Corporations Question

(Study Tips, Dealing With Stress, Maintaining a Social Life, Financial Aid, Internships, Bar Exam, Careers in Law . . . )
User avatar
98234872348
Posts: 1547
Joined: Mon Dec 22, 2008 3:25 pm

Corporations Question

Postby 98234872348 » Sun Dec 05, 2010 4:29 pm

I am sure this question is more academic than practical, but I'm going to ask it anyways because I am curious. So as I understand it, shareholders under Delaware law and the MBCA have the power to "adopt, amend and repeal bylaws." In the same vein, that power can be delegated to the board of directors. Under a merger agreement, the shareholders of the acquiring corp do not have the right to vote on the merger if it does not: alter the charter, shares are identical before and after the merger, and their shares aren't diluted more than 20% (Del. 251(f)). So, my question is, in a merger action that does not change any of those rights, but does amend the bylaws of the corporation, do the shareholders of the acquiring corp have the right to vote on the transaction.

My guess is no, but, I am open to suggestions as to why they would.

User avatar
crEEp
Posts: 116
Joined: Mon Dec 06, 2010 12:15 am

Re: Corporations Question

Postby crEEp » Mon Dec 06, 2010 12:46 am

It depends on the specifics of the fact pattern; you can't generalize corporations law to the abstract. It's just that fucked up and directors will still do whatever they want anyway. The courts, at least in my opinion, have tried to keep their hands off of daily business in corporate life, up until the point where there's a violation of the business judgment rule/duty of care.

Anyway, to answer your question correctly and within the context of th MBCA, check out §§ 10.20-10.22. § 10.20(b) says that the board may amend/repeal the corporation's bylaws unless the articles of incorporation forbid them from doing so, or the shareholders expressly reserved that power for themselves, only. So, in your question, they don't have an explicit "right" to vote on the transaction; instead, it's more of a de facto right- they can just repeal the offending bylaw if they don't like it. Remember, the board of directors manages the business and its affairs- they have a fiduciary duty to the shareholders, by dint of which they adhere to best business practices.

Just to clear up something else, it's not that the shareholders of the acquiring corporation don't have the "right" to vote on the merger. It's just that the board of directors doesn't have to seek the shareholders' approval when (1) the articles of the surviving corporation remain unchanged; (2) the acquiring corporations' shareholders retain the same number of voting shares as before; and (3) the merger does not dilute voting/participation rights of the acquiring corporation's shareholders by more than 20%.

Renzo
Posts: 4265
Joined: Tue Dec 02, 2008 3:23 am

Re: Corporations Question

Postby Renzo » Mon Dec 06, 2010 12:51 pm

mistergoft wrote:I am sure this question is more academic than practical, but I'm going to ask it anyways because I am curious. So as I understand it, shareholders under Delaware law and the MBCA have the power to "adopt, amend and repeal bylaws." In the same vein, that power can be delegated to the board of directors. Under a merger agreement, the shareholders of the acquiring corp do not have the right to vote on the merger if it does not: alter the charter, shares are identical before and after the merger, and their shares aren't diluted more than 20% (Del. 251(f)). So, my question is, in a merger action that does not change any of those rights, but does amend the bylaws of the corporation, do the shareholders of the acquiring corp have the right to vote on the transaction.

My guess is no, but, I am open to suggestions as to why they would.



I don't think this question can be answered in the abstract, there are too many circumstantial variables that could change the answer.




Return to “Forum for Law School Students”

Who is online

Users browsing this forum: baileymjd, hairbear7 and 10 guests