Fundamental Corporate Changes Flashcards
Types of Fundamental Corp Change
Amending Articles
Merging or consolidating into antoher company
Transferring substantially all assets (or having stock acquired in “share exchange”)
Converting to another form of business
Dissolving
Procedure for Fundamental Corp Change
- BOD action adopting a resolution of fundamental change;
- BOD submits proposal to the SHHs with written notice; and
- SHH’s approval
Shareholder Approval
SHH vote that’s required for approval of a fundamentla corp change is a majority of the shares entitled to vote.
Dissenting SHH Right of Appraisal
SHH who did not vote in favor of the change may have appraisal rights.
Dissenting SHH right of appraisal is the right of a SHH to force the corp to buy their stock for fair value.
Applies only to certain types of fundamental changes:
1. merging or consolidating
2. transferring substantially all assets
3. stock being acquired in a share exchagne
4. converting to antoher form of business
Right of Appraisal - Close Corp
Right of Appraisal - even if the comp is doing one of these changes, there is no appraisal right if the comp’s stock is listed on NYSE (i.e., if it is publicly traded) and the shares involved have a vlue of at least $20 million.
This is the market-out exception - this means the right of appraisal exists in close corps.
Perfecting Right of Appraisal
- SHh must file with the corp a written notice of objection and intent to demand payment;
- SHH must abstain or vote against teh proposed changed;
- Corp must ntoify within 10 dyas after approval all SHHs who filed an intent to demand payment
- SHH must make written demand to be bought out and deposit her stock with the corp, and
- Corp must pay teh dissenters the amount the corp estimates as the fair value of the shares, plus accrued interests.
If the SHH is dissatisifed with the corp’s determination of value, teh SHH has 30 days in which to send the corp her own estimate of value and demand payment of that amount.
Exclusive Remedy
Absent fruad, the right of appraisal is the SHH’s exclusive remedy if tehy do not like a fundamental change.
Amendment to AOI
Requires majority of shares entitled to vote
Mergers and Consolidations
Merger involves teh blending of one or moer corps into antoher corp, and the latter corp survives while the merging corp cease to exist following the merger.
Consolidation involves two corps combining to form a new entity.
For both Merger and Consolidations, BOD action (by both corps) is requried, as well as notice to SHHs and SHH approval, generally by both corps.
If approved, the surviving corp must deliver articles of merger or consolidation to the secretary of state. There is a right of appriasal, generally, for shareholders entitled tovote on teh merger or consolidation and also for shareholders of the subsidiary in a short form merger.
No Significant Change to Surviving Corp
Approval of a plan of merger by shareholders of the surviving corp is not required if all the follwoing conditions exist:
1. AOI of surviving corp will not differ from teh articles before the merger
2. each SHH of the survivor whose shares were outstanding immediately prior to eh effective date of the merger will hold the same number of shares, with identical preferences, limitations, and rights; and
3. the voting power of the shares issued as a result of the merger will comprise no more than 20% of the voting power of the shares of hte surviving corp
Short Form Merger of Subsidiary
No SHH approval is required for a short form merger. With short form mergers, a parent corp owning at least 90% of the outstanding shares of each class of a subsidiary corp may merge the subsidiary into itself without the approval of the shareholders or directors of the subsidiary.
Effect of Merger or Consolidation
The surviving corp succeeds to all rights and liabilities of the constitutents.
This is known as successor liability.
Transfer of All or Substantially All of the assets
Fundamental Change - transfer of all or substantially all of the assets of a corp not in the ordinary course of business.
Good rule of thumb is that it requires teh transfer of at least 75% of the corp’s assets.
Fundamental Corp Change for Sellign Corp Only
Both the transfer of all or substantially all assets and teh share exhcange are fundamental corp changes fo rthe selling corp only - not the buyer.
Successor Liability: All or Substantially All
No sucessor liability because the selling corp is still in existence so creditors can still sue it.
Exception: “Mere Continuation”
Exception: De Facto Merger
