asset acquisitions - Jackson Walker LLP

Appendix BEXCERPTS FROM BYRON F. EGAN AND CURTIS W. HUFF,CHOICE OF STATE OF INCORPORATION --TEXAS VERSUS DELAWARE:IS IT NOW TIME TO RETHINK TRADITIONAL NOTIONS?”,54 SMU LAW REVIEW 249, 287-290 (WINTER 2001)7. Sales of Substantially All Assetsa. Shareholder ApprovalTexas and Delaware law differ substantially with respect to the approval that is necessary toauthorize a sale of all or substantially all of the assets of a corporation. In Texas, shareholderapproval is not required for any sale, lease, exchange, or other disposition of all or substantially allof the property and assets of a corporation if made in the usual and regular course of the business ofa corporation. 229 A transaction will be considered to be made in the usual and regular course ofbusiness of a corporation if the corporation either continues to engage in one or more businessesfollowing the transaction or applies a portion of the consideration received in the transaction to theconduct of a business following the transaction. 230 If either of these two conditions ARE met, it isirrelevant whether or not the sale involves all or substantially all of a corporation’s assets. 231 Acorporation could thus consummate an asset disposition without obtaining the shareholder approvalotherwise required by TBCA art. 5.10 because the transaction is by definition within the “usual andregular course of business” and therefore covered by TBCA art. 5.09. 232 In effect no disposition ofassets by a corporation will require shareholder approval unless the corporation liquidates and ceasesto do business after the disposition. 233Where shareholder approval is required under the TBCA for a sale of all or substantially allof the assets of a corporation, the required approval will be the affirmative vote of the holders of atleast two-thirds of the outstanding shares. 234 This percentage may be decreased to the holders of amajority of the outstanding shares if so provided in the articles of incorporation of the corporation. 235In Delaware, stockholder approval is required for any sale, lease or exchange of all orsubstantially all of the corporation’s property and assets. 236 The DGCL, however, does not definewhat constitutes all or substantially all of the property and assets of a corporation and this concepthas been left open for the courts to determine on a case-by-case basis. In general, where the value orincome of the assets to be sold represents more than 50% of the assets of the corporation on anongoing or historical basis, the question of whether the assets or income constitute substantially all235 TEX. BUS. CORP. ACT ANN. art. 2.28 (Vernon Supp. 1999-2000).236 DEL. CODE ANN. tit. 8, § 271(a) (1991).Appendix B - Page 13017261v1229 See TEX. BUS. CORP. ACT ANN. arts. 5.09-5.10 (Vernon 1980 & Supp. 1999-2000).230 TEX. BUS. CORP. ACT ANN. art. 5.09(B) (Vernon Supp. 1999-2000).231 TEX. BUS. CORP. ACT ANN. arts. 5.17-5.20 (1997).232 Egan & French, 1987 Amendments, supra note 3, at 11.233 See id. at 11-12.234 TEX. BUS. CORP. ACT ANN. art. 5.10(A)(4) (Vernon Supp. 1999-2000).