FACT PATTERN 5: FUNDAMENTAL CORPORATE CHANGES

Question 1

What four things must happen when there is a fundamental corporate change?

Answer 1

1. Board action adopting a resolution of fundamental change.
2. Board submits proposal to shareholders with written notice.
3. Must get shareholder approval.
4. In most of these changes, we need to deliver a document to the Secretary of State.

Question 2

What shareholder vote is required for a fundamental corporate change?

Answer 2

Majority of shares entitled to vote.

Question 3

What is the dissenting shareholder right of appraisal?

Answer 3

It is the right to force the corporation to buy your stock for fair value.

Question 4

When will a shareholder have a dissenting shareholder right of appraisal?

Answer 4

When the corporation does any of these:

1) Merger or consolidation;
2) Transfer of substantially all assets not in the ordinary course of business; or
3) Transfer of shares in a share exchange.

Question 5

Under what circumstance will a shareholder not have a right of appraisal?

Answer 5

the right is not available if the stock is listed on a national exchange or has 2,000 or more shareholders.

Question 6

The right of appraisal only exists in what type of corporation?

Answer 6

A close corporation

Question 7

If the shareholder and the corporation cannot agree on the fair value of the shares, what can the court do?

Answer 7

the court may appoint an appraiser.

Question 8

Is the right of appraisal the shareholder’s only remedy for these fundamental changes?

Answer 8

Yes, absent fraud

Question 9

What does an amendment to an articles require?

Answer 9

1. Board of director action and notice to shareholders.
2. Shareholder approval
3. if approved, deliver amended articles to secretary of state

Question 10

Is there a right to appraisal when there is an amendment to the articles?

Answer 10

No

Question 11

What is required for mergers and consolidations?

Answer 11

1. Board of director action (both corporations), and notice to shareholders.
2. Shareholder approval (generally both corporations). As with others, majority of shares entitled to vote
3. If approved, surviving corporation delivers articles of merger or consolidation to the Secretary of State.

Question 12

Is there shareholder approval required if a 90 percent-or-more owned subsidiary is merged into a parent corporation.

Answer 12

No

Question 13

No shareholder approval required if a 90 percent-or-more owned subsidiary is merged into a parent corporation. What is this called?

Answer 13

A short form merger

Question 14

Is there a right of appraisal for a merger or consolidation?

Answer 14

Yes (if less than 2000 SH and not publicly traded

Question 15

What is the effect of the merger or consolidation?

Answer 15

surviving corporation succeeds to all rights and liabilities of the constituents.

Question 16

“surviving corporation succeeds to all rights and liabilities of the constituents” What is this called?

Answer 16

Successor liability