Chapter 5: Mergers and Acquisitions

Question 1

What happens when there is a merger?

Answer 1

Target’s assets and liabilities transfer to acquirer

Question 2

Steps for merger

Answer 2

Board of Directors for each corp. must approve merger
Notice is given to SH of each corp. w/ summary plan
SH of each corp vote to approve
Required documents (plan of merger, amended articles) are filed w/ the state.

Question 3

Short form merger (parent-subsidiary merger)

Answer 3

90% of more of subsidiary stock owned by parent, not board vote req. at subsidiary level.

Question 4

Whale-minnow exception

Answer 4

A very big corp acquiring another through merger. No SH vote at the whale level if there is not an increase in the whale’s outstanding stock by more than 20%.

Question 5

Sales of assets

Answer 5

G/R do not require approval of board or SH
SH and board approval necessary for sales of all or substantially all of its property outside the ordinary course of trade or business

In NC “all or substantially all” means more than 75% of assets or revenue. Only T’s target corp., shareholders must approve. Acquiring company’s SH do not need to approve.

Unlike merger, liabilities stay w/ target corp. unless they are assumed by acquiring co. and the creditor grants a novation.

Question 6

Stock Acquisition

Answer 6

Acquiring co. buys the stock of target co.
A corp. may acquire the stock also by: purchase stock on open market, tender offer for shares, or share exhcange.

Share exchanges: paralles merger except the acquiring co. would acquire the target company’s stock, but not assets. Acquiring co. SH do not have to vote.

Question 7

Conversions

Answer 7

Corporations can be converted into another business entity through a plan of conversion and articles of conversion filed w/ the state. SH and board must vote to approve.

Question 8

Dissenting SH right of appraisal

Answer 8

SH may dissent and receive the FMV of their shares following: merger, share exchange, sale of assets.

(1)Must give written notice to corp. of intent to seek appraisal before SH votes. (2)Must abstain or vote no. Written demand for payment.

Corp pays the amount that it determines to be FMV, SH can disagree in writing and sue w/in 30 days.

Question 9

Voluntary Dissolution

Answer 9

Board adopts a plan of dissolution, SH vote to approve and corp files articles of dissolution w/ the state. May continue existing for purpose of winding up and liquidation.

Winding up: assets are disposed of in orderly fashion by paying creditors.

Liquidation: distribution made to SH

First pay off creditors
Then pay off preferred SH
Then whatever is left goes to common SH

Question 10

Involuntary Dissolution

Answer 10

The AG or any other creditor who has a judgment against the corp that is not satisfied r SH of corp may bring an action for involuntary dissolution.

SH may bring an action when:
Corp affairs are deatlocked at SH or director level and there will be irreparable injury
SH voting deadlock in electing directors for 2 or more consecutive years
Corp assets are being wasted
Liquidation is reasonably necessary to protect SH rights
If liquidation is allowed at the will of the SH
Upon the occurrence of an event specified in art. of inc.