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The regulations of the new Companies Act of 2008 simplify merger and acquisition transactions and put more tools at companies' disposal.
At the same time, however, the Act also gives minority shareholders greater leverage in the business. For example, the appraisal rights remedy enables shareholders to challenge the terms of a merger that might affect their shares, and to request that the company buy back their shares at full value.
It also gives them more say in whether the business owner can buy or sell the business assets. Historically, minorities could block the passing of a special resolution with 25% of the vote at a meeting. Now, they can force a court review with as little as 15%.
How this affects you
Even if a resolution is duly passed, shareholders can still require your company to buy back their shares, provided that they attended the meeting and lodged their intention to exercise their appraisal rights beforehand.
While this new regulation helps to prevent minority shareholders in private companies from being steamrollered into accepting a price that suits the majority, it can also drag out the negotiation process and increase your legal costs considerably.
Furthermore, any company contemplating a merger or acquisition, even large companies, will now have to set aside a significant amount of money to potentially pay out such shareholders.
This article is a general summary and should not be construed as legal advice or as an exhaustive overview.