## Facts

- Tails, Inc., a Virginia corporation and regional RE/MAX franchisee, had minority shareholders holding about 21% of its shares; RE/MAX-affiliated owners held a majority.
- Tails agreed to a four-step transaction to sell the business to a RE/MAX affiliate, Buena Suerte Holdings, Inc.
- The steps were: (1) domestication/reincorporation from Virginia to Delaware under Va. Code § 13.1-722.2; (2) merger into a newly formed Delaware LLC; (3) amendment of the LLC agreement; and (4) sale of the LLC interests to Buena Suerte.
- Minority shareholders received notice describing a proposal for a cash sale of the business assets.
- The minority shareholders sued in circuit court seeking (a) a declaration that the transaction gave them appraisal rights and (b) damages premised on denial of those rights.
- The circuit court sustained Tails’ demurrer without leave to amend, concluding the change of domicile did not trigger appraisal rights and the complaint failed to state sufficient facts.
- The minority shareholders appealed.

## Issues

1. Whether domestication of a Virginia corporation to Delaware under Va. Code § 13.1-722.2 triggers appraisal rights under Virginia law.
2. Whether Virginia or Delaware law governs appraisal rights for transaction steps occurring after the corporation becomes a Delaware corporation.
3. Whether the complaint stated a claim for declaratory and monetary relief premised on an asserted entitlement to appraisal rights.

## Decision

- The Supreme Court of Virginia affirmed the dismissal on demurrer.
- The court held that domestication to Delaware did not constitute a merger or share exchange under Virginia law and did not trigger Virginia appraisal rights.
- The court held that, after reincorporation, Delaware law governed shareholder appraisal rights as to the later merger and sale.
- Under Delaware law as applied to the alleged structure, the minority shareholders were not entitled to appraisal rights.
- Because the asserted causes of action depended on appraisal rights that did not exist under either body of law, the complaint failed to state a viable claim.

## Legal Principles

- A Virginia corporation’s domestication to another jurisdiction under Va. Code § 13.1-722.2 does not, by itself, create statutory appraisal rights.
- Virginia appraisal rights are statutory and are triggered only by transactions identified by the governing appraisal provisions (such as specified mergers or share exchanges), not by a shareholder’s characterization of a broader business plan.
- After a corporation changes its state of incorporation, the law of the new state governs internal-affairs questions, including shareholder rights tied to subsequent mergers and equity sales.
- On demurrer, courts accept well-pleaded facts but not legal conclusions; claims that depend on a nonexistent statutory right fail as a matter of law.

## Conclusion

The court ruled that the corporation’s move from Virginia to Delaware did not trigger Virginia appraisal rights, and that Delaware law governed and did not provide appraisal rights for the later merger-and-sale steps; accordingly, the minority shareholders’ appraisal-based declaratory and damages claims were properly dismissed on demurrer.


Fisher v. Tails, Inc., 289 Va. 69, 767 S.E.2d 710 (Va. 2015)