Cadwalader, Wickersham & Taft LLP
MONTH-IN-BRIEF (Sep 2022)
Business Litigation
Delaware Court of Chancery Provides New Guidance for Seeking Interim Distributions in Connection with Corporate Dissolution under Sections 280-282 of the DGCL
By Rafael Zahralddin, Lewis Brisbois
The Delaware Court of Chancery recently denied a request by a corporation for an interim distribution prior to final payment of creditors under the corporate dissolution process of sections 280 and 281 of the Delaware General Corporation Law. In re Anavrin, Inc. C.A. No. 2022-0197-JTL, Order 1 of 2 (Del.Ch. Aug. 16, 2022). Sections 280, 281, and 282 of the Delaware General Corporation Law comprise the statutory framework for an orderly corporate dissolution that provides finality for directors and the various constituencies owed payment, including unknown creditors. A corporation can either seek the Court’s assistance under 280 and 281(a) or use the unsupervised process under section 281(b), all of which shield directors from liability from post-dissolution lawsuits. Under the court-supervised process, the corporation will “smoke out claims, pay off claims in accordance with statutory priorities, and establish reserves for contingent claims.” Territory of U.S.V.I. v. Goldman Sachs & Co., 937 A.2d 760, 798 (Del. Ch. 2007), aff’d, 956 A.2d 32 (Del. 2008).