Dissenter's Rights - Explained
What are Dissenter's Rights?
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Table of ContentsDissenters Right DefinitionA Little More on Dissenters RightsFacilitating Corporate Practice through Dissenters RightsAcademic Research
What are Dissenters Rights?
Dissenters Rights is a state corporate (or business entity) law enabling the shareholders to receive a cash payment equal to the the fair value of their shares if the company management undertakes a major transaction with which the shareholder does not agree or consent. For example, when a hen a share-to-share merger or acquisition takes place, the shareholders are entitled to demand cash payment for their share if they do not want to be a part of the merger or consolidation.
How do Dissenter's Rights Work?
Generally, a company's regular operations are run by the officers and directors. However, in the event of major transactional undertaking that will change the nature of the company - such as merger and acquisition, the shareholders have the right to express their dissent. Merger and acquisition must always be approved by the present shareholders of the company.
Facilitating Corporate Practice through Dissenters Rights
Before this legislation was passed, just one shareholder could stop a merger or acquisition by expressing his or her dissent even when the merger or acquisition was the only viable option for the company. This legislation has eased out the process by giving the dissenters right to those shareholders who are not ready to enter the merger. They can now simply accept the cash payment according to the fair market value of their shares. Now, if the majority shareholders approve the merger or acquisition, the process advances and the dissenting shareholders receive cash. These dissenting shareholders are not obliged to accept shares in the surviving or successor company. Instead, they may just be paid the fair market value of his or her share by the pre-merger or pre-consolidation corporation.
- What are the main characteristics of a Corporation
- Articles of Incorporation
- Corporate Bylaws
- Exiting the Corporation
- Dissenter's Rights
- What are the requirements to be an S Corporation?
- Appraisal Rights
- Dissenter's Rights
- Say on Pay Rights
Academic Research on Dissenter's Rights
- The exclusiveness of the Dissenting Stockholder's AppraisalRight, Vorenberg, J. (1964).Harvard Law Review, 1189-1217. In this study, questions regarding the rate at which the statutory scheme of the protection forecloses several lines of attack on the proposal were explained and answers were given as regards the decision taken.
- Amendments of Model Business Corporation Act AffectingDissenters; Rights (Sections 73, 74, 80, and 81), Conard, A. F. (1977).Bus. Law.,33, 2587. According to this paper, the amendment as regards the model of the Business Corporation Act affecting majorly the Dissenters right according to sections 73, 74, 80 and 81) were made.
- Rights of dissenting shareholders to appraisal and payment, Levy, I. J. (1929). Cornell LQ,15, 420. The major aim of this academic study is to explain the rights of the dissenting shareholders to payment and appraisal. This study however focused mainly on practical examples (regarding the rights of dissenting shareholders) which were pointed out and discussed.
- Payment of Dissenting Stockholders, Weiner, J. L. (1927). Colum. L. Rev.,27, 547. This paper explained the processes involved in disbursing of funds as well as the ways in which payments are made to dissenting stockholders. The processes involved in estimating the individual share of the fund were also step-wisely explained.
- Dissenting Shareholders: TheirRightto Dividends and the Valuation of Their Shares, Robinson, B. M. (1932). Columbia Law Review,32(1), 60-78. According to this academic research paper, the right of dissenting shareholders towards their dividends as well as the calculation and estimation of the valuation of their shares were explained. Processes involved in sharing of accumulated dividends of shareholders were discussed in this paper.
- Valuation ofDissenters' Stock under the Appraisal Remedy-Is the Delaware Block MethodRightfor Tennessee, Clardy, D. S. (1994). Tenn. L. Rev.,62, 285. According to this paper, the valuation of several dissenters stock allocated to the Appraisal Remedy is regarded as the Delaware Block Method Right for Tennessee.
- Changes in the Model Business Corporation Act AffectingDissenters' Rights, Conard, A. F. (1977). The Business Lawyer, 1855-1878. One major importance of this paper is that it explains the changes found in the model business corporation Act which affects most dissenters rights. This study focuses on how this change has caused disequilibrium in the Model business corporation act.
- Dissenters' Rights: The Effect of Tax Liabilities on the Fair Value of Stock, Edwards, C. C. (1993). DePaul Bus. LJ,6, 77. This paper explained if or not the tax consequence of the transaction which helps to increase the right to dissent will affect the number of dividends paid to the dissenting shareholders. This study, however, answered three questions pertaining to the effect of tax liabilities on the fair value of stock although, the fair value was not particularly explained in this paper. This study also explained that in view of the purpose and history of the dissenters rights statutes as well as their traditional belief of the fair value, these tax consequences should however not outrageously affect the value of the dissenters shares. Dissenters' Rights and Fundamental Chances under the New Iowa Business Corporation Act, Brown, D. J., & Waters, M. D. (1991). Drake L. Rev.,40, 733. This paper explains the Fundamental chances and the dissenters rights under the New Iowa Business Corporation Act. As it has been rightly discussed in this paper, dissenters possess a number of chances that can be maximally utilized if properly harnessed. This paper, however, explained one of the fundamental; chances of dissenters and how they can be fully maximized.
- Upsetting Mergers and Consolidations: Alternative Remedies of Dissenting Shareholders in California, Ballantine, H. W., & Sterling Jr, G. L. (1938). Cal. L. Rev.,27, 644. According to the analysis drawn from this paper, the consolidations and upsetting of mergers were properly discussed. This study also explained the alternative remedies of the dissenting shareholders taking California as a case study.
- A Reconsideration of the Stock Market Exception to the Dissenting Shareholder'sRightof Appraisal, CODE, M. Michigan Law Review,74, 1023. In this study, reconsideration, as regards the stock market in view of the exception to the dissenting shareholders right of appraisal, was discussed and solutions as regards how these problems could be managed were also made available.