When Will You Need a Full Proxy Statement

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.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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