Quick Answer
The pre-vote prospectus delivery rule covers a reclassification, merger, consolidation, or asset transfer put to security holders. Delivery must happen before the vote, or before the earliest date the action could be taken by consent, and must reach every holder of record entitled to vote or consent, at the address of record on the transfer records.
The safe harbors earlier in this unit govern what a communication can say. The pre-vote prospectus delivery rule governs something narrower: when a specific document, the prospectus, has to reach security holders relative to a vote.
What Transactions Does the Pre-Vote Prospectus Delivery Rule Cover?
The pre-vote prospectus delivery rule applies to a reclassification, merger, consolidation, or asset transfer that is submitted to security holders for a vote or a consent. These are transactions where the security holders themselves have to approve the deal before it closes.
Exam Tip: Gotchas
- The pre-vote prospectus delivery rule applies only when the transaction requires a security-holder vote or consent. A transaction that does not need holder approval, such as a straightforward cash purchase, does not trigger this timing rule.
When Must the Prospectus Arrive?
"Preceded by a prospectus" means the prospectus reaches security holders:
- Before the vote of security holders on the transaction, or
- With respect to actions taken by consent, before the earliest date on which the corporate action could be taken
Exam Tip: Gotchas
- A prospectus delivered after the vote or consent action does not satisfy the pre-vote prospectus delivery rule, even if it reaches every security holder. Timing, not eventual completeness, is what the safe harbor tests.
Who Must Receive It?
Delivery must reach all security holders of record who are entitled to vote or consent, sent to each holder's address of record on the corporation's transfer records.
Think of it this way: The pre-vote prospectus delivery rule is not asking whether the prospectus eventually arrived. It is asking whether every eligible voter had it in hand before casting a vote, or before a consent action became irrevocable.
What Should You Check on Exam Day?
- Confirm the transaction type: reclassification, merger, consolidation, or asset transfer requiring a security-holder vote or consent.
- Check the delivery timing against the vote date or the earliest possible consent date, not against when the deal closed.
- Confirm delivery reached the address of record on the transfer records, not just any last-known address.