Question

1. Merger The board of directors of Plant Indus-tries, Inc. ( Plant), under the guidance of Robert B. Bregman, the chief executive officer of the corporation, embarked on a course of action that resulted in the sale of several unprofitable subsidiaries. Bregman then engaged in a course of action to sell Plant National ( Quebec) Ltd., a subsidiary that constituted Plant’s entire Canadian operations. This was a profitable subsidiary that comprised more than 50 percent of Plant’s assets, sales, and profits. Do Plant’s shareholders have to be ac-corded voting and appraisal rights regarding the sale of this subsidiary? Katz v. Bregman, 431 A. 2d 1274, Web 1981 Del. Ch. Lexis 449 ( Court of Chancery of Delaware)

bus law question

Answer 1

Answer:

Yes, Plant’s shareholders do have to be accorded voting and appraisal rights regarding the sale of this subsidiary. This is as per the rights of the shareholders for the company. Since the shareholders of the company are the owners of the company, they have the rights to do voting for the sale and appraisal of the company. So based on the voting result in favor of the sale, then only Company can be planned for sale by the board of directors and the chief executive officer.

The shareholders have the rights for the company to do voting for appointing any directors, outing any director, purchasing any major asset, and approving the sale of the company or its subsidiary.

So in order to precede for the sale of the Company’s major subsidiary which is profit generating unit for the whole Canada, this will undergo the voting for approving the sale by the shareholders, as being the owners of the company. Once it is approved by shareholder voting, then only the board of director and CEO can proceed for the Company’s sale.