Formation

Question 1

Promoters

Answer 1

• act on behalf of a corp before the corp is formed.
• liable for pre-incorp transactions
• corp not liable for pre-incorp transactions unless corp adopts the K

Question 2

Organizer

Answer 2

• prepares the CoF
• can be any person 18 or older
• need not be a TX resident

Question 3

CoF

Answer 3

-K between corp, shareholders, and the State

Question 4

Merger

Answer 4

• Co A merges with Co B (taregt corp) and B is merged with and into A and is merged out of existence
• SH must approve: written notice of meeting which must include a summary of the proposed plan (at least 21 days prior). Required vote= 2/3 of share entitled to vote unless CoF says otherwise
• Certificate of Merger filed with SOS

Question 5

conversions

Answer 5

• EX LLC to Corp

- board adopts a resolution + 2/3 of shares entitled to vote

Question 6

interest changes

Answer 6

• one corp purchases all the outstanding shares of another corp resulting in a wholly owned subsidiary
• board adopts resolution+ 2/3 of shares entitled to vote

Question 7

asset sales

Answer 7

• corp A purchases substantially all the assets of Corp B

- board adopts resolution + 2/3 of shares entitled to vote from selling company only

Question 8

capital reductions

Answer 8

• process by which corp reduces capital by repurchasing shares that have been outstanding and then cancelling those shares
• Par Value shares= board adopts resolution only
• non-PV shares= board adopts resolution + majority SH vote of shares entitled to vote

Question 9

dissenting SH’s right of appraisal

Answer 9

• dissenter’s rights give the dissenting SH the right to ahve the corp purchase the SH’s shares at fair value as determined by the company and assessing the value of SH’s shares
• generally granted to the selilng co, but the co that is acquiring
• context: appraisal rights are triggered when a corp is considering merging, selling substantially all of its assets, or consolidating with another co and a minority SH group objects to the terms of the fundamental change
• you can buy out SH not wanting to merge

Question 10

exceptions to when SH can invoke SH rights

Answer 10

1) market-out exception: Sh do not get appraisal rights when shares are listed on a national securities exchange, or held by more than 2000 shareholders
(appraisal or dissenter’s rights are not necessary since there already exists a forum where the Sh can sell his shares)

2) 90% ownership exception- no appraisal rights where survinvg corp already owns 90% of the target corp

Question 11

de facto merger

Answer 11

-TX courts will grant appraisal rights if the transaction’s substance is that of a merger or a consolidation

Question 12

Procedure for merger

Answer 12

1) SH must be notified of appraisal rights
2) no favorable vote- dissenting SH may not vote in favor of the proposed action
3) demand for payment- after the merger is approved, SH must make written demand to the corp for payment
4) price for shares- SH and corp must agree on share’s FMV (corp has 90 days to make payment from approval date; corp can counter with own fair value assessment then has 20 days from agreement to make payment; if corp and Sh can’t agree, court can determine price)

Question 13

included in a demand for payment

Answer 13

1) must be addressed to corp’s prez and sec
2) order payment be made for share’s FV
3) include a return addres fo that the corp can send dissenting Sh instructions outlining the dissenting and appraisal procedures
4) state # of shares and teh stock class that the SH owns along with a fair value estiamte of the shares
5) be delivered to the corp at its principal executive offices no later than 20 days after receiving notice the action was approved
6) SH must relinquish his share certificates within 20 days after making the demand. at that point, person is no longer a SH

Question 14

Term of corp status

Answer 14

-invol or vol

Question 15

voluntary term of corp status

Answer 15

-either (1) written consent from all SH or (2) board adopts resolution and resolution is passed by a 2/3 vote of all outstanding shares entitled to vote

Question 16

invol term of corp status

Answer 16

• creditor may seek invol dissolution when corp is insolven- immediate if creditor establishes that irreparable damage will ensue to the corp’s unsecured creditors
• SH grounds

Question 17

SH grounds for involunt term

Answer 17

1) direcgors are all deadlocked- cant be resolved, and corp is suffering or it is threatened with irreparable injury from deadlock
2) deadlock in SH voting power, which hasn’t been broken in 2 consecutive annual meetings
3) directors actions are illegal, oppressive, or fraudulent OR
4) corp assets are being wasted or misapplied
5) SH are deadlocked in voting powers and ahve failed the previous 2 years to elect successors to directors whose terms have expired

Question 18

State agency- mandatory dissolution-

Answer 18

• TX AG must dissolve a corp if:
  1) SOS has sent notice to the corp instituting term proceedings and the cop hasn’t cured those problems within 31 days of notice or
  2) Ag has indepently determined that cause excists for termination

Question 19

state agency-discretionary dissol

Answer 19

may dissolve if:

1) crp has failed to comply with any condition precedent to forming corp
2) corp has procured CoF by fraud
3) corp is transacting business beyond the scope of the CoF
4) corp has fraudlently misrepresnted any matter required in repor, affid, application, etc OR
5) if pubic interest requires winding up the corp because the corp or its public interest requires winding up corp because corp or its high ranking officer has been convicted of a felony. felonious actions are persistent, and terminating is necessary to prevent future felony actions