Delaware Court Ruled Buyer Must Disclose Earnout Data
Acquirers cannot withhold project details while demanding that sellers prove eligibility for earnout payments.
Updated on Sept. 30, 2026 in Corporate Finance
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The Delaware Court of Chancery ruled that a buyer of a technology consulting firm must provide sellers with the necessary information to track and classify projects tied to an earnout. The decision requires transparency in performance reporting to ensure sellers can participate in the earnout process as contractually agreed.
Why it matters
The ruling prevents buyers from using information asymmetry to block earnout payouts by withholding the data needed for sellers to satisfy contract conditions. It highlights the judicial enforcement of good faith when deal structures require mutual participation in project classification.
The Delaware Court of Chancery issued a ruling in C.A. No. 2026-0138-LWW to resolve an information dispute between a buyer and a seller representative. The judgment mandates periodic disclosures to satisfy contractual obligations, rejecting the buyer's attempt to impose unwritten limits.
The players
The Delaware Court of Chancery
A specialized Delaware court that decides corporate law matters, often setting national precedents for business agreements and fiduciary duties.
The North Highland Co. LLC
A buyer firm that acquired a technology consultancy and became subject to this ruling regarding its earnout disclosure practices.
The Bridge
The technology consulting firm acquired by The North Highland Co. LLC whose sellers were party to the earnout dispute.
The details
The court applied the implied covenant of good faith and fair dealing to invalidate the buyer's practice of withholding pricing data while simultaneously demanding seller notification. While the court granted the seller representative rights to periodic reports, it stopped short of allowing unrestricted real-time access to the buyer's internal systems. Furthermore, the ruling barred the buyer from excluding projects based on client identity or work location, ensuring those variables cannot be used as pretexts to deny earnout credit.
Timeline
September 18, 2026: The Delaware Court of Chancery issued its decision.
Market Landscape
This decision aligns with the consistent application of the implied covenant of good faith and fair dealing in Delaware contract law. It reinforces the judicial standard that buyers cannot weaponize contract ambiguity to strip sellers of negotiated compensation.
Operators overseeing earnout provisions should ensure that disclosure requirements are explicitly defined to prevent reliance on post-closing cooperation. If your existing agreements lack clear reporting schedules, consult with counsel to evaluate if your current data access triggers the implied covenant standard.
The takeaway
This ruling establishes that courts will intervene to ensure sellers can verify earnout performance when a buyer controls the relevant data. Review your current acquisition agreements to confirm that notification and reporting windows are not contingent on informal or unwritten cooperation.
Further reading
For more on managing M&A terms, see our guide to Corporate Finance.
Source note: This article includes information reported by HLS Program on Corporate Governance.
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