Fundamental Corporate Changes, Dissolution, & Liquidation Flashcards
Examples of fundamental changes
Amendments to articles, mergers, consolidations, share exchanges, dispositions if substantially all assets outside of regular course of business
General procedure for fundamental corporate change
(1) Board resolution
(2) Notice to shareholders
(3) Shareholder approval
(4) Articles of change filed with state
Merger of corporations
Generally must be approved by directors and shareholders of both corporations, unless a parent-subsidiary merger or when rights of survivor’s shareholder not significantly effected
Dissenter’s appraisal remedy
Dissenting shareholders who do not like a corporation’s change can force the corporation to purchase their shares at a fair price if they:
(1) give corporation notice of intent to demand appraisal rights before vote is taken
(2) do not vote in favor of the change
(3) demand payment after change is approved
Voluntary dissolution
If shares have not yet been issued or business has not yet commenced, dissolution by majority of incorporators or initial directors
Once shares have been issued, corporation may dissolve by a corporate act approved under the fundamental change procedure
Effect of dissolution
(1) corporate existence continues
(2) corporation not allowed to carry on any business except business appropriate to winding up and liquidating its affairs
What kind of claim can be asserted against a dissolved company if assets have been distributed?
If assets have been distributed to the shareholders, a claim can be asserted against each shareholder for a pro rata share of claim, to the extent of assets distributed to the shareholder
Can a corporation cut short the time for bringing claims?
Yes, when a corporation has dissolved it can cut short the time for bringing known claims by notifying claimants of a filing deadline.
Unknown claims can be limited to five years by publishing notice of the dissolution in a newspaper in the county where the corporation’s known place of business is located
When can an attorney general seek judicial dissolution?
On the grounds that the articles of incorporation were obtained fraudulently or the corporation is exceeding/abusing authority
When can a shareholder seek judicial dissolution?
(1) directors are deadlocked in management, shareholders can’t break deadlock, and injury is threatened OR corporations affair can’t be conducted advantageously to the shareholders;
(2) directors have acted or will act in a manner that is illegal, oppressive, or fraudulent;
(3) the shareholders are deadlocked in voting power and have failed to elect one or more directors for a period that includes at least two consecutive annual meetings; or
(4) corporate assets are being wasted, misapplied, or diverted for non-corporate purposes
When can creditors seek judicial dissolution?
(1) corporation has admitted in writing that the creditor’s claim is due and owing, and the corporation is insolvent; or
(2) the creditor’s claim has been reduced to judgement, execution of the judgement has been returned unsatisfied, and the corporation is insolvent
