Monday, November 18, 2013
Surprising almost nobody, Chancellor Strine issued an opinion in Great Hill Equity Partners vs SIG Growth Equity Fund providing a statutory interpretation of DGCL Sec. 259. You'll remember that 259 reads in relevant part as follows:
§ 259. Status, rights, liabilities, of constituent and surviving or resulting corporations following merger or consolidation.
(a) When any merger ... shall have become effective ... the separate existence of all the constituent corporations, or of all such constituent corporations except the one into which the other or others of such constituent corporations have been merged ... shall cease and the constituent corporations shall ... be merged into 1 of such corporations ... possessing all the rights, privileges, powers and franchises as well of a public as of a private nature, and being subject to all the restrictions, disabilities and duties of each of such corporations so merged or consolidated; and all and singular, the rights, privileges, powers and franchises of each of said corporations, and all property, real, personal and mixed, and all debts due to any of said constituent corporations on whatever account, as well for stock subscriptions as all other things in action or belonging to each of such corporations shall be vested in the corporation surviving or resulting from such merger...
The question for the court was whether the attorney client privilege of the seller passes to the buyer upon the closing. You can imagine why this might be of interest to buyers. You know, a successful buyer of a certain kind might want to use privileged information to seek undemnification for a breach of a representation post-closing, etc. In Great Hill, the seller was seeking to prevent the buyer from getting post-closing access to privileged attorney-client communications of the seller. Great Hill asked the court to rule that when 259 says all "privileges" it doesn't mean the seller's attorney-client privilege. Chancellor Strine wasn't having any of that:
To indulge the Seller‟s argument would conflict with the only reasonable interpretation of
the statute, which is that all means all as to the enumerated categories, and that this
includes all privileges, including the attorney-client privilege.
So, sellers ... remember to box up all that legal work and leave it for the buyers when they wander in to take over. It's theirs.