Shareholder Rights and the Bargaining Structure in Control Transactions
State corporate law grants shareholders two key sets of rights in mergers and acquisitions (M&A). First, shareholders have statutory rights, such as voting on the transaction and appraisal rights for dissenting shareholders. Second, shareholders are entitled to loyal conduct by corporate fiduciaries—managers and directors—through the enforcement of their fiduciary duties. However, legal reforms in recent […]
Ryan Bubb is the Robert B. McKay Professor of Law at New York University School of Law, Emiliano Catan is the Catherine A. Rein Professor of Law at New York University School of Law, and Holger Spamann is the Lawrence R. Grove Professor at Harvard Law School. This post is based on their recent paper.
State corporate law grants shareholders two key sets of rights in mergers and acquisitions (M&A). First, shareholders have statutory rights, such as voting on the transaction and appraisal rights for dissenting shareholders. Second, shareholders are entitled to loyal conduct by corporate fiduciaries—managers and directors—through the enforcement of their fiduciary duties. However, legal reforms in recent years have reduced shareholders’ ability to sue for breaches of these duties, placing greater reliance on shareholders’ statutory rights to safeguard their interests. This raises an important question: how powerful is the first set of rights—voting and appraisal—and can it obviate the second set—fiduciary duties? More generally, how should we understand and protect shareholders’ interests in control transactions from a functional perspective?
