Merger Upheld In Light of Shareholders' Right to Consent But Not Vote on Merger
In Matulich v. Aegis Comm'ns Group, Inc., (Del. Ch., May 31, 2007), read opinion here, the Chancery Court addressed the issue of the number of shares needed to complete a merger under DGCL Sections 251 and/or 253. Also discussed is the right of preferred shareholders to vote as opposed to merely "consenting to a transaction without voting". Basic principles of Delaware corporate law were captured in the following quote:
In general, a merger between a controlling parent and a subsidiary will implicate issues of fiduciary duty, and a parent company and its directors will be liable to minority shareholders unless they can demonstrate the entire fairness of the transaction, including fair price and fair dealing.(7) Under the Supreme Court's ruling in Glassman v. Unocal Exploration Corp., however, a minority shareholder forced out by a short-form merger has no alternative but to seek an appraisal for the shares. (8).
In addition, the difference between statutory interpretation principles and contract interpretation was discussed as well as the rights of shareholders whose current contact information was not available. In a prior ruling in this case (no cite provided in the opinion), the court authorized a transaction to go forward despite the inability to contact certain shareholders who were entitled to vote on the transaction, after best efforts were made to contact them.
The court concluded that:
Aegis was entitled to create shares that could consent to a merger without possessing voting rights for purposes of § 253. There is no reason to suspect that it did not do so. (emphasis added).
UPDATE: Here is the Delaware Supreme Court's opinion affirming.
