8-KShareholder MattersCorporate ChangesExhibits & Filings

General Motors Co 8-K Report, Rights Modification (Nov 3, 2010)

Filed November 3, 2010For Securities:GM

Summary

General Motors Company (GM) filed an 8-K on November 3, 2010, detailing significant corporate actions approved by its stockholders on November 1, 2010. The primary focus for investors is the unanimous approval of two amendments to the company's Certificate of Incorporation. The first amendment dramatically increases the authorized shares of both Common Stock (from 2.5 billion to 5 billion) and Preferred Stock (from 1 billion to 2 billion). This substantial increase in authorized shares is likely in anticipation of future financing needs or strategic initiatives following GM's emergence from bankruptcy. The second, and critically important, amendment introduces restrictions on the transfer of 'corporation securities' (including common stock, preferred stock, and warrants) to preserve the company's net operating loss (NOL) carryovers and other tax benefits, as defined by Section 382 of the Internal Revenue Code. These restrictions aim to prevent an 'ownership change' that could limit GM's ability to utilize these valuable tax assets. While these restrictions are significant, they include various exceptions for authorized transfers, public offerings, and distributions related to the Motors Liquidation Company's bankruptcy plan. The restrictions are set to expire by December 31, 2013, unless modified or extended under specific conditions.

Key Highlights

  • 1GM stockholders approved an amendment to increase authorized Common Stock from 2.5 billion to 5 billion shares.
  • 2GM stockholders approved an amendment to increase authorized Preferred Stock from 1 billion to 2 billion shares.
  • 3A new transfer restriction amendment was approved to preserve GM's Net Operating Loss (NOL) carryovers and tax benefits.
  • 4The transfer restrictions are designed to prevent an 'ownership change' under Section 382 of the Internal Revenue Code.
  • 5Restrictions apply to 'corporation securities' including common stock, preferred stock, and warrants.
  • 6The transfer restrictions have exceptions for authorized transfers, public offerings, and bankruptcy-related distributions.
  • 7The transfer restrictions are scheduled to expire by December 31, 2013, with provisions for extension or earlier termination based on board determination or changes in tax law.

Frequently Asked Questions

The significant increase in authorized shares of both Common and Preferred Stock suggests that GM is positioning itself for potential future capital raising activities, strategic acquisitions, or other corporate actions that might require a larger pool of authorized shares. It provides the company with greater flexibility for its future financial and operational strategies.

'Corporation securities' are defined to include common stock, preferred stock, and warrants to purchase common stock. The transfers of these securities are being restricted to prevent an 'ownership change' as defined by Section 382 of the Internal Revenue Code. Such an ownership change could severely limit GM's ability to utilize its substantial Net Operating Loss (NOL) carryovers and other tax benefits, which are crucial for reducing future tax liabilities.

The transfer restrictions are generally set to expire on December 31, 2013. However, they can be terminated earlier if the Board of Directors determines that the restrictions are no longer necessary for preserving tax benefits due to changes in tax law or if the NOLs can no longer be carried forward. The expiration date can also be extended by the Board for up to two additional one-year terms if deemed necessary.

Yes, the transfer restrictions do not apply in several key situations. These include transfers authorized by the Board of Directors, certain merger or consolidation transactions where all stockholders receive comparable consideration, and transfers to an underwriter for a public offering (though subsequent sales by the underwriter may still be restricted). Specific exceptions also exist for the transfer of Series A Preferred Stock and certain transfers related to the Motors Liquidation Company's bankruptcy plan.