Shareholder Approval
Shareholder approval refers to the process in which shareholders vote and approve major matters of the company. According to the provisions of the Company Law and the Articles of Association, certain major matters such as mergers, splits, and issuance of new shares need to be approved by shareholders. Shareholder approval is usually conducted through a shareholders' meeting, where shareholders can vote according to their own wishes and express their support or opposition to the matter. Shareholder approval has a significant influence on the company's decision-making and strategy, and is one of the important mechanisms for protecting shareholder rights and maintaining corporate governance.
Definition: Shareholder approval refers to the process by which shareholders vote on and approve major corporate matters. According to corporate law and the company's articles of association, certain significant issues such as mergers, splits, and new stock issuance require shareholder approval. This approval is typically conducted through a shareholders' meeting, where shareholders can vote and express their support or opposition to the matter. Shareholder approval has a significant impact on the company's decisions and strategies, serving as a crucial mechanism for protecting shareholder rights and maintaining corporate governance.
Origin: The concept of shareholder approval originated from the basic principles of corporate governance, aiming to ensure shareholders' participation and right to information in major corporate decisions. As early as the 19th century, with the rise of joint-stock companies, the mechanism of shareholder approval gradually formed and improved to protect shareholders' interests from being compromised by unilateral decisions of the management.
Categories and Characteristics: Shareholder approval can be divided into ordinary resolutions and special resolutions. Ordinary resolutions typically involve routine business matters, such as the election of directors and approval of annual financial reports, usually requiring a simple majority vote. Special resolutions involve significant matters, such as mergers, splits, or amendments to the articles of association, usually requiring a higher proportion of shareholder agreement, such as a two-thirds or three-quarters majority vote. Ordinary resolutions have a lower threshold for approval, suitable for routine management decisions; special resolutions have a higher threshold, ensuring broader shareholder support for major decisions.
Specific Cases: 1. In 2016, Tesla proposed a $2.6 billion acquisition of SolarCity. This proposal required shareholder approval and ultimately received 85% shareholder support at the shareholders' meeting, successfully completing the acquisition. 2. In 2019, Disney proposed a $71.3 billion acquisition of 21st Century Fox's entertainment assets. This proposal also required shareholder approval and received overwhelming shareholder support at the shareholders' meeting, completing the massive transaction.
Common Questions: 1. How is voting power allocated in shareholder approval? Typically, voting power is allocated based on the number of shares held by shareholders, with each share corresponding to one vote. 2. Can resolutions passed at a shareholders' meeting be overturned? In specific circumstances, if the resolution process is found to be illegal or unjust, shareholders can challenge and overturn the resolution through legal means.
