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Common Stockholders Can Wa[i]ve Appraisal Rights Goodbye

Law360 (January 11, 2019, 5:38 PM EST) -- Private equity and venture capital firms have long been including so-called drag-along rights in the agreements surrounding their investments. Drag-along rights protect these investors from subsequent attempts by minority stockholders to block the sale of the company. And in exchange for the minority stockholders’ consent to sell the company, the minority stockholders receive a sales price, terms and conditions equal to the majority. For this benefit, stockholder agreements typically require minority stockholders to waive their statutory appraisal rights in the event of a merger or acquisition where the majority had to use its drag-along rights.

Despite this common practice, up until a...

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