Fundamental Corporate Changes

Question 1

What corporate changes qualify as “extraordinary” such that the board cannot conduct them alone?

Answer 1

The following corporate changes are considered extraordinary:

1. Amending the articles of incorporation;
2. Merging or consolidating with another company; (RoA)
3. Transfering substantially all of a corporation’s assets; (RoA)
4. Converting to another form of business; (RoA)
5. Dissolving.

Question 2

In general, what must be done for a corporation to take an extraordinary action?

Answer 2

In general, a corporation must take the following steps to approve an extraordinary action:

1. The board must adopt a resolution recommending the action to the shareholders;
2. The board submits the proposal to the shareholders with written notice;
3. The shareholders approve by majority vote of share entitled to vote.

Dissenting shareholders may be entitled to appraisal.

Question 3

Right of Appraisal

Answer 3

The right of appraisal is a dissenting shareholder’s right to force the corporation to buy the shareholder’s stock at fair market value. The right of appraisal is available only in close corporations.

Question 4

Which extraordinary corporate changes trigger the right of appraisal?

Answer 4

• Merging/consolidating
• Transferring substantially all assets
• Stock being acquired in a share exchange
• Converting to another form of business

Question 5

How does a shareholder perfect their right of appraisal?

Answer 5

A shareholder perfects her right of appraisal by:

1. Filing notice with the corporation before the shareholders vote;
2. Attending the shareholder vote;
3. Abstaining from voting or voting against the proposed change;
4. Making written demand.

Question 6

Successor Liability

Answer 6

After a merger of two corporations, the resulting corporation is liable for the merging corporations’ liabilities.