Freeze out

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Freeze out

The action of pressurizing shareholders with relatively minor amounts of stock to sell their shares after a takeover.

Freeze Out

1. In an acquisition, a provision in a charter allowing the acquiring company to buy out all minority shareholders in the target company for a fair price for a limited period of time. The freeze out provision usually lasts from two to five years following the acquisition.

2. A situation in which the majority shareholder(s) of a company pressure minority shareholders to sell their holdings. For instance, majority shareholders may conduct a freeze out by completely shutting minority shareholders out of the decision making process or by withholding pertinent (but not legally required) information.
References in periodicals archive ?
in its partially held subsidiary by arranging a freeze-out merger.
fall outside the standard freeze-out context but nevertheless raise
primarily in freeze-out mergers and closely held corporations.
to controlling shareholders, primarily in freeze-out and close
73) As such, an appraisal proceeding must award dissenting stockholders the fair value of what the freeze-out took from them.
77) Within this formula, fair value must also consider externalities that might have depressed the current market, cyclical earning cycles, and whether management timed the freeze-out in anticipation of a positive development.
In contrast, the opt-in, non-class action structure of an appraisal proceeding makes it difficult for owners of a small amount of stock to challenge a freeze-out valuation.
The procedural inadequacy of Delaware's appraisal remedy, which leaves shareholders unprotected against the risk of majority overreaching, suggests the possibility that minority shareholders account for the risk of an unfair freeze-out ex ante, when pricing the corporation's stock.
33) The court treated the freeze-out transaction as a simple manifestation of the core self-dealing conduct that requires intensive judicial review of the transaction terms for fairness.
Having established that a freeze-out triggered intensive judicial review of the transaction's fairness, the court went on to delineate the terms of that review.
In a class action under the Weinberger standard, however, the price exposure extends to all shares acquired through the freeze-out merger without the need for shareholders to take any action at all.
Finally, if the freeze-out merger consideration is stock in the controller or stock in any publicly traded corporation, the minority shareholders have no right to appraisal.