MGT2000 Chapter 38

Proxy

Written document signed by a shareholder that authorizes another person to vote their shares

Section 14 (a)

Provision of securities Exchange Act of 1934 that gives the SEC the authority to regulate solicitation of proxies

• SEC requires party seeking proxy to prepare and file Proxy Statement

Proxy Statement

Document that fully describes:

• matter for which the proxy is being solicited

• who is soliciting the proxy

• any other pertinent information

Antifraud Provision

Section 14(a) of the Securities Exchange Act which prohibits misrepresentations or omissions of a material fact in proxy materials

• anyone injured by misrepresentation may sue the wrongdoer both criminal/civil liability possible, court may also order new election

Incumbent Directors

Current directors of the corporation

Insurgent Directors

Proposed slate of directors to replace the incumbent directors

Proxy Contest

Contest in which opposing factions of shareholders and managers solicit proxies from other shareholders

• side that receives the greatest number of votes wins the proxy contest

Shareholder Resolution

a resolution that a shareholder who meets certain ownership requirements may submit to other shareholders for a vote

• most shareholder resolutions have a slim chance of being enacted

Merger

situation in which one corporation is absorbed into another corporation and ceases to exist

Surviving Corporation

Corporation that continues to exist after a merger

Merged Corporation

Corporation that is absorbed in the merger and ceases to exist after the merger

Share exchange

a situation in which one corporation acquires all the shares of another corporation

• both corporations retain their legal existence

Parent Corporation

The corporation that owns the shares of the subsidiary corporation in a share exchange

Subsidiary Corporation

The corporation that is owned by the parent corporation in a share exchange

Required Approvals for Merger or share Exchange

Required of board of directors of each corporation and affirmative vote of the majority of voting shares of each corporation

Short form merger

a merger between a parent corporation and a subsidiary corporation

• does not require the approval of the shareholders of either corporation

• does not require the approval of the BOD of the subsidiary corporation

Sale or lease of assets

a corporation may sell, lease, or otherwise dispose of all or substantially of its property

Requires

• recommendation of the BOD

• affirmative vote of the majority of the voting shares of the selling corporation

Dissenting shareholder Appraisal Rights

The rights of shareholders who object to

• a proposed merger

• share exchange

• sale/lease of all or substantially all of the property of a corporation

objecting shareholders are provided statutory right to dissent and obtain payment of the fair value of their shares

Tender Offeror

The party that makes a tender offer

Tender Offer

Offer that can acquirer makes directly to a target corporation’s shareholders

Target Corporation

The corporation that is proposed to be acquired in a tender offer sitaution

Williams Act

An amendment to the Securities Exchange Act of 1934

• made in 1968- specifically regulates tender offers

• established certain disclosure requirements and antifraud provisions

Tender Offer Rules

• Duration- offer cannot be closed before 20 business days after commencement

• if tender offeror increases number of shares/payments, offer must be extended for 10 business days

• fair price ruke

• Pro Rata Rule

Section 14(e) of the Williams Act

Prohibits fraudulent, deceptive, and manipulative practices in connection with a tender offer

Business Judgement Rule

Protects the decisions of a board of directors that

• acts on an informed basis

• in good faith

• in the honest belief that the action taken was in the best interests of the corporation and its shareholders

Stake Antitakeover Statutes

Enacted by a state legislature and protects against the hostile takeover of corporations incorporated in or doing business in the state

Exon- Florio Foreign Investment Provision

Federal law that mandates the president of the U.S to suspend, prohibit, or dismantle the acquisition of U.S businesses by foreign investors

• if there is credible evidence that the foreign investor might take action that threatens to impair the national security

Multinational Corporations

A corporation that operates in more than one country

• known as transnational corporation

• operate across borders by using branch offices

International Brach Office

Office of a multinational corporation that is located in a foreign country

International Subsidiary Corporation

Corporation that is organized under the laws of the foreign country