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The Anatomy of Corporate LawA Comparative and Functional Approach$
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Reinier Kraakman, John Armour, Paul Davies, Luca Enriques, Henry Hansmann, Gerard Hertig, Klaus Hopt, Hideki Kanda, Mariana Pargendler, Wolf-Georg Ringe, and Edward Rock

Print publication date: 2017

Print ISBN-13: 9780198739630

Published to Oxford Scholarship Online: March 2017

DOI: 10.1093/acprof:oso/9780198739630.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use.date: 28 January 2022

Fundamental Changes

Fundamental Changes

Chapter:
(p.171) 7 Fundamental Changes
Source:
The Anatomy of Corporate Law
Author(s):

Edward Rock

Paul Davies

Hideki Kanda

Reinier Kraakman

Wolf-Georg Ringe

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780198739630.003.0007

This chapter discusses fundamental or structural changes affecting the relationship of participants in a firm, such as charter amendments, mergers, reincorporations, or share issuances, and how corporate law mitigates the opportunism that can accompany such changes. Jurisdictions differ in their assessment of which situations require a statutory protection mechanism, and the legal strategies to address them. Strategies include: judicial review; double-majority or supermajority requirements; majority-of-the minority requirements; and exit rights. Across all jurisdictions, the law tends to allocate the decision right to the shareholders, thus reversing the board’s power to take independent decisions. Most fundamental changes discussed involve either a management-shareholder conflict or a majority-minority shareholder problem. For charter amendments, most jurisdictions provide for an ex post decision right strategy to ratify the amendment, although there are differences across jurisdictions, taking into account shareholder structure and prevailing agency conflicts. The issuance of new shares can be seen as a course of action that may dilute minority shareholders’ stake; this is frequently addressed by preemptive rights.

Keywords:   fundamental changes, structural changes, charter amendments, mergers, reincorporations, share issuances

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