Merger without meeting of stockholders: Overview, definition, and example
What is a merger without a meeting of stockholders?
A merger without a meeting of stockholders refers to a situation in which two companies agree to merge, but the shareholders of either company do not need to physically meet to vote on the merger. Instead, the merger is approved based on written consent or other means, such as electronic voting or proxy voting, without the need for a formal shareholder meeting. This type of merger is often used in certain situations to simplify the process and speed up the merger, especially when there is overwhelming support for the transaction from shareholders.
The legal basis for conducting a merger without a meeting typically depends on the company’s bylaws, the jurisdiction's corporate laws, and the level of shareholder approval required. In some cases, a merger can be completed if the majority (or sometimes the unanimous) consent of shareholders is obtained in writing or through other electronic means.
Why is a merger without meeting of stockholders important?
A merger without a meeting of stockholders is important because it streamlines the process of merging two companies, reducing the time and resources required to organize a formal shareholder meeting. This method can expedite mergers and make them more efficient, particularly in situations where shareholder approval is not contested or where shareholders are generally in agreement on the merger.
For companies, this approach can save on administrative costs, time, and logistical efforts. For shareholders, it allows for a quicker decision-making process, ensuring that the merger proceeds without unnecessary delays, provided that the necessary consent is obtained in the proper manner.
Understanding a merger without meeting of stockholders through an example
Imagine Company A and Company B are both publicly traded companies. After extensive negotiations, they agree to merge. In order to speed up the process, both companies decide to execute the merger without holding a formal stockholder meeting. Instead, they obtain written consent from a sufficient percentage of their stockholders (typically a majority or supermajority, depending on the company's bylaws).
The stockholders of both companies are sent a written proposal outlining the merger, and they are asked to sign the consent forms or vote electronically. Once the required level of approval is obtained, the merger is finalized without needing a physical meeting. This method expedites the transaction and avoids the need for additional administrative procedures associated with convening and conducting a shareholder meeting.
Example of a merger without meeting of stockholders clause
Here’s how a merger without meeting of stockholders clause might appear in a merger agreement:
"Notwithstanding any provision to the contrary in the Company’s Articles of Incorporation or Bylaws, the parties agree that the merger described in this Agreement may be effected without a formal meeting of the stockholders of either Company. The approval of the merger shall be obtained by written consent or other permissible means in accordance with applicable corporate law, provided that the required consent threshold is met."
Conclusion
A merger without a meeting of stockholders is a convenient and efficient method for companies to merge without the need for a formal shareholder meeting. It allows for a faster decision-making process by utilizing written or electronic consent, which can save time and resources while ensuring that the merger proceeds smoothly.
For companies considering this route, it is essential to ensure that the necessary legal requirements are met and that sufficient consent is obtained from shareholders. This approach is particularly useful when the merger has broad shareholder support and when companies are looking to expedite the process without the logistical challenges of organizing a formal meeting.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.