USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Kristina Trauger, Pierre-Emmanuel Perais, Clara Pang, Gregory Gewirtz and Vinita Sithapathy, Linklaters
The bidder may also seek information rights – eg, appointing a non-voting board observer or requiring periodic financial information and reports about the company’s operations. The bidder may also look to obtain certain rights allowing it to exit its investment – eg, requiring regis - tration rights for the bidder’s shares or a drag-along provision allowing it to compel other shareholders to join a sale of the company’s shares. 6.9 Voting by Proxy Voting by proxy is generally allowed under state law, federal regulations and rules of applicable US stock exchanges. The majority of shareholders of public corporations vote by proxy. State law and the target company’s governance docu - ments will generally set out requirements relating to: • notice of the meeting/vote; • record date for determining shareholders eligible to vote; and • quorum and votes required. SEC rules and regulations promulgated under the Exchange Act govern proxy solicitation of share - holders of publicly traded companies. These regula - tions provide additional procedural requirements and require certain information to be included in the proxy statement sent to shareholders as part of the proxy solicitation. Lastly, the exchange on which the target company’s stock is traded (eg, the New York Stock Exchange (NYSE) or the Nasdaq Stock Market (Nasdaq)) may impose additional timing and disclosure requirements. While the exchanges may require that certain nomi - nees be able to vote on behalf of the beneficial hold - ers of the stock, both the NYSE and Nasdaq prohibit such voting for non-routine matters (eg, M&A) without specific instructions from the beneficial holders. 6.10 Squeeze-Out Mechanisms In Delaware, a squeeze-out in the form of an interme - diate form merger can be effected without obtaining stockholder approval following successful completion of a tender offer for at least a majority of the outstand -
ing shares, provided the merger meets certain pro - cedural conditions pursuant to Section 251 (h) of the DGCL. Otherwise, 90% is the most typical threshold for short-form mergers and is the threshold set by New York and for squeeze-outs in Delaware, except following a tender offer as described in the foregoing sentence. In a friendly transaction, a “top-up” stock option may be granted by the target company to the acquirer pursuant to which the target company would issue up to 19.9% of its outstanding shares to help the acquirer reach the short-form squeeze-out threshold. See 2.1 Acquiring a Company . If, upon completion of the tender offer, the acquirer owns less than the minimum amount of the target company’s shares necessary to complete a short- form merger or otherwise does not meet the require - ments of DGCL Section 251 (h) as mentioned above, a long-form merger following the tender offer would be subject to shareholder approval. Since the acquirer should own the requisite number of the target com - pany’s shares, such approval should be assured; see 6.5 Minimum Acceptance Conditions . However, the acquirer would still need to comply with state law procedures relating to the calling of a shareholders’ meeting and SEC requirements relating to proxy state - ments. Regardless of whether a long-form or short- form merger is utilised, appraisal rights may apply. 6.11 Irrevocable Commitments Before announcing a transaction, the acquirer may wish to execute agreements with the target com - pany’s board of directors and senior management to ensure their support of the transaction, and that they will tender any shares they own into a tender offer or vote in favour of a proposed merger. In some cases, if the target company has one or more significant share - holders, requiring such shareholders to sell their stock to the acquirer, vote their stock in favour of the merger (and against any competing transaction) and/or to ten - der their stock into the tender or exchange offer is an effective way to “lock up” the deal. However, Delaware courts have struck down such lock-up agreements that absolutely preclude the tar - get company’s shareholders from availing themselves of a more attractive subsequent offer. Further, com - mitments by directors will be subject to the reasona -
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