The nuances and changes that naturally occur throughout the reverse merger process will often require approval from the shareholders from a solicitation referred to as a proxy statement. Certain changes to the firm may require a full proxy, requiring a shareholder vote of approval so as to solidify any changes to be made. Here are some clarifying areas that may or may not require a full proxy.
Private Placements and Public Offerings–If duly authorized under a company’s charter securities offered via a private placement or public offering generally do not require a full proxy or shareholder approval.
Change in the Board –If a majority of the seats on the board changes as part of the reverse merger, then a mailing announcement to shareholders is required, but a full proxy statement is generally not.
Corporate Name Change–When a shell mergers with a private company, it will typically go through a change of name to reflect the branding of the newly combined entity. This typically requires shareholder approval unless the business is incorporated in Delaware.
Stock Splits — The number of authorized shares of stock may require a forward or reverse stock split, depending on the number of outstanding shares desired for the reverse merger. When stock splits are necessary, most state rules require shareholder approval and a full proxy.
Changes to the Corporate Charter–If a stock split is not desired, the next best option is for the firm to change the corporate charter to allow for a change in the number of shares authorized or outstanding. If this is the case, then shareholder approval and a proxy will be required.
Direct Party to the Merger--The structure of the deal could require a full proxy statement will full shareholder approval. If the public shell itself is a direct party to the merger, shareholder approval will be necessary, but that can vary depending on the laws of the state of incorporation. Unfortunately a merger proxy often takes several rounds of comments from the SEC and often requires a detailed and difficult process.