Fundamental Corporate Changes

Question 1

What are the types of fundamental corporate changes?

Answer 1

1. Merger
   
   1. Fundamental. A becomes B
2. Consolidation
   
   1. Fundamental. A and B become C
3. Share exchange
   
   1. Fundamental. A and B exchange shares.
4. Dissolution
   
   1. Fundamental. A dissolves.
5. Fundamental (not ministerial) Amendment of the Articles
   
   1. Fundamental. Sale (not purchase) of substantially all the assets not in OCOB.

Question 2

What are the procedural steps to effectuate fundamental changes?

Answer 2

1. Resolution by board at a valid meeting
2. Notice of special meeting (25-60 days in advance)
3. Approval by more than 2/3 of all shares entitled to vote. The articles may provide for different percentage, but not less than a majority
4. File notice with the state corporation commission

Question 3

What is the dissenting shareholder right of appraisal?

Answer 3

The right of a shareholder who dissents to the fundamental change to force the corporation to buy her shares at fair value.

Question 4

How does the dissenting shareholder exercise her right of appraisal?

Answer 4

1. Before shareholder vote
   
   1. File a notice in writing of his objection to the change and intent to demand payment
2. At the vote
   
   1. Can abstain or vote against the change
3. After the vote
   
   1. Must again make prompt demand in writing to be bought out

Question 5

What happens if the dissenting shareholder and corporation cannot agree on fair value of the stocks?

Answer 5

The court then has a power to appoint an expert appraiser who values the shares. The appraisal is binding on the parties. Called an appraisal value.

Question 6

What are the types of amendments?

Answer 6

1. Ministerial Amendments
   
   1. Not fundamental changes. The board on its own has power to make those amendments.
2. Fundamental Amendments
   
   1. More than 2/3 of all shares must vote for FA for it to pass.

Question 7

Does a dissenting shareholder have the right to an appraisal of stocks when the Articles are amended?

Answer 7

No, but if the amendment adversely affects a class of stock, more than 2/3 that class must approve the amendment (in addition to being approved by 2/3 of all the shares of the entire corporation entitled to vote)

Question 8

Selling all assets not in the OCOB is a fundamental change for…

Answer 8

the selling corporation only, not the purchasing corporation.

Question 9

What fraction of the selling corproation’s shares must approve the sale of all/substantially all assets not in OCOB?

Answer 9

More than 2/3.

Question 10

To sell all or substantially all of the assets not in OCOB, is approval needed from the shareholders buying the assets?

Answer 10

No.

Question 11

During sale of all or substantially all of the assets not in OCOB, a shareholder has dissenting rights of appraisal only if…

Answer 11

• She is selling shareholder, and
• sale of the assets is to an interested party.