## Facts

- RegO Company, a Delaware corporation, manufactured components used in liquid petroleum and other explosive gas systems and faced recurring product-liability litigation arising from explosions.
- RegO filed a certificate of dissolution on February 3, 1989.
- RegO sought judicial approval of a post-dissolution plan under 8 Del. C. §§ 280–282 to wind up affairs and set “security” for corporate claims.
- The plan would transfer essentially all assets (about $36 million in receivables and intangibles, including insurance-related rights) into a “Claimants Trust” intended to satisfy present and future creditors.
- RegO’s known and projected liabilities—particularly long-tail product-liability exposure—substantially exceeded available trust assets.
- The proposed trust terms and payment structure would pay present claimants preferentially and risk exhausting trust assets before future claimants could recover.
- Claimants (including Emerson Electric and others) and a court-appointed guardian ad litem for future claimants objected that the plan provided inadequate protection for foreseeable future victims.
- A Master in Chancery reviewed the plan and recommended approval only with modifications; the parties filed exceptions, bringing the matter before the Chancellor.

## Issues

1. Whether the proposed plan provided “reasonable security” for all corporate claimants, including foreseeable future, unknown claimants, as required by 8 Del. C. §§ 280–281.
2. Whether a plan that materially favors present claimants over future claimants is permissible under the statutory dissolution framework.
3. Whether the adequacy of “reasonable security” is determined by director business judgment or by an independent judicial assessment.

## Decision

- The Court of Chancery declined to approve the plan as proposed.
- The court held that the plan’s preferential structure, including an excessively high interim payout limit for current claims, created an unacceptable risk of depleting the trust and leaving inadequate security for foreseeable future claimants.
- The court required a more conservative structure consistent with the statute’s purpose and the Master’s recommended approach as a condition to any approval conferring statutory protections.

## Legal Principles

- A dissolution security plan under 8 Del. C. §§ 280–282 must provide reasonable security for both present claimants and foreseeable future, unknown claimants.
- The statute’s protections for directors and stockholders (including limits on post-dissolution liability tied to compliant distributions) are conditioned on a court-approved plan that fairly addresses foreseeable future claims.
- Plans that functionally subordinate foreseeable future claimants—by permitting substantial near-term payouts that are likely to exhaust limited assets—fail the “reasonable security” requirement.
- Determining what constitutes “reasonable security” is a judicial responsibility under the statutory scheme; director judgment does not control the outcome.

## Conclusion

The Court of Chancery enforced the statutory requirement that dissolved corporations meaningfully protect foreseeable future claimants and refused to approve a trust structure that prioritized present claims in a way likely to drain limited assets, emphasizing the court’s independent role in assessing the adequacy of dissolution security.


In re RegO Co., 623 A.2d 92 (Del. Ch. 1992)