Fundamental Corporate Changes Flashcards
General procedure for fundamental changes (KNOW THIS)
(1) Board action adopting a resolution of fundamental change; (2) proposal to Sh with written notice; (3) SH approval; and (4) delivery of the change to the secretary of the state
SH vote required for fundamental change
meeting that constitutes a quorum where votes cast in favor exceed votes cast against
Right of Appraisal
If corporation approves, Sh who dissent to the change may force the corporation to buy your shares for fair value
Triggered by : (1) merger or consolidation; (2) transfer of substantially all assets not in the ordinary course of business; or (3) transfers of shares in a share exchange
Market Out Exception
appraisal is NOT available to Sh of publicly held corps or of corps with at least 2K shareholders and the shares have a value of at least $20M
Essentially, appraisal rights exist only in close corporations
Perfecting right of appraisal
(1) before SH 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, make WRITTEN DEMAND to be bought out and deposit stock with the corporation
“Fair value” for right of appraiser
If Sh and corp cannot agree, court will appoint an appraiser
Amendment of the articles procedure
(1) board action; (2) notice to Sh; (3) SH approval (standard); (4) amended articles delivered to Secretary of State
NO RIGHTS OF APPRAISAL FOR AMENDMENTS
Mergers or consolidations
(1) board action of BOTH corps; (2) notice to SH; (3) SH approval (standard); (4) SURVIVING corp delivers articles of merger or consolidation to the secretary of state
NOTE: appraisal rights exist!
When SH approval of surviving corp is unnecessary
Surviving corp Sh vote is not necessary if (1) AOI of surviving corp will NOT CHANGE; (2) each SH whose shares were outstanding prior to the merger will hold the SAME NUMBER OF SHARES with identical rights and preferences; and (3) the voting power of the shares issued will comprise of NO MORE THAN 20% of the voting power of the shares of the survivng corp
When SH approval of merging corp is not necessary
not required if it is a short form merger of subsidiary (parent owning at least 90% of subsidiary merges it into itself)
Successor liability
surviving corp succeeds to ALL RIGHTS AND LIABILITIES of its constituents
Transfer of all or substantially all of the assets not in the ordinary course of business
“substantially all” = 75%.
FUNDAMENTAL CHANGE FOR THE SELLING OMPANY ONLY, NOT THE BUYER
(1) Board approval by BOTH corporations, (2) Notice to SELLING corp’s SH’s; (3) approval by SELLER’s SH
NOTE: NO DELIVERY to secretary of state
NOTE: rights of appraisal limited to SELLING company’s Shs
Successor liability in asset sales
Generally, NO SUCCESSOR LIABILITY b/c selling company still exists, unless deal says otherwise
EXCEPTION: if sale is really a disguised merger, court might treat it as a merger under de facto merger doctrine and hold purchaser liable for seller’s obligations
Voluntary Dissolution
If NO shares have been issued or biz has not commenced, majority of incorporators or initial directors may dissolve by simply delivering articles of dissolution tot he state
Otherwise, (1) Director action; (2) notice to SH; (3) approval by SH (standard); (4) file notice of intent to dissolve with teh secretary of state
NOTE: Must notify creditors so they can make their claims
Involuntary Dissolution by AG
AG may seek judicial dissolution on ground that corporation FRAUDULENTLY OBTAINED AOI or is abusing its authority
SH may petition for involuntary dissolution because of (1) Director ABUSE, waste of action, or MISCONDUCT; (2) director DEADLOCK that is irreparably injuring the corp; (3) SH have failed at two consecutive ANNUAL meetings to fill a vacant board position; (4) directors are acting ILLEGALLY, OPPRESSIVELY, or FRAUDULENTLY
