Fundamental Corporate Change

Question 1

Actions necessary for fundamental corp. change?

Answer 1

4 things necessary:

1. Board action adopting a resolution of fundamental change
2. Board submits proposal to shareholders with written notice
3. Must get shareholder approval (majority of voting shares)
4. In most, delivery of document to Secretary of State

Question 2

Dissenting Shareholder to Fundamental Change Right of Appraisal

Answer 2

The right to force the corporation to buy your stock at fair value. Right triggered by:

1. Amendment to Articles
2. Merger
3. Disposition (sale) of substantially all assets
4. Transfer of shares in a share exchange

• Right is not available if the stock is listed on a national exchange or has 2k or more shareholders.
• So basically just applies in close corp.

Question 3

What does shareholder have to do to perfect her right of appraisal?

Answer 3

1. Before shareholder vote, file with the corporation written notice of objection and intent to demand payment
2. Abstain or vote against the proposed change, and
3. After the vote, within time set by corp, make written demand to be bought out and deposit stock with corp.

If shareholder and the corp cannot agree on fair value of the shares? The corp sues.

Question 4

Amendment of Articles

Answer 4

Requires:

1. First, board of directors action and notice to shareholders AND THEN
2. Shareholder approval (majority of voting shares)
3. If approved, delivery of certificate to Secretary of State

Question 5

Short Form Merger

Answer 5

• No shareholder approval required

- Where a 90% or more owned subsidiary is merged into a corporation

Question 6

Voluntary Dissolution

Answer 6

1. Voluntary - same process as substantial change

THEN WINDING UP OCCURS

Question 7

Liquidation Preference

Answer 7

Means “pay first” (Must pay creditors first)

Question 8

Requirements for Mergers

Answer 8

1. BOD action (both corps) and notice to shareholders, then
2. Shareholder approval. Majority of shares entitled to vote.
3. No shareholder approval required if short form merger
4. If approved delivered to SOS

Question 9

Effect of Merger

Answer 9

Surviving corp succeeds to all rights and liabilities of the disappearing company

Question 10

Involuntary Dissolution

Answer 10

• Done by court order
• Present shareholder can petition because of 1. Waste of assets,
  2. Director deadlock,
  3. Shareholder have Failed for at least 2 consecutive annual meetings to fill vacant board position,
  4. 20% of outstanding shares petition because of illegal or fraudulent acts by directors

***In close corp as alternative to involuntary dissolution court might order by out of objecting shareholder

Question 11

Administrative Dissolution

Answer 11

• SOS gives notice of
  1. failure to pay license tax for 1 year or more,
  2. To maintain a registered office, or
  3. To file annual registration
• If corp does not remedy w/in 60 days SOS can certify dissolution
• Corp can apply for reinstatement