Under Section 262 of the Delaware General Corporation Law (“DGCL”), the Court is authorized to add simple or compound interest to the appraised value to a dissenting shareholder.
The Court has discretion whether to award simple or compound interest. In some cases, the court has simply awarded the legal rate of interest, or the Federal Reserve discount rate plus 5 percent. In other cases, the court has awarded interest equal to the average of the acquirer’s cost of borrowing and the so-called “prudent investor” rate.
Historically, Delaware courts have awarded simple interest. However, compound interest has been awarded in more recent cases. Factors considered by the courts include the amount of the appraised value and the amount of time that has elapsed since the completion of the merger.