The Inability To Satisfy Common Stockholder Voting Requirements: Is Bankruptcy A Potential Solution?
Metromedia International Group, Inc.’s board of directors faced a perplexing dilemma. Approached with an attractive offer from a potential purchaser, the board wanted to sell the corporation’s primary asset and cease operations. In order to consummate the transaction, however, Delaware law and the company’s certificate of incorporation required approval from the majority of Metromedia’s common stockholders. Metromedia’s advisors informed Metromedia’s directors they could not hold a shareholder meeting or solicit proxies due to the company’s failure to comply with federal reporting requirements. As a result, the directors believed they could not obtain the required shareholder approval. The board decided to pursue an alternate route to complete the transaction — bankruptcy. Their strategy contemplated finalizing an agreement to sell Metromedia’s controlling equity interest in Magitcom, a profitable mobile telephone provider in the Republic of Georgia, after which Metromedia would file
