SqueezeOut

A squeeze-out is a corporate-law mechanism that allows a controlling shareholder or group of shareholders to compel minority shareholders to sell their shares in a company. It typically arises after a control-changing transaction such as a merger, acquisition, or buyout that gives the acquirer a dominant ownership stake. The aim is to simplify ownership and remove remaining minority interests, often to enable a delisting or full integration of the company.

Triggering a squeeze-out usually requires achieving a high threshold of ownership or control under applicable law. This threshold and the exact procedures vary by jurisdiction but commonly involve obtaining a majority or near-total ownership and meeting statutory requirements. After the threshold is met, the controlling party can initiate the squeeze-out process to purchase the remaining shares from minority holders. Price is a central issue and is typically described as fair value, sometimes with a premium to prevailing market prices. In many systems, the price is determined or reviewed by regulatory authorities, and minority shareholders may have appraisal rights or recourse to court to challenge the price.

Protections for minority shareholders vary but often include mandatory disclosure, fairness opinions, and the possibility of judicial review of the purchase price. Squeeze-outs are distinct from drag-along rights, which allow a majority to compel the sale of the entire company, and from tag-along rights, which let minorities participate in a sale on the same terms as majority holders.

Regional practice differs; in the European Union and many member states, squeeze-outs are supported by specific directives and national laws, while in other jurisdictions, statutory buyouts and court-approved appraisals govern the process.