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Laiskai Ir Žodžiai
Laiskai Ir Žodžiai
following advice.
Firstly, to summarise the facts of the case, a group of shareholders of Longfellow Inc. has filed an action in the district court seeking
to set aside the election of the board of directors on the grounds that the shareholders'meeting atwhich they were elected was
held less than a year after the last such meeting.
The bylaws of the company state that the annual shareholders' meeting for the election of directors be held at such time each year
as the board of directors determines, but not later than the fourth Wednesday in July. In 2009, the meeting was held on July 17th.
At the discretion of the board, in 2O1O the meeting was held on March 'l9th. The issue in this case is whether the bylaws provide
that no election of directors for the ensuing year can be held unless a full year has passed since the previous annual election
meeting.
The law in this jurisdiction requires an 'annual'election of the directors for the ensuing'year'. However, we have not found any
cases or interpretation of this law which determine the issue of whether the law precludes the holding of an election until a full
year has passed. The statutes give wide leeway to the board of directors in conducting the affairs of the company. I believe that it is
unlikely that a court will create such a restriction where the legislature has not specifically done so.
However, this matter is complicated somewhat by the fact that there is currently a proxy fight underway in the company. The
shareholders who filed suit are also alleging that the early meeting was part of a strategy on the part of the directors to obstructhe
anticipated proxy contest and to keep these shareholders from gaining representation on the board of directors. lt is possible that
the court will take this into consideration and hold that the purpose in calling an early meeting was to improperly keep themselves
in office. The court might then hold that, despite the fact that no statute or bylaw was violated, the election is invalid on a general
legaltheory that the directors have an obligation to act in good faith. Nevertheless, courts are usually reluctant to second-guess the
actions of boards of directors or to play the role of an appellate body for shareholders unhappy with the business decisions of the
board. Only where there is a clear and serious breach of the directors'duty to act in good faith will a court step in and overturn the
decision. The facts in this case simply do not justify such court action and I therefore conclude that it is unlikelv that the
shareholders will prevail.
You have requested advice regarding your rights as stockholder in Alca Corporation (the "Target Corporation") which entered into a stock-for-assets
agreement with Losal Corporation (the "Purchasing Corporation").
The advice and statements set forth below are based on the facts you presented to me in our telephone conference of January 27. This advice
should be viewed in light thereof and remains subject to future discovery and research.
The facts are as follows: you are a stockholder in the Target Corporation. On or about October 1 last year, the Target Corporation and the
Purchasing Corporation entered into a Reorganization Agreement by which the Target Corporation agreed to sell all its assets to the Purchasing
Corporation in consideration for 350,000 shares of the Purchasing Corporation's stock. The Target Corporation called a stockholders'meeting to
approve the Reorganization Agreement and the voluntary dissolution of the Target Corporation upon distribution of the shares to the Target
Corporation's stockholders. As I understand it, the stockholders' meeting approved the plan, 70"k oI all stockholders voting. You did not vote at the
meeting. Your query to me is whether it is possible to set aside the transaction based on your rights as a stockholder.
Generally, astockholder's rights in a merger situation are twofold. First, the stockholder has the right to approve or disapprove the agreement.
Second, the stockholder holds an appraisal right, which means that he is entitled to have an independent appraiser determine what his shares are
worth. The aforesaid provides the stockholder with assurance that the Purchasing Corporation is not getting a discount on the shares. As I
understand it, you were not afforded any appraisal rights.
The difficulty in the rnsfant case is that the transaction is not a "true" merger but rather a sale of assets in exchange for shares. In the latter case,
strictly speaking, the statutes do not provide the shareholder appraisal rights. However, it might be argued that, due to the fact that the transaction
at issue achieved the same results as a merger, the court should look at the substance of the transaction rather than its form in order to protect
your rights as a shareholder. /n essence, the argument is that a "de facto" merger has taken place and that you should be entitled to the same
rights as if a "true" merger had taken place. lf the court finds in your favor, the transaction could then be set aside as being in violation of the
applicable statutes.
Although Iconsider the argument above to be persuasive, I doubt whether the courts of this jurisdiction will accept it. The doctrine of de facto
merger is widely accepted in many other jurisdictions for the reasons I have set forth above. However, in this jurisdiction, the courts have been
hesitantlo take a position. In addition, in one particular case, Heil v. Star Chemical, the court, although not addressing exactly the same situation as
in this case, referred to the fact that the provisions governing merger and the sale of all the assets in a corporation are separate and should be
treated as such. fhe mere fact that they overlap does not change the legislative intent.
In summary, you have an argument, but in my opinion your chances are slim. lt will most likely take an appeal to win, as I suspecthe trial court will
not stray from the reasoning established in the Heil case. Hence, as your attorney, Iwould suggest that you take a look at your options from a
financial perspective and make a determination as to whether it is worth it.
As always, Iremain at your disposal should you wish to discuss your options. I look forward to hearing from you and answering any further questions
you may have.
Draft write
Efficacious
Execute sign
Franchise permission
Impair
Injunction - obligation
Prior to something
Supersede replace
Template
To execute a contract
To override a law
Arbitration
Conciliation
Conventional traditional
Employment code
Immune to/from
Pervade be present
Recruitment
Re-engagement re-employment
Substance abuse
Termination
To tackle
Trade union
Unfair dismissal
Breach paeidimas