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Court of Chancery Upholds Short Form Merger With Odd Vote

Posted In M&A

Matulich v. Aegis Communications Group. Inc., C.A. No. 2601-CC (May 31, 2007).

Under Section 253 of the DGCL, a parent corporation that owns 90% or more of the stock entitled to vote in a subsidiary may merge the subsidiary into itself without a stockholder vote. Here, however, some of the subsidiary's stock had the right to 'consent' to major corporate events, but not to vote on those events. Illustrating the importance of adherence to proper corporate formalities, this decision holds that the right to "'consent' is not the same thing as the right to vote". Hence, the merger was valid when the parent company had 90% of the voting stock of the subsidiary, even if the minority stockholder with the right to consent to the merger did not do so. In short, be careful how you write a corporate charter because the words used really count.

On January 15, 2008, the Delaware Supreme Court affirmed the Court of Chancery's judgment.