FACT PATTERN 5: FUNDAMENTAL CORPORATE CHANGES- TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS NOT IN THE ORDINARY COURSE OF BUSINESS, OR SHARE EXCHANGE

Question 1

When one company acquires all the stock or substantially all the stock of another, what constitutes “substantially all of the assets”?

Answer 1

varies from state-to-state. A rule of thumb is that it requires transfer of at least 75 percent of the assets.

Question 2

When one company acquires all the stock or substantially all the stock of another, these are fundamental corporate changes for which corporation?

Answer 2

The seller only, not the buyer.

Question 3

What is needed when S Corp. wants to sell all of its assets to B, Inc. or B, Inc. wants to buy all of the stock of S Corp.?

Answer 3

1. Board of director action (both corporations), and notice to selling corporation’s
   shareholders.
2. Approval by transferring corporation’s shareholders.
3. Deliver to Secretary of State articles of exchange in share exchange. Usually, there is no filing in a transfer of assets.

Question 4

S Corp. wants to sell all of its assets to B, Inc. or B, Inc. wants to buy all of the stock of S Corp., Number of shares of S Corp. that must approve the sale?

Answer 4

Majority of shares entitled to vote.

Question 5

S Corp. wants to sell all of its assets to B, Inc. or B, Inc. wants to buy all of the stock of S Corp., Number of shares of B Corp. that must approve the sale?

Answer 5

0

Question 6

When one company acquires all the stock or substantially all the stock of another. Are there dissenting shareholders’ rights of appraisal for shareholders of the selling corporation

Answer 6

Yes

Question 7

When one company acquires all the stock or substantially all the stock of another. Are there dissenting shareholders’ rights of appraisal for shareholders of the buying corporation

Answer 7

No

Question 8

Do we expect successor liability in the sale of substantially all assets?

Answer 8

No, because the selling company still exists.