Fundamental Corporate Changes

Question 1

Fundamental Corporate Changes

Answer 1

Fundamental changes such as Mergers, Sale of substantially all assets (75%), Amendment of Articles, and Dissolution cannot be done by the Board alone. These changes require 1) board resolution, 2) notice to shareholders, 3) shareholder approval by ordinary voting rules, and 4) Articles of the change filed with the State. Here,

Question 2

Mergers

Answer 2

Generally, mergers must be approved by Directors and Shareholders from both corporations. However, this is not required in a Parent-Subsidiary merger (short-form merger) or when the rights of the survivor’s shareholding is not significantly affected. Here,

Question 3

Dissenter’s Appraisal Remedy

Answer 3

A shareholder who does not approve of the fundamental change may force the corporation to purchase their shares at a fair market price. But this right is only if shares are not listed on a national exchange where shares could easily be sold, ie. close corps. Reserving this right requires notice of intent to demand appraisal before the vote/change, a vote against the change (or abstain), and a demand for payment after the change is approved. Here,

Question 4

Dissolution

Answer 4

The board can dissolve a corporation by following the rules for fundamental changes. Dissolution is not the end of the corporation, but rather the beginning of the winding up process. This consists of liquidating all corporate assets, paying creditors, and paying any remaining funds to shareholders pro-rata based on liquidation preferences in articles. Here,