Fundamental Corporate Changes

Question 1

Fundamental corp changes requires what three things:

Answer 1

Board approval

Notice to SHers AND

Approval by a majority of the shares actually cast on the issue

Question 2

What is a dissenting SH right of appraisal?

Answer 2

The right of a SH to force the corp to buy up his stock at FMV before a fundamental corp change

Question 3

When will a SH have a dissenting right of appraisal? If the corp is doing one of these 4 things?

Exception?

Answer 3

Merging
Consolidation
Transferring substantially all assets
Share being acquired in a share exchange

EXCEPTION: No right IF the stock is listed on a national exchange OR if there are more than 2,000 SH

Question 4

When will a SH not have a dissenting right of appraisal? (2)

Answer 4

IF the stock is listed on a national exchange OR if there are more than 2,000 SH

Question 5

The right of appraisal is basically limited to which type of corp?

Answer 5

Close

Question 6

If there is a right to appraisal, how the SH perfect it? (3)

Answer 6

Before the SH vote, file with the corp a written notice of the objection and intent to demand payment;

Abstain or vote against the proposed change; AND

Within 30 days after notice that the change was approved, make written demand to be bought out.

Question 7

To amend the articles we need BOD action, notice to SH, and . . .

Answer 7

SHer approval

Question 8

Corp has 4000 shares entitled to vote. Of those, 3,000 attend the meeting to consider an amendment. Of those, 2,4000 actually vote on the amendment. How many yes do we need?

Answer 8

at least 1,201 SHARES

Question 9

Are there dissenting SH rights of appraisal for article amendments?

Answer 9

no

Question 10

Mergers and Consolidations require what three things?

Answer 10

BOD action for BOTH corps;

Notice to SH

SH approval of both corps (majority of shares that actually vote on the proposal)

Question 11

When is SH approval of a merger not needed?

Answer 11

If 80%-or-more owned subsidiary is merged into parent corp.

Question 12

What happens in a short form merger? What is not need

Answer 12

80%-or-more owned subsidiary is merged into parent corp.

No SH approval needed.

Question 13

Is there a right of appraisal for dissenting SHers in a regular merger and consolidation?

Answer 13

Yes

Question 14

Who gets a right of appraisal in a short form merger?

Answer 14

Dissenting SHers of the subsidiary

Question 15

Effect of a merger or consolidation?

Answer 15

Surviving company succeeds to all right AND liabilities of the disappearing companies.

Question 16

What is successor liability?

Answer 16

Idea that, in a merger or consolidation, the surviving company succeeds to all right AND liabilities of the disappearing companies.

Question 17

A corp and B corp form C corp. Called a. . .

Answer 17

Consolidation

Question 18

S corp wants to sell all its assets to B corp. Or B Corp wants to acquire all assets of S corp. We need BOD approval of both corps, and approval by which corp’s SHers? How many

Answer 18

S (majority of the shares voting)

Question 19

S corp wants to sell all its assets to B corp. Or B Corp wants to acquire all assets of S corp.

Whose dissenting SHers get appraisal rights? WHose do not?

Answer 19

S corp’s get em

B corp’s do not

Question 20

Generally, there is no successor liability for a sale of all assets (because selling corp still exists). Exception? What is it called?

Answer 20

There IS successor liability IF the company buying assets is the SAME COMPANY as the one selling them (same SHers, same management, etc).

This is called the MERE CONTINUATION DOCTRINE

Question 21

Can SH or Directors petition to dissolve the corp?

Answer 21

Yes

Question 22

What must SH or Directors show to dissolve the corp? (one of 3)

Answer 22

Fraudulent, illegal or oppressive acts by directors

Waste of assets

Director deadlock that harms the co

Question 23

When can a credit petition to dissolve? When the corp is _______ and the creditor has either an unsatisfied ____ against the corp OR the corp admits the ____ in writing

Answer 23

INSOLVENT

JUDGMENT

DEBTS

Question 24

When a corp is dissolved, it remains in existence BUT ONLY FOR _____

Answer 24

Liquidation

Question 25

In liquidation, a corp does these 4 things, in this order

Answer 25

Gather all assets

Convert to cash

Pay creditors

Distribute remainder to SH pro rate UNLESS there is a liquidation preference

Question 26

Upon dissolution, SH will get a pro rata distribution of remaining assets after creditors are paid unless there is a …..

Answer 26

Liquidation preference.

Question 27

A liquidation preference works like a _____ preference.

Answer 27

Dividend

Question 28

How are liquidation preferences relevant to insolvency?

Answer 28

LPs are included in the corps liabilities.