Final Flashcards
(75 cards)
Letter of Intent
- Clarifies deal terms (decided v. open)
- sets up due diligence
**Terms, even if originally enforceable, become unenforceable if LOI expires
LOI Binding Provisions
- No shop
- Confidentiality
- Governing Law
- Public announcements
LOI Non-Binding Provisions
- Deal terms
- Reps & Warranties
- Terminations Fees
DE §144
Shareholder ratification/cleansing vote
- Burden of proving entire fairness shifted to π if transaction is approved by a majority of the minority s/hs
- Not a “get out of jail free” card
DE §251 Statutory Mergers
- By operation of law, shares of T become shares of B (according to ratio established by merger K)
- ALL assets & liabilities follow
DE §251 Merger Approvals
- Both bds
- T s/h’s
- B s/h’s UNLESS:
- –B’s shares unaffected,
- –B’s certificate of incorporation is not changed; AND
- –B is NOT using more than 20% of shares outstanding immediately prior to deal
DE §253 Short-Term Mergers
When parent owns 90%+ of subsidiary’s stock, ONLY approval needed is P bd
-Absent illegality or fraud, appraisal is the EXCLUSIVE remedy available to minority s/h who objects
DE Triangular Mergers
Forward = NewCo survives Reverse= T survives (use if anything non-transferable)
APPROVALS: both bds, s/h of dissolved corp, s/h of surviving corp (unless §251(f))
DE §262 Appraisal Rights
- Only applies in §251 mergers
- Dissenting s/h has right to be cashed out based on FMV of entire entity
- EXCEPTIONS
(1) Market out - s/h in publicly traded company
(2) surviving s/h not entitled to vote under §251(f) - EXCEPTION TO EXCEPTION
- –rights are revived where s/h is forced to accept consideration other than stock
DE §271 Asset Acquisition
- T sells all or substantially all assets to B
- Negotiations determine which liabilities go with them
- Remaining car’s must be allowed for before consideration can be distributed to s/hs
-APPROVALS: both bds, T s/h, NOT B s/h
“Substantially All”
(1) Vital to operation of corp
(2) Over 50%
(3) Out of the ordinary transaction
(4) Substantially effects existence and purpose of corp
(5) Asset strikes at the heart of corp’s existence
DE Stock Acquisitions
From T - need both bd approvals
From T s/h - only need approval of B’s bd
CA §183 De Facto Mergers
Regardless of form, substance of deal if merger if:
(1) transfer of all shares & assets
(2) assumption of liabilities
(3) pooling of interests
(4) absorption and dissolution
(5) joinder of officers & directors
(6) T execs retained by B
(7) S/hs of absorbed corp surrender existing shares for newly issued shares
DE Independent Legal Significance Doctrine
An action taken pursuant to the auth’y of the various sections of the law constitute acts of independent legal significance and their validity is not dependent on other sections of the act
CA §1200 Board Approvals
Merger: both
Asset: both
Exchange: B
CA §1201 S/h Approvals
If co’s bd approval is req’d, it’s s/hs must also approve UNLESS:
(1) shares remain unchanged
OR
(2) corp will own, immediately after the reorganization, equity securities of the surviving corp that equate to more than 5/6 of the voting power
CA §1300 Appraisal Rights
If s/hs were entitled to vote, each can demand FMV of dissenting shares in cash
- Market out exception: publicly traded shares
- Exception to exception: 5%+ of outstanding shares of the class demand appraisal
CA §2115 Quasi-CA Corps
Foreign corp’s articles of incorporation are deemed amended to comply w/ CA law IF:
(1) 50%+ of voting securities are held of record by people with CA addresses; AND
(2) 50%+ of business is in CA (measured by assets, payroll, and sales)
DE cts refuse to apply
Internal Affairs Doctrine
Only state of incorporation should have auth’y to regulate matters than pertain to the relationships among and between a corp & its officers, directors, and s/hs
Majorities
Simple= majority of voted shares
Absolute = majority of shares entitled to vote
Super = established in articles; makes minority vote necessary to approve specified issues
NYSE §312
S/h approval is req’d ANY time you issue more than 20% of shares
Weinberger Entire Fairness
FAIR DEALING = PROCESS
–time constraints, arm’s length negotiations, uninformed votes, concealing superior knowledge
FAIR PRICE = RESULT
–must consider ALL relevant factors EXCEPT “speculative elements of value that may have arisen from the accomplishment or expectations of the merger”
Independent Negotiating Committee
Shifts entire fairness burden to π
Must have real bargaining power that it can exercise on an arm’s length basis
Change in Control Provisions
- Change in ownership in excess of X%
- Change in X% of bd w/in X time
