Cash Left Behind by the Seller in the Target Belongs to the Target | Weil, Gotshal & Manges LLP

A recent Delaware Court of Chancery decision,
Deluxe Entertainment Services Inc. v. DLX Acquisition Corporation, 2021 WL 1169905 (Del Ch. Mar. 29, 2021), provides a stark reminder of the need to carefully provide, in your stock purchase agreement, mechanics for the transfer by the target to the selling shareholders of any assets that remain in the target at closing that were intended to be excluded from the sale of the target and retained by the selling stockholders. In
Deluxe Entertainment, the buyer was entitled to keep all cash held in target bank accounts after closing, even though cash had been excluded from the net working capital adjustment (i.e., the seller received no credit for the amount of cash left in the target’s bank accounts), and the seller could have swept the cash from the target immediately prior to closing, but failed to do so.

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