Chancery Court Rejects Corporation’s Attempt to Bind Stockholders to Release Attached to Parties’ Merger Agreement    

05.2026

This article was originally published the May 2026 issue of Month-in-Brief: Mergers & Acquisitions, a publication of the Business Law Section of the American Bar Association.

Joinder agreements are often deployed in mergers and acquisitions to attempt to bind target stockholders to indemnification agreements, releases and waivers of appraisal rights by buyers seeking recourse against the target’s stockholders for breaches of the target’s representations and warranties, and to minimize post-closing deal litigation. In a recent decision, Chertok v. OnSolve, LLC, C.A. No. 2020-0417-PAF (Del. Ch. April 21, 2026), the Delaware Court of Chancery held that a target stockholder who asserted, but then withdrew, a demand for appraisal rights could not be forced to sign a joinder agreement containing, among other things, a release and waiver of appraisal rights as a condition to receiving his merger consideration even where the joinder was attached to the merger agreement and the merger agreement expressly conditioned the stockholders’ receipt of the merger consideration upon the signing of a joinder agreement. A target stockholder who had chosen not to comply with the corporation’s demands later sued the corporation, asserting claims for breach of the certificate of incorporation and for unjust enrichment. The corporation withdrew the conditions after the stockholder filed suit but contended that it was not required to pay prejudgment interest. The stockholder, on the other hand, maintained that he was not only entitled to interest, but also to damages exceeding the per share consideration provided for in the merger agreement on the basis that he was not bound by the provisions of the merger agreement that deducted transaction expenses, including management bonuses, from the merger consideration via escrow holdbacks.

Here, the Court held that: (1) there was no consideration for the release contained in the joinder agreement, and (2) the merger agreement violated the target’s certificate of incorporation by conditioning the stockholder’s receipt of the merger consideration on the signing of the release contrary to Delaware law. According to the Court, Delaware’s appraisal statute entitles stockholders to the merger consideration upon withdrawal of the demand within sixty days of the effective date, a requirement plaintiff met. However, the Court rejected plaintiff’s claimed entitlement to merger consideration without any deduction for expenses under escrow provisions in the merger agreement, finding that plaintiff was bound by the provisions of the merger agreement providing for those deductions. The Court ordered defendant to pay plaintiff his merger consideration plus simple interest at 6.75 percent, which was the legal rate on July 29, 2017, when plaintiff was entitled to payment of the merger consideration.

The Court of Chancery’s decision in Chertok built on its earlier decision in Cigna Health & Life Insurance Co. v. Audax Health Solutions, Inc., 107 A.3d 1082 (Del. Ch. 2014), in which the Court held that stockholders could not be bound to uncapped and indefinite indemnification obligations and a release via a letter of transmittal where the letter of transmittal was not attached to the merger agreement or supported by consideration. Here, unlike Cigna, the merger agreement attached the joinder agreement containing the release as an exhibit to the merger agreement, but the Court found that there was no consideration for the release.

Lisa R. Stark brings more than two decades of experience guiding companies through complex corporate transactions and strategic decisions involving Delaware corporate law. Her practice spans mergers and acquisitions, IPOs, proxy contests, asset sales, stock issuances and hostile takeovers. She advises both public companies and private equity funds and their portfolio companies in connection with mergers and acquisitions. She also counsels both public and private companies on corporate governance matters, including Delaware fiduciary duties, and the General Corporation Law of the State of Delaware.