Opt-Out Vote
Categories: Board of Directors
See: Opt-Out Right.
An “opt-out vote” is when shareholders of a company vote to decide if they want the company to waive, or opt out of, certain laws or regulations. Specifically, we’re talking about laws pertaining to avoiding a corporate takeover.
Like...let’s say Fantastic Foreheads, a headwear retail company, is headquartered in a state that requires an acquiring company to hold 67% of the target company’s stock before it can legally take it over. That’s great for companies that don’t want to be taken over, but Fantastic Foreheads is heading toward financial insolvency, and being acquired by Domepieces, Inc. might just be the best thing for them. They don’t want to wait around for Domepieces to buy up two-thirds of their stock, so they hold an opt-out vote. If the majority of shareholders agree, Fantastic Foreheads can opt out of their state’s takeover protection regulations and allow themselves to be acquired by Domepieces, even though they don’t have the requisite amount of company stock.
Of course, this doesn’t work for everything—we can’t just take a vote and decide to opt out of obeying drunk driving laws, for example—but in the specific case of state laws and statutes that are designed to protect companies from being taken over, opt-out votes are an opt-ion.
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