Amendments to California Corporations Code (“CCC”) §603(b) were signed into law on August 16, 2013 and will become effective January 1, 2014. CCC §603(b) relates to written consents of shareholders in certain reorganization transactions. CCC §603(b) currently requires that a corporation approving a reorganization by shareholder written consent either (1) solicit the written consent of all shareholders, or (2) wait 10 days after giving notice to all shareholders that approval by shareholder written consent has been obtained before closing the transaction.
The Corporations Committee concluded that this 10-day requirement: (1) unnecessarily delays the closing of a transaction that has been approved by a corporation’s board of directors and shareholders; and (2) subjects the transaction to confidentiality and consummation risks (e.g., facts or circumstances may develop that may cause financing for the relevant transaction to fall through or otherwise may change the landscape of the transaction and affect the ability or obligation of a party to close, etc.). In order to avoid the 10-day waiting period, parties will often solicit the consent of all shareholders in spite of the increased costs, delays and risks. The Corporation Committee determined that this solicitation requirement provides no clear benefit to shareholders. The change eliminates the 10-day notice period before reorganizations with Dissenters’ Rights may be consummated. The change only applies to reorganizations in which dissenters’ rights are available to shareholders.