Business / Legal

This Delaware law is behind Google’s recent restructuring

Google was able to create Alphabet thanks to some Delaware legalese.

Hello, Alphabet. (Photo by Flickr user SimonHulatt, used under a Creative Commons license)

Last August, a few amendments were officially made to the Delaware General Corporation Law. One amendment to Section 251, “Merger or consolidation of domestic corporations,” essentially expedites the merger process by lifting certain requirements.
Specifically, the amendment added some legalese to Section 251(h)(1) of the code. The new language points to Section 251(g), which allows mergers to happen under a parent entity and its subsidiary without stockholder vote. Those few changes added to Section 251 one year ago this month gave leeway to some big changes made recently at a well-known tech behemoth.
On Monday, Google was able completely overhaul its corporate structure by creating a new holding company for itself called Alphabet without the consent of its shareholders.
From the company’s SEC filing:

The Alphabet Merger will be conducted pursuant to Section 251(g) of the General Corporation Law of the State of Delaware, which provides for the formation of a holding company without a vote of the stockholders of the constituent corporations. Effective upon the consummation of the Alphabet Merger, Alphabet will adopt an amended and restated certificate of incorporation and amended and restated bylaws that are identical to those of Google immediately prior to the consummation of the Alphabet Merger, except for the change of the name of the corporation as permitted by Section 251(g).

Now, instead of Google operating its plethora of subsidiaries, it will be able to focus solely on Android, Chrome, Gmail, YouTube and Maps while Alphabet takes care of Google X, Google Ventures, Google Fiber and, well, everything else.
“We are not intending for this to be a big consumer brand with related products,” wrote Google cofounder Larry Page in a blog post announcing the change. “The whole point is that Alphabet companies should have independence and develop their own brands.”
Thanks to the amendments to Section 251 of the Delaware Corporation Code, cofounders Page and Sergey Brin and executive chairman Eric Schmidt were able to restructure the entire corporation without conducting a shareholder vote — not that it even matters. According to the Wall Street Journal, shares increased 6.2 percent in late trading yesterday after what had been a yearlong lag period.
And if you’ve got stock in Google? Rejoice. Once the merger is completed later this year, shares of Google will be converted to shares of Alphabet, though the company will continue trading on the Nasdaq under GOOGL and GOOG.

Companies: Google

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