Fundamental Changes in Corporate Structure

Question 1

Fundamental Changes: Definition

Answer 1

Unusual occurrences, so require

• resolution by board
• notice to all SH entitled to vote; and
• approval by majority of SH (NOT majority of quorum) entitled to vote

*Generally, right of appraisal attaches

Question 2

Right of Appraisal

Answer 2

Defn: right of dissenting SH to force corp to buy his shares at FMV

Question 3

Right of Appraisal: actions that trigger

Answer 3

-The issue is whether there is a corp change of such nature that forcing SH to retain his shares would be inequitable

e. g.
- merger, consolidation, sale of all corp assets
- amending articles to change purpose of corp business

Question 4

Right of Appraisal: to perfect right

Answer 4

1. before SH votes, files written notice of objection + intent to demand payment
2. abstain or vote against proposed change
3. after vote, make written demand to be bought at FMV
4. if cannot agree on FMV, court-appointed appraiser decides

Question 5

Amendment of Articles

Answer 5

Need:

• board of directors + notice to SH + SH approval (majority of shares entitled to vote)
• file amended articles with Sec of State
• right of appraisal if change inequitable to SH

Question 6

Merger

Answer 6

A corp + B corp form A corp

-one corp is absorbed into another

Question 7

Consolidation

Answer 7

A corp + B corp form C corp

-2 or more corps combine to form a new corp

Question 8

Merger/Consolidation: Requirements

Answer 8

Need:

• board of director’s approval + notice to SH + SH approval (majority of SH entitled to vote)
• No SH approval required for short-form merger (90% or more subsidiary merged)

Question 9

Merger/Consolidation: Effect

Answer 9

• Surviving corp succeeds to all rights and liabilities (including torts)
• Appraisal rights attach

Question 10

Transferring All (or Substantially All (75%)) Assets/Shares

Answer 10

• fundamental corp change for selling corp only
• need same as merger
• right of appraisal for selling corp

Question 11

Dissolution: Voluntary

Answer 11

• Same as merger or unanimous written SH agreement

- Key: limited to fiduciary duty owed to minority

Question 12

Dissolution: Involuntary

Answer 12

1. SH can petition for involuntary dissolution of corp
   
   • Sale:
     
     • director abuse, waster, misconduct, illegal/oppresive
     • SH failure to fill vacant board position
     • director deadlock harming company
2. Court may order buyout of complaining SH
3. Creditors can petition if corp insolvent if creditor has a judgment OR corp admits its debt in writing
4. Quo warranto proceeding: corp exceeded, abused its authority, fraudulently obtained certificate

Question 13

Winding Up

Answer 13

• gather all assets
• convert to cash
• pay creditors
• distribute remainder pro rata unless distribution preference