What Is a Supermajority Clause in M&A?

A supermajority clause in M&A refers to a provision that requires a higher-than-normal percentage of shareholder approval—typically 66% to 90%—to authorize major corporate decisions, such as mergers, acquisitions, or amendments to company bylaws. It is designed to protect minority shareholders and prevent hostile takeovers.

How a Supermajority Clause Works

Higher Approval Threshold – Unlike standard majority votes (51%), a supermajority clause requires a larger percentage of shareholders to approve critical decisions.

Takeover Defense Mechanism – It prevents hostile takeovers by making it harder for an acquirer to gain control without broad shareholder agreement.

Minority Shareholder Protection – Ensures that major decisions are not made solely by a controlling shareholder group, giving smaller shareholders a say in the process.

Corporate Governance Stability – Maintains consistency in decision-making by requiring strong consensus before implementing significant changes.

Legal Actions and Protections

Corporate Bylaws Review: Companies must define and include the supermajority clause in their bylaws or articles of incorporation.

Regulatory Compliance: Ensure compliance with corporate laws and SEC regulations governing shareholder rights.

Shareholder Agreements: Clarify voting rights and procedures to avoid legal disputes.

Court Intervention: If a supermajority clause is unfairly used to block a beneficial merger, minority shareholders may seek legal remedies.

Example

A publicly traded company includes a 75% supermajority clause in its bylaws to prevent hostile takeovers. When a potential acquirer offers to buy the company, they fail to secure the required shareholder votes, blocking the deal and maintaining the company’s independence.