This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.
Here is how this usually shows up. A private company signs a merger agreement, the majority stockholders approve it by written consent, and a week later the minority holders get an email from an exchange agent. Attached is a closing packet — a letter of transmittal, a stock power, a W-9, and, buried in the middle, a joinder agreement running a dozen pages that waives appraisal rights, covenants against transferring shares, and releases every claim the holder has ever had against the company, the buyer, and merger sub “from the beginning of time.” The cover note says the consideration will be wired once all of the required deliveries come back signed. Nobody in the deal thinks twice about it. That packet is standard.
The Delaware Court of Chancery has now said, after trial, that the standard packet can breach the target’s certificate of incorporation.
What Chertok v. OnSolve actually holds
In Chertok v. OnSolve, LLC, C.A. No. 2020-0417-PAF, Vice Chancellor Fioravanti issued a post-trial memorandum opinion decided April 13, 2026 and corrected April 21, 2026. The facts are unremarkable, which is what makes the holding useful. A Delaware corporation was acquired by merger in 2017. Stockholders holding the requisite shares approved by written consent. The company sent non-consenting holders an information statement with the executed merger agreement, the written consents, a copy of Section 262 of the DGCL, and a spreadsheet of share counts. To receive the merger consideration, a common stockholder had to deliver an executed joinder agreement — an annex to the merger agreement itself — along with the other required deliveries.
One stockholder disputed his share count, demanded appraisal, and then withdrew the demand. He never signed the joinder. Years later, after he sued, the company dropped the conditions and tendered payment, but argued it owed no prejudgment interest because it had not been obligated to pay any earlier. The court disagreed on that point and held that conditioning payment of the merger consideration on execution of a release agreement breached the certificate of incorporation.
The reasoning runs through the appraisal statute. Under Section 262(e), a stockholder who demanded appraisal but has not commenced or joined a proceeding may withdraw the demand within sixty days of the effective date and accept the terms offered in the merger. And if no appraisal petition is filed within one hundred twenty days, appraisal rights lapse and the stockholder is entitled to the merger consideration. That statutory right is incorporated into the charter. So when the stockholder timely withdrew, the surviving company owed him the consideration as a matter of corporate contract — not as a matter of grace conditioned on whatever paperwork the buyer wanted in return. The court relied on the reasoning of Mehta v. Smurfit-Stone Container Corp., where a corporation told withdrawing appraisal claimants they could have their consideration only if they signed a settlement agreement, and the court held the corporate contract was breached by the failure to pay when payment came due.
The practical translation is short. A general release is separate value. If the buyer wants it, the buyer has to pay for it separately. It cannot be extracted by holding the merger consideration hostage.
The damages ruling is the other half of the lesson
The stockholder did not get a windfall, and that matters for anyone reading the headline and imagining leverage. He argued for a share of the full enterprise value without deduction for management bonuses or the amounts that had been escrowed. The court rejected that and held his damages were no greater than his share of the merger consideration as calculated under the terms of the merger agreement, which came to a figure just under half a million dollars including released escrow amounts and agreed distributions. The alternative unjust enrichment count was dismissed as duplicative, on the settled ground from Nemec v. Shrader that Delaware courts will not permit an unjust enrichment claim where the alleged wrong arises from a relationship governed by contract.
What the stockholder did get was prejudgment interest, and he got it as a matter of right rather than as a matter of discretion. Under 6 Del. C. § 2301(a), the Delaware legal rate is five percentage points above the federal discount rate, and Delaware courts use that legal rate as the default in the absence of an express contract rate. The court declined to compound and declined to blend rates across the period, instead applying the legal rate in effect when payment became due.
Sit with the arithmetic. Interest at the legal rate, running simple from mid-2017 to a 2026 judgment, on a payment the company always conceded it owed, is a meaningful multiple of the litigation’s nominal stakes — and the company also spent nine years and a Skadden defense to get there. That is the cost of a form document nobody re-read.
Why buyers use the packet anyway, and what to do instead
The impulse behind the joinder is not irrational. A buyer purchasing a private company with a scattered cap table wants three things from every holder: confirmation of share ownership, an agreement to be bound by the indemnification and escrow mechanics, and a release of pre-closing claims. Bundling all three into one signature page and gating the wire on it is the cheapest possible enforcement mechanism. It works on almost everyone, because almost everyone signs.
