Fundamental Corp Changes Flashcards
What are SH appraisal rights?
When the corporation wants to make a fundamental corporate change the dissenting shareholder has the right to force the corporation to buy his shares at “fair value” If SH & corp cannot agree on fair value, the CORPORATION sues to determine the value→ct cannot discount the shares if they are minority shares and not controlling shares
What are 5 fundamental changes that trigger SH appraisal rights?
1) SOME amendments to the certificate; like those altering or abolishing a preference, changing redemption rights, altering or abolishing a preemptive right, limiting voting rights 2) Consolidation 3) YOUR corporation merges into another corporation 4) YOUR corporation trnfrs substantially all of its assets 5) YOUR corporation’s shares are acq’d in a share exchange NOTE: BUT EVEN IF a corp is doing one of these fund. changes, if the stock is listed on a PUBLIC exchange→ NO appraisal rights (i.e. applies to CLOSE corps only)
What 3 things must a SH do to “perfect” his appraisal rights?
1) Before the SH vote, file written objection & your intent to demand payment with the corporation; 2) Abstain or vote against the change;AND 3) After the vote, make written demand to be bought out
How can changes be made the the certificate of incorporation?
STEP 1: Minor changes: can be made by the BOD ALONE e.g. changing office location, registered agent, etc Non-minor changes: must be approved by (i) the BOD; AND (ii) a MAJORITY of the shares entitled to vote (NOT just those ACTUALLY voting) NOTE: If amendment will change or strike a supermajority quorumor voting requirement for shareholder voting (NOT directors) → needs approval of (i) the BOD; AND (ii) 2/3d of the shares entitled to vote STEP 2: If an amendment is approved, certificate of amendment must be delivered to the Dept. of State for filing
What is the difference b/t a merger and a consolidation?
1) Merger = Corp A merges into Corp B → Corp Adisappears & Corp B survives 2) Consolidation = Corp A and Corp B form Corp C (both A & B disappear)
What 3 steps are req’d to effect a merger (or consolidation)?
1) EACH company’s BOD adopts a plan of merger (or consolidation); 2) SH approval is needed from BOTH corps; AND NOTE: NO SH approval is necessaryIF the parent (acq’ing) corp owns 90 PERCENT or more (i.e. a short form merger) 3) Deliver a certificate of merger (or consolidation) to Dept. of State for filing
NOTE: Successor Liability = the surviving company succeeds to all rights & liabilities of the disappearing corp.
What are the steps toeffect of a transfer of substantially all of the assets of a corp?
STEP 1: each corp’s BOD authorizes the deal; AND STEP 2: approval by SELLING corp’s SHs (ONLY); majority of shares ENTITLED to vote must approve the sale. Right of appraisal for SHs of selling company ONLY. STEP 3: In the share exchange, deliver plan of exchange to the Dept. of State for filing. In the transfer of assets, no filing is required.
NOTE:Generally, the company acquiring the assets will not be liable for the torts of the company whose assets it acquired unless 1)the deal provides otherwise or 2) the purchasing company is mere continuation of the seller, or 3) the deal was entered fraudulently to escape such obligations.
What is 2 steps are necessary to effect a share exchange?
STEP 1: one company acquires all the outstanding shares of one or more class of another corporation STEP 2: deliver plan of exchange to Dept. of State for filing NOTE: These are ONLY fundamental changes for the SELLING corporation so only SH of the selling corp. have rights of appraisal
What 2 things areneeded for VOLUNTARY dissolution?
1) Votes of majority of SHARES entitled to vote(NOT those “actually voted”) NO BODvote necessary 2) Certificate of dissolution delivered to Dept. of State for filing
What are the 4 ways to petition the ct for INVOLUNTARY dissolution?
1) Resolution by BOD OR majority of shares entitled to vote, IF the corp has insufficient assets to discharge liability or dissolution would be beneficial to SH 2) One half or more of shares entitled to vote may petition, IF(i) directors too divided to manage; (ii) SH too divided to elect directors; OR (iii) internal dissention makes dissolution beneficial to SH 3) ANY SH entitled to vote may petition , IF SHs are unable to elect directors for 2 annual meetings
4) 20%+ of voting shares in a CLOSE CORP, IF there is evidence of… mgmt’s (i.e. directors or managing SHs)illegal, oppressive or fraudulent acts toward the complaining SH; OR mgmt’s wasting, diverting or looting of assets NOTE: ct can deny if complaining SH can get fair return (e.g. by ordering buyout); will consider if liquidation is the ONLY way to get a fair return
Corp. or non-complaining SH can AVOID dissolution IF w/in 90 days of the petition, they buy the petitioner’s shares at fair value on terms approved by the court (i.e. a buyout)
What are the steps to liquidating a business after it has been dissolved?
Dissolution does NOT end the corporation’s existence.Further steps must be taken. Steps to winding up (i.e. liquidating): 1) gather all assets 2) convert them to cash 3) pay creditors 4) distribute remainder to SH, pro-rata by share unless there’s a dissolution preference. Must say “dissolution preference” (which means paid first) . SHs CANNOT agree that they will be paid before creditors
