Definition - What does Supermajority Provision mean?
A supermajority provision is a contract provision that states that, for certain business actions, a super majority vote is needed. This differs from a simple majority.
Divestopedia explains Supermajority Provision
A supermajority provision is most often utilized in cases of mergers and acquisitions. For instance, when a target company is thinking about completing a merger, there typically needs to be a favorable supermajority vote in order for the merger to pass. Oftentimes, a supermajority is two-thirds of the vote; however, it may vary from case to case.
In large businesses, all (or most) shareholders need to be onboard with decisions that can drastically change the course of the firm. With a simple majority vote, too many shareholders may potentially be disappointed with a vote result. A supermajority vote prevents this from occurring.
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