Document: Tang Capital Partners, LP v. Norton, C.A. No. 7476-VCG (Del. Ch. July 27, 2012)
The Delaware Court of Chancery held that a creditor could contractually waive its statutory right to bring an action for the appointment of a receiver under Section 291 of the General Corporation Law of the State of Delaware (“Section 291”). Section 291 empowers the Delaware Court of Chancery to appoint a receiver for the administration of the affairs of an insolvent Delaware corporation upon the application of any stockholder or creditor of the corporation. In this case, certain holders of senior convertible notes of Savient Pharmaceuticals, Inc. (“Savient”) sought, inter alia, the appointment of a receiver for Savient pursuant to Section 291 after Savient restructured some of its existing debt on terms that the plaintiffs claimed would be detrimental to Savient. However, the terms of the indenture governing plaintiffs’ notes purported to preclude plaintiffs from seeking the appointment of a receiver for Savient unless, among other things, Savient defaulted on its loan. Ruling on defendants’ motion to dismiss plaintiffs’ receivership action for lack of standing, the Court found that Savient had not defaulted on its debt obligations and that a contractual waiver or limitation of a statutory right to seek a receivership did not violate Delaware public policy, notwithstanding plaintiffs’ arguments to the contrary.