejected petitioners’ estoppel argument premised on the company’s alleged disclosure violations in the appraisal notice.
For beneficial owners, the takeaway from this case remains true today: to be entitled to appraisal their record holders must submit an appraisal demand on their behalf.