## Facts

- American Maize-Products Company (American Maize), a Maine corporation, had outstanding voting stock and additional authorized but unissued shares.
- William Ziegler III was American Maize’s chairman of the board and, through his holdings and related trust holdings, effectively controlled enough voting power to defeat a proposed merger requiring shareholder approval.
- A group of other American Maize directors approved a merger agreement between American Maize and Eridania Beghin-Say (EBS).
- Maine’s merger statute required approval of a merger by the affirmative vote of at least a majority of the outstanding shares entitled to vote (and, where applicable, by class vote).
- Ziegler opposed the merger and had sufficient voting strength to block shareholder approval under the statutory voting requirement.
- To eliminate Ziegler’s blocking position, the directors approved a transaction to issue previously authorized but unissued American Maize voting shares that EBS would purchase, giving EBS enough votes to obtain merger approval.
- Ziegler (and a co-trustee, Fidelity Bank) sued in Maine Superior Court seeking to enjoin the issuance, arguing it was designed solely to defeat the merger-vote requirement.
- The directors argued they had authority under Maine corporate law’s general stock-issuance provision to issue authorized but unissued shares on terms set by the board.
- The Superior Court denied injunctive relief, and Ziegler appealed.

## Issues

1. Whether a board may use its general statutory authority to issue authorized but unissued voting shares when the issuance is made solely to change the outcome of the shareholder vote on a proposed merger.
2. Whether the merger-approval statute’s majority-of-outstanding-shares voting requirement limits merger-related share issuances that would otherwise fall within the board’s general stock-issuance power.

## Decision

- The Maine Supreme Judicial Court vacated the Superior Court’s order denying injunctive relief.
- The court enjoined the proposed issuance of voting shares to EBS.
- The court held that a stock issuance made solely to avoid an unfavorable shareholder vote on a proposed merger is barred by the merger-approval statute and cannot be justified by the general statute granting directors authority to issue authorized but unissued shares.

## Legal Principles

- When two statutory provisions address the same subject, a specific provision governs over a more general provision to the extent of any conflict.
- Corporate statutes authorizing mergers modify the common-law rule of unanimous shareholder consent only to the extent clearly stated; courts construe the statutory voting scheme to preserve the meaning of the required shareholder vote.
- Directors’ general authority to issue authorized but unissued shares does not extend to share issuances whose sole purpose is to defeat the shareholder approval requirement for a merger.
- Courts may grant injunctive relief to prevent a merger-related stock issuance that would nullify the statutory requirement of shareholder approval by a majority of the outstanding voting shares (and any required class vote).

## Conclusion

The Law Court ordered injunctive relief because the directors’ planned issuance of voting shares to EBS was aimed only at changing the shareholder voting outcome on a merger, and the merger statute’s majority vote requirement restricted the board’s otherwise broad power to issue authorized but unissued stock.


Ziegler v. American Maize-Products Co., 658 A.2d 219 (1995)