Delaware Court Of Chancery – M&A Transactions
The Delaware Chancery Court’s recent decisions in Crispo v. Musk, West Palm Beach Firefighters v. Moelis & Company, Chordia v. Lee, and Sjunde AP-fonden v. Activision Blizzard, Inc. have caused some angst for merger and acquisition (M&A) practitioners. This blog will summarize those opinions and the statutory changes proposed by the Delaware Bar in response.
Crispo v. Musk
In Crispo v. Musk, the court decided on the ambiguous issue of when a target may assert a claim for premium damages in the event of a default by a buyer in an acquisition agreement. In essence, when a public company is the target in an acquisition, the board of directors act as agents for the shareholders, who will ultimately receive the merger consideration. Moreover, that merger consideration is almost always at a premium to pre-merger market price. Unfortunately, this creates a contractual legal issue, whereby if the buyer breaches the agreement, the only damage claim by the target
Mergers And Acquisitions; Appraisal Rights
Unless they are a party to the transaction itself, such as in the case of a share-for-share exchange agreement, shareholders of a company in a merger transaction generally have what is referred to as “dissenters” or “appraisal rights.” An appraisal right is the statutory right by shareholders that dissent to a particular transaction, to receive the fair value of their stock ownership. Generally such fair value may be determined in a judicial or court proceeding or by an independent valuation. Appraisal rights and valuations are the subject of extensive litigation in merger and acquisition transactions. As with all corporate law matters, the Delaware legislature and courts lead the way in setting standards and precedence.
Delaware Statutory Appraisal Rights
Although the details and appraisal rights process vary from state to state (often meaningfully), as with other state corporate law matters, Delaware is the leading statutory example and the Delaware Chancery Court is the leader in judicial precedence in this area of
Completing A Name Change Without Shareholder Approval
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Generally a name change is completed through an amendment to a company’s articles of incorporation. Moreover, amendments to articles of incorporation generally require shareholder consent, which can be time-consuming and expensive and become even more so if the company is subject to the reporting requirements of the Securities Exchange Act of 1934.
All companies with securities registered under the Securities Exchange Act of 1934, as amended, (i.e., through the filing of a Form 10 or Form 8-A) are subject to the Exchange Act proxy requirements found in Section 14 and the rules promulgated thereunder. The proxy rules govern the disclosure in materials used to solicit shareholders’ votes in annual or special meetings held for the approval of any corporate action requiring shareholder approval. The information contained in proxy materials must be filed with the SEC in advance of any solicitation to ensure compliance with the disclosure
