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Manichaean Capital LLC v. Exela Technologies Inc.
Delaware Court of Chancery
251 A.3d 694 (2021)

Although a corporation and its owners are distinct legal entities, courts may, in appropriate circumstances, disregard this separation and pierce the corporate veil. Typically, the corporate veil is pierce to hold a shareholder liable for the corporation's conduct.

However, in Manichaean Capital versus Exela Technologies, a Delaware court considered whether to reverse pierce the corporate veil, and hold a corporation liable for shareholders conduct.

Source HOV Holdings merged into Exela Technologies.

Manichaean Capital, a former Source Holdings shareholder, dissented from the merger, and was ultimately awarded a sizable appraisal award for its shares.

To facilitate the payment of this award, the Delaware Court of Chancery entered a charging order against Source Holdings interests in its subsidiaries.

The order required any funds flowing through Source Holdings or its subsidiaries to first be paid to Manichaean before flowing up to Exela.

After the appraisal award remained unsatisfied, Manichaean filed suit against Exela to collect the remainder. Manichean asserted that in addition to lacking corporate separateness, Exela and its subsidiaries were carrying out a scheme to prevent post merger Source Holdings from paying the appraisal award.

Manichaean asked the court to pierce Source Holdings corporate veil upwards to reach Exela and downwards to reach the subsidiaries, so that Manichaean could enforce the charging order against those entities.

Exela moved to dismiss Manichaean's claims. The Delaware Court of Chancery considered the motion.

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