Tort claimants sought the appointment of a receiver for a dissolved Delaware corporation. The Court of Chancery did not appoint the receiver and the Delaware Supreme Court reversed and remanded. The case raised questions of first impression in the Supreme Court: First, does a contingent contractual right, such as an insurance policy, constitute “property?” Second, does Delaware’s statutory corporate dissolution scheme under the DGCL time-bar claims against a dissolved corporation by third parties after the 10-years limit stated in the statute? The case also raised the question of whether, after the three year statutory winding-up period expires, a dissolved corporation has the power to act on its own, or requires a court-appointed receiver or trustee.
Regarding the first question, the Court concluded that contingent contractual rights do in fact constitute “property” because the rights are capable of vesting. If the dissolved corporation were to be found liable to the tort claimants then the policies would pay out and the rights would be vested. They therefore represent “significant potential indemnification value,” the Court said. Whether this vesting was at all possible hinged on the second question: whether the dissolution scheme found in the DGCL imposes a statute of limitations. The Court found that it does not. Sections 280(c) and 281(b) of the DGCL “require a dissolved corporation to set aside assets for the payment of claims against the corporation that may arise or become known five to ten years after dissolution,” the Court noted. However, the Court concluded that the legislative history revealed that this time period is not a statute of limitations, but rather a guideline so companies can plan for contingent claims. The Court said: “The synopsis of the amendments to §§ 280 and 281 explained that those changes ‘provide[d] a temporal limitation on the claims for which a dissolved corporation . . . must make provision . . . .’ That same synopsis explained that other amended provisions of § 280 . . . ‘barred’ certain claims. Had the General Assembly intended the ten year period to operate as a limitations time bar, that body would have clearly expressed that intent in either the synopsis or in the statutory language.”
Regarding the third question, the Court held that a dissolved corporation may act only through a court-appointed receiver or trustee for litigation commenced after the expiration of the 10-year period. “As a pure matter of statutory law, the Corporation presently lacks any authority to continue managing the winding-up of its business, which includes defending lawsuits brought against it. Only if a receiver is appointed can the Corporation lawfully obtain that authority,” the Court said, adding that the actions of the insurers in continuing to defend lawsuits on the corporation’s behalf “cannot re-infuse the Corporation with a legal existence that by statute has terminated.