§ 1111 Close Corporation Merger Approval

This law says that when a close corporation merges into a company that is not a close corporation, the merger must be approved by a 2/3 vote of each share class, unless the company's articles set a lower minimum (but it can't be lower than a majority).

Key Takeaways

•A 2/3 vote of each share class is required for the merger, unless the articles specify a lower minimum.
•The lower minimum cannot be less than a majority (1/2) of the outstanding shares of that class.
•The vote requirement applies separately to every class of shares the disappearing corporation has.

Example

A close corporation that is merging into a regular corporation has two classes of shares: 10,000 common shares and 5,000 preferred shares.

The company must get at least 2/3 of the common shares (about 6,667 votes) and at least 2/3 of the preferred shares (about 3,333 votes) to approve the merger, unless its articles allow a lower threshold but not below 1/2 of each class.

How to Calculate

Required votes per class = (2/3) × outstanding shares of that class; minimum allowed = majority (≥ 1/2) if articles lower the threshold.

Count the total outstanding shares for each class of the disappearing corporation.
Multiply that number by 2/3 to find the minimum votes needed for approval.
Check the corporation's articles; if they set a lower requirement, it must still be at least 1/2 of the outstanding shares of that class.

A disappearing close corporation has 12,000 shares in one class.

Result: Required votes = 12000 × 2/3 = 8000 shares

Key Takeaways

•A 2/3 vote of each share class is required for the merger, unless the articles specify a lower minimum.
•The lower minimum cannot be less than a majority (1/2) of the outstanding shares of that class.
•The vote requirement applies separately to every class of shares the disappearing corporation has.

Example

A close corporation that is merging into a regular corporation has two classes of shares: 10,000 common shares and 5,000 preferred shares.

How to Calculate

Required votes per class = (2/3) × outstanding shares of that class; minimum allowed = majority (≥ 1/2) if articles lower the threshold.

Count the total outstanding shares for each class of the disappearing corporation.
Multiply that number by 2/3 to find the minimum votes needed for approval.
Check the corporation's articles; if they set a lower requirement, it must still be at least 1/2 of the outstanding shares of that class.

A disappearing close corporation has 12,000 shares in one class.

Result: Required votes = 12000 × 2/3 = 8000 shares

Key Takeaways

Example

How to Calculate

Key Terms

References

§ 1111 Close Corporation Merger Approval

Key Takeaways

Example

How to Calculate

Key Terms

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References