A BEECHMONT CREST ONLINE GUIDE
MERGERS & ACQUISITIONS
Minority Shareholders and Freezeouts
Suppose that 51% of a company’s shareholders approve a merger deal. What about the remaining shareholders in the minority?
When a majority of shareholders approves a merger deal, the minority shareholders are required to tender their shares. (Whether or not they voted for the merger is irrelevant.) This is referred to as a freezeout, as these shareholders are “frozen out” of their shares or positions.
What are shareholder appraisal rights?
If a shareholder believes that the merger agreement requires her to sell her shares for substantially less than they are worth, she can demand a cash settlement to make up the difference.
In practice, however, it is very difficult for a dissenting shareholder to win a cash settlement based on shareholder appraisal rights.