The fix is not to abandon releases. It is to stop treating the merger consideration as the consideration for them. There are four workable paths, and deal lawyers should be choosing among them consciously rather than by default.
First, get the release into the merger agreement itself as a term approved by the requisite stockholder vote, so that it is part of the deal the charter and the statute authorize rather than an add-on imposed afterward. That has its own limits — a charter and the DGCL only reach so far into a non-consenting holder’s independent claims — but it is a different posture than a post-closing demand.
Second, pay separately for the release. A modest incremental per-share amount, or a portion of the escrow release conditioned on the joinder, gives the release independent consideration and takes the whole dispute off the table. Buyers resist this because it feels like paying twice for something they thought they already had. They were not entitled to it in the first place.
Third, unbundle the packet. A letter of transmittal that asks for a stock power, a certificate of ownership, tax forms, and payment instructions is administratively necessary and is not the same animal as a release. Nothing in Chertok suggests a buyer cannot require the ministerial deliveries needed to actually pay someone. The problem is the general release riding along in the same envelope with the same “sign or no wire” cover note.
Fourth, if a holder refuses, pay them and preserve the claim rather than sitting on the money. Interest at five over the discount rate accrues whether or not the buyer thinks it is right, and it accrues on the entire withheld amount.
What this means on the sell side and for minority holders
For a founder or early investor holding a minority stake in a company being sold, the takeaway is that the closing packet is negotiable in a way most holders assume it is not. A holder who does not want to release unknown claims — against the board, against a controller, against the buyer for something surfacing in diligence — is not required to trade the merger consideration for that release. Courts typically will not rewrite the price, as Chertok confirms, so this is not a route to a better number. It is a route to keeping claims that the standard form quietly extinguishes.
The appraisal interaction deserves its own note, because the sequencing in this case is instructive. Demanding appraisal and then withdrawing under Section 262(e) is a real option, and holders who go that route sometimes discover the company treats the withdrawal as a favor requiring a signature in exchange. It is not. Once the demand is withdrawn within the statutory window, or once appraisal rights lapse for want of a timely petition, the entitlement to merger consideration is the entitlement the charter already promised. We have written before about how appraisal risk has migrated into private deals and about how Florida’s § 607.1302 appraisal rights create analogous minority leverage in FBCA cash-out mergers.
The Florida analogue is worth flagging even though Chertok is Delaware law. The Florida Business Corporation Act likewise gives dissenting shareholders a statutory payment right, and a Florida surviving corporation that conditions the statutory payment on a general release is making the same structural mistake. The doctrinal hook differs — Florida courts reason from the statute and the articles rather than from the DGCL — but the underlying point holds: a payment obligation created by statute and incorporated into the corporate contract is not currency for buying releases.
The form-file problem
What makes this case worth reading in full is that no one behaved outrageously. The joinder was an annex to a negotiated merger agreement drafted by sophisticated counsel. The information statement attached Section 262. The company eventually paid. The breach was structural, sitting in a form document that had been used dozens of times without incident because dissenting holders almost never push.
Deal teams should pull their transmittal and joinder templates now and ask a single question: does anything in this packet ask the holder to give up a right that the merger agreement did not already buy? If the answer is yes, the packet is asking for a gift, and the price of asking for it the wrong way is nine years of simple interest at five points over the discount rate. The corrected opinion is available in full from the Delaware Court of Chancery opinion library, and it is short enough to read before the next closing packet goes out.
One more structural note for sponsors. Where a drag-along is used to pull minority holders into a sale, the drag provision itself is often drafted to require the dragged holder to sign “such documents as the acquirer reasonably requests,” which deal counsel then reads as authority for the release. That reading is doing a lot of work. A drag-along in a stockholders agreement can bind a holder to vote and to sell; whether it can compel an unbargained-for general release, and whether the charter’s payment obligation survives that compulsion, is exactly the question Chertok puts in play. Sponsors relying on that language should assume it will be tested. Related mechanics on the escrow side of the closing packet are worth reviewing at the same time, since escrow release conditions are the most natural place to relocate a release that no longer belongs in the transmittal.
If you are drafting or reviewing a letter of transmittal, a joinder agreement, or a drag-along that conditions merger consideration on a release, feel free to reach out to our firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
