Rath v. Rath Packing Company
Iowa Supreme Court
136 N.W.2d 410 (1965)
- Written by Sean Carroll, JD
Facts
Rath Packing Company (Rath) (defendant) entered into an agreement with Needham Packing Company that was called a “Plan and Agreement of Reorganization.” Under the agreement, Rath would amend its articles of incorporation to double its amount of common stock and would change its name to Rath-Needham Corporation, among other things. Needham would transfer its assets to Rath and stop using the Needham name. The agreement amounted to a de facto merger. Rath’s articles of incorporation and Iowa law on mergers both required a two-thirds vote to approve a merger. At a meeting of Rath shareholders, 60.1 percent of Rath’s outstanding shares were voted in favor of the agreement. Minority shareholders of Rath (minority shareholders) (plaintiffs) brought suit, alleging that the agreement was invalid under Iowa law and Rath’s articles of incorporation because it was not approved by a two-thirds-majority vote. Rath argued that the agreement fell under the provision in Iowa law that permitted approval of amendment of articles of incorporation with only a majority vote of shareholders. The trial court agreed with Rath and found that the agreement was validly approved. The minority shareholders appealed.
Rule of Law
Issue
Holding and Reasoning (Garfield, C.J.)
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