EGC Corporate Governance Practices (May 2018)

EGC Corporate Governance Practices: A Survey and Related Resources PAGE 26 Figure 38 : N=848. Blank Check Preferred Stock 637 of the EGCs we reviewed, or approximately 75.1%, had the authority to issue “blank check” preferred stock, which may be issued with super voting, special approval, dividend, or other rights or preferences without a shareholder vote. “Blank check” preferred stock often is used as a protective measure in the context of a hostile take-over attempt by permitting the adoption of a shareholder rights plan at that time. Section 203 of the Delaware General Corporation Law Section 203 of the Delaware General Corporation Law (“Section 203”) prohibits a Delaware corporation from engaging in a business combination with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder. The term “business combination” is broadly defined to include mergers, consolidations, sales and other dispositions of assets having an aggregate market value equal to 10% or more of the consolidated assets of the corporation and other specified transactions resulting in financial benefits to the interested stockholder. Under Section 203, an interested stockholder generally is defined as a person who, together with affiliates and associates, owns (or within the three prior years did own) 15% or more of the corporation’s outstanding voting stock. Of the 648 EGCs that were not FPIs, approximately 73.0% included Section 203 disclosure that they were subject to Section 203 in their IPO prospectuses, and approximately 27.0% did not. Yes; 63 No; 785 Shareholder Rights Plans (By Frequency) Yes No