Legal Question in Securities Law in Delaware
Proxy laws regarding reverse splits in Delaware
A company has 7 million shares held by insiders, of those, 3 million shares have prefferred status of 4 votes per share. This gives the company 16 million votes in management, the firm has 26 million shares outstanding which means the float is 19 million shares. The shareholders wanted to take firm over, which they had enough votes to do so. The company went ahead and issued a private placement for 10 mil shares and are proceeding with a reverse split. They didnt have enough votes for a reverse split so they issued the private placement to an accomplice to get enough votes, which I think is illegal. The CEO cant issue stock to someone to alter a vote so he remains in control to do a reverse split without a formal proxy. I need your opinion ASAP.
2 Answers from Attorneys
Re: Proxy laws regarding reverse splits in Delaware
I would be happy to discuss this situation with you. Please call me on (212) 355-2777 or visit our web site at www.cosolaw.com.
Re: Proxy laws regarding reverse splits in Delaware
Self-dealing and insider transactions under Delaware law may constitute breaches of the duty of loyality, duty of care and duty of disclosure under a variety of circumstances. In order to assess properly your case, I would need additional information regarding the circumstances of the various private placement offering, etc., and would need to review certain public documents regarding the company. I note, however, that this scenario sound eerily similar to a lawsuit that I currently have pending in Delaware Chancery Court.
-- Kenneth J. Ashman; Ashman Law Offices, LLC; [email protected]
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