Approval of Shareholders
Whether or not shareholders are required to approve a particular transaction varies depending on the jurisdiction in which the company is formed. Generally, shareholders holding a majority of the company's outstanding stock must approve any stock purchase, asset sale or merger. In a merger, necessity of shareholder approval becomes more complex if the target company is a public company. In a stock sale, although unanimous shareholder approval is not required by law, the acquirer will often require that all shareholders approve the deal so that no minority shareholders remain after the transaction. In some instances, the shareholders of a target company may have entered into a Shareholders' Agreement that requires a greater percentage of the shareholders to approve a transaction than would otherwise be required by applicable law. Therefore, it's important for an acquirer to have its attorneys conduct a thorough review of the target's corporate documents.