Fundamental Corporate Changes

Question 1

Examples of Fundamental Corporate Changes

Answer 1

• Amending articles
• Merging or consolidating into another company
• Transferring substantially all assets
• Converting to another form of business
• Dissolving

Question 2

Procedure for Fundamental Corproate Changes

Answer 2

1. Board action adopting resolution of fundamental change
2. Board submission to shareholders with written notice
3. Shareholder approval by majority of shares entitled to vote
4. Delivery to secretary of state

Question 3

appraisal rights

Answer 3

Dissenting shareholder has right to force corproation to buy stock for fair value

No appraisal right for shareholder if
1. Shares listed on national exchange
2. COmpany has 2,000+ sahreolders and shares > $20million

Only applies to fundamental changes, closed corps.

Question 4

Perfecting Right of Appraisal

Answer 4

1. Before vote, files written ntoice of objection and intent to demand payment
2. At vote, must abstain or vote against
3. If approved, corporation must notify, within 10 days, all shareholders who filed intent
4. Within time set by corp., shareholder must make written demand and deposit stock with corp.
5. Corp. must pay fair value
6. If shareholder disagrees w value, has 30 days to send own estimate
7. Corporation must file action in court within 60 days or must pay shareholder estimate

Question 5

Amending Articles of Incorporation

Answer 5

• Requires majority of shares entitled to vote
• If approved, articles must be delivered to SoS
• Generally, no appraisal rights

Question 6

Mergers and Consolidations

Answer 6

• Merger: involves blending of one or more corps into another corporation, latter corp survives and merging corp ceases to exist
• Consolidation: involves two corps combining to form new entitity
• For both, board action and shareholder approval (maj. of shares entitled) necessary from both corps.
• If approved, must be delivered to SoS
• Right of appraisal in shareholders entitlted to vote, shareholders in subsidiary in short form merger (> 90% owned already by corp.)

Question 7

M&C: Mo Significant Change to Surviving Corp.

Answer 7

Approval of merger by shareholders of surviving corporation not required if all of following exist
1. Articles of surviving corp. will not change
2. Each shareholder will hold same number of shares w/ identitical rights
3. Voting power of shares issued will comproise more than 30% of voting shares

Question 8

M&C: Short Form Merger of Subsidiary

Answer 8

• No shareholder approval required for short-form merger
• Parent corp. already owns at least 90% of outstanding shares of each class

Question 9

Sucessor liability

Answer 9

Surviving corproation suceeds to all rights and liabilites of constituents

Question 10

Transfer of All or Substantially All Assets and Share Exchange

Answer 10

• Rule of thumb: about 75% of corporation’s assets
• FCC for selling corporations only, NOT the buyer
• Appraisal rights available for shareholders of selling corp.
• May require filing with SoS
• No successor liability

Question 11

Conversion

Answer 11

• One business entity changing form to another business form
• Needs board approval, notice to shareholders, shareholder approval
• Must deliver doc to SoS
• Right of appraisal available

Question 12

Dissolution: Generally

Question 13

Voluntary Dissolution by Incorporators or Inital Directors

Answer 13

• Shares have not yet been issued or business has not yet commenced
• Majority approval required
• Deliver articles of dissolution to state

Question 14

Voluntary Dissolution by Corporate Act

Answer 14

• Under FCC procedure
• Requires board approval, notice to shareholders, and shareholder approval
• Must file notice of intent to dissolve with SoS

Question 15

Effect of Dissolution

Answer 15

• Continues in corproate existence but not allowed to carry on business outside of winding up and liquidating affairs
• Must notify creditors so they can make claims

Question 16

Revocation of Voluntary Dissolution

Answer 16

Use the same method as used to approve dissolution

Question 17

Involuntary Dissolution by Attorney General

Answer 17

On grounds that corp. fraudulently obtianed articles on inc. OR exceeded/abused authority

Question 18

Involuntary Dissolution by Shareholders

Answer 18

Grounds
* Director abuse, waste of assets, misconduct
* Directors are deadlocked and irreperable injury is threatened
* Shareholders are deadlocked and failed to elect directors

Election to purchase in lieu of dissolution
* Court may order buy-out of objecting shareholder
* Most likely in closed corporation

Question 19

Involuntary Dissolution by Creditor Action

Answer 19

Grounds
* Creditor’s claim has been reduced to judgement, execution of judgement has been unsatisfied, and corp is insolvent
* Corp has admitted in wrtiting that creditor’s claim is due and corp is insolvent

Question 20

Involuntary Administrative Dissolution

Answer 20

Failure to pay fees or penalties, failure to file annual report, failure to maintain registered agent in state

State must serve with written notice, give corp opportunity ti correct grounds within 60 days

Corp may apply for reinstatement within two years

Question 21

Winding Up

Answer 21

Steps
* Given written notice to known creditors and publish notice in newspaper in county of PPB
* Gather all assets
* Convert assets to cash
* Pay creditors
* Distribute any remaining sums to shareholders, pro rata by share unless there is a liquidation preference