Force-the-Vote Clauses

Summary

This clause is a type of lock-up provision that requires the board of directors to submit a merger proposal to a stockholder vote even if the board no longer recommends the merger transaction. This clause includes practical guidance, drafting notes, and alternate clauses. Delaware and many other states permit corporations to agree to force-the-vote provisions. See e.g., 8 Del. C. § 146. An acquirer's right to force-the-vote of target stockholders may be coupled with a voting agreement as a deal protection package. A force-the-vote provision generally means that the merger transaction must be submitted to the stockholders for approval even after the board changes its recommendation because of an alternative proposal or intervening event. For further discussion about fiduciary duties and the enforceability of force-the-vote provisions under Delaware law, see Voting Agreements in M&A Deals — Delaware-Specific Issues for Public M&A Transactions. From an acquirer's perspective, a force-the-vote provision can enhance closing certainty in a merger transaction. From a target company's perspective, a force-the-vote provision can impede alternative transaction discussions from proceeding or deter third-party bids altogether. Although less common, a target may also negotiate for a force-the-vote right enabling it to cause the acquirer to submit the merger transaction to the acquirer stockholders for approval. Click here to see recent examples of force-the-vote provisions in Market Standards, the searchable database of publicly filed M&A deals from Practical Guidance that enables users to search, compare, and analyze its comprehensive database of transactions using over 150 detailed deal points to filter search results. You can customize this search to your needs by adding filters or modifying the search criteria.