Written Consent to Take Action in Lieu of Meeting of Shareholders
(Asset Sale) (Seller) (CA Corporation)

Summary

This template is a Written Consent to Take Action in Lieu of Meeting of Shareholders (Asset Sale) (Seller) (CA) designed for use in the sale of all or substantially all of the assets of a target company to a purchaser. This template includes practical guidance and drafting notes. The California General Corporation Law permits written consent in lieu of a meeting by the holders of outstanding shares having at least not less than the minimum number of votes necessary to authorize or take that action at a meeting at which all shares entitled to vote thereon were present and voted. Cal. Corp. Code § 603. Section 1001 of the California General Corporation Law provides that a sale of all or substantially all of the assets of a target company must be approved by the board and a majority of the outstanding shares entitled to vote; this approval requirement includes the majority vote of the outstanding shares of each class entitled to vote as a class or series. The articles may provide for a greater proportion of the outstanding shares to approve the transaction. Cal. Corp. Code § 1001. Note that minority shareholders are protected under California General Corporation Law if a controlling shareholder of the target also controls the buyer entity. If the buyer is under the control of, or under common control with, the target, and the consideration for the target's assets is not nonredeemable common shares or nonredeemable equity securities of the buyer, then (with limited exceptions) the principal terms of the sale must be approved by at least 90% of the voting power of the target corporation. Cal. Corp. Code § 1001(d) and (e). This template requires the shareholders providing consent to waive any statutory dissenters' rights. In California, a transaction that qualifies as a "reorganization" requires the approval of the outstanding shares of each class of each corporation involved. Cal. Corp. Code. § 1201(a). Section 181(c) of the California Corporations Code includes in the definition of a "reorganization" a sale-of-assets reorganization, which involves one organization exchanging all or substantially all of its assets for the equity securities or debt securities (which are not adequately secured and which have a maturity date longer than five years) of another organization. Cal. Corp. Code § 181(c). Under California's dissenters' rights statute, if the approval of the outstanding shares of a corporation is required for a reorganization under Section 1201, then the shareholders of the target in a reorganization are eligible for dissenters' rights. Cal. Corp. Code § 1300. For additional information on stockholder approvals and asset sales, see Stockholder Approval and Appraisal Rights in M&A Deals and Asset Sales: Defining "All or Substantially All". For a full listing of content related to the signing and closing of an M&A transaction, see Signing and Closing the M&A Transaction Resource Kit.