Rump
What is a Rump?
Rump is the name given to minority group of shareholders who will not tender their shares in a corporate action. The rump might be endeavoring to prevent quite a few corporate actions, including a rights issue, merger, or acquisition.
How a Rump Works
The rump can slow down or halt corporate takeovers assuming they own an adequate number of shares. Nonetheless, even on the off chance that they are not in that frame of mind to block a merger, their share of the company's cash flow might be sufficient to deter the obtaining company from finishing the merger or acquisition in any case.
Rump shareholders can be forced to sell their shares without their consent by the underwriters, through a squeeze-out, contingent upon the percentage of shares owned by the majority — and for however long it is on similar conditions as the offer made to different shareholders. For instance, in the United Kingdom, shareholders claiming 90% of the company can consent to squeeze out the other minority shareholders. In the United States, the percentage of shareholders required to consent to a squeeze out is represented by state law.
Illustration of a Rump
Expect a UK based corporation, ABC Company, wishes to converge with XYZ Corp. A small portion of XYZ Corp's shareholders, 8%, are stubbornly against the merger. In spite of their best efforts, the acquisition goes through as expected. The rump shareholders are in this way forced to liquidate their shares at the current fair market value in a squeeze out, likewise at times alluded to as a freeze out.
Features
- Rump shareholders can be forced to sell their shares without their consent, through a squeeze-out.
- The rump might find actual success in halting a planned takeover, or it might somehow obstruct the securing or combining element's objectives.
- Rump is the term used to depict a group of shareholders endeavoring to obstruct a corporate action.
