How to Get Shareholders' Approval for a Merger
In most mergers, you will need the consent of the corporation's shareholders to effectuate a merger. Usually, you can obtain shareholders' approval for a merger when you can show them that the merger will result in increased profitability for the corporation. You will need to conduct due diligence research on the other corporation, and pass all relevant information on to the shareholders so that they can make an informed decision. The majority of corporations are incorporated under Delaware state law.
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Things You'll Need
- Financial statements and internal accounting documents
- Corporate accountant
Instructions
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Conduct Due Diligence for Shareholders' Approval
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1
Request financial statements and internal accounting documents covering the past 3 to 5 years from the company with which you wish to merge.
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2
Hire a corporate accounting firm to audit the target company's records to develop a picture of the company's current worth and of its projected future profitability.
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3
Request your corporate attorneys and accountants to review the information about the other company and create a report detailing how the merger would be best structured, and how the corporation will make use of the new business once the merger is completed.
Follow All Corporate Shareholder Disclosure Laws
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4
Provide proper notice of the shareholder meeting to all current shareholders. Notice must be sent to the shareholders' most current addresses, and must include the purpose of the meeting. In the notice, state that voting on a proposed merger will occur.
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Disclose all relevant information you have gathered during the due diligence process to the shareholders during the meeting. As a director or officer of the corporation, you are under duties of care and loyalty to the corporation, and as such, you are required to disclose even negative implications of the proposed merger to the shareholders.
Get Shareholders Excited About the Venture
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Present the information about the merger in an upbeat manner to get shareholders excited about the possibility of being part of a new venture.
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Discuss the past successes of the merging company to get the shareholders to understand that such a merger could result in increased stock prices.
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Talk about the possibility of a dividend issuance when the merger is complete.
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Tips & Warnings
Laws regarding the disclosure of merger information to shareholders for their approval vary by state, so be sure to have an experienced corporate attorney explain these variances to you based on the state in which your business is incorporated.
Follow the laws and regulations regarding shareholder approval carefully. Failure to follow the appropriate procedures can result in having the merger set aside by a court, which can result in a huge loss of profits.
Depending on whether the merger is legally considered ordinary business or a fundamental change, you must obtain the approval of either a majority of the shareholders entitled to vote or of at least two-thirds of the outstanding shares in existence to continue with the merger.
