freeze-out provision

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Freeze-out provision is part of a corporate charter that allows an acquiring company, during a freeze-out merger, to buy the stock of minority shareholders in exchange for fair cash value for a certain period of time, usually two to five years, after the acquisition. Freeze-outs through a merger must follow heightened corporate governance rules ensuring fair dealing and fair compensation in order to be validated by a court. This is because the acquiring company will be able to make decisions without the minority shareholders, and the interests of the acquiring company and minority shareholders will often be in conflict. 

[Last updated in December of 2022 by the Wex Definitions Team]