Mergers and Termination of Corporate Status Flashcards
What is a merger?
The combination of two or more corporations, such that only one survives
What is required for a merger in Pennsylvania?
- A resolution by the board;
- Written notice to shareholders;
- Approval by a majority of voting shareholders at a meeting when a quorum is present; and
- Amendment of the articles of incorporation
Where do the liabilities belonging to the corporation merging with the other corporation go?
To the surviving corporation
What is a short-form merger?
When a corporation owns 80% of the stock of another corporation; no shareholder approval is required.
To avail itself of dissenter’s rights and be bought out, what must a shareholder dissenting to a merger do?
- Before shareholder vote, file a written notice of intention to demand fair value for his shares;
- Not effect a change in the beneficial ownership of his shares; and
- Not vote to approve the merger
When do asset transfers require approval by the board and shareholders?
When they involve all, or substantially all of the corporation’s assets
What are the procedures for an asset transfer?
The same as a merger, except for only the transferor corporation
Does the transferor remain liable for its debts after transferring its assets?
Yes
When is the transferee responsible to the transferor’s creditors?
- Upon assumption;
- The transaction amounted to a consolidation or de facto merger;
- a continuity of enterprise
- The transaction was entered into fraudulently to escape liability; or
- The transfer was made without adequate consideration and no provisions were made for creditors of the selling corporation
What factors guide a court’s consideration under the continuity of enterprise theory?
Did the purchaser:
- Retain the same employees and supervisors?
- Retain the same facilities?
- Deal in the same products?
- Retain the same name or same assets?
- Continue the same business?
- Hold itself out as a continuation of the enterprise?
When can a shareholder who is entitled to vote on a merger, acquisition, or amendment to the AOI exercise appraisal rights?
if there is no market out opportunity for sale for fair value (e.g., sale on NYSE)
How can a shareholder exercise a right of appraisal?
- Make written notice to the corporation before a shareholder vote on the action
- Make a written demand for FMV after an unfavorable vote
When may a corporation dissolve voluntarily before the issuance of stock?
- If no business was transacted and no assets held;
- All debts are paid or provisions have been made for payment;
- Money received on stock subscriptions was returned; and
- The dissolution was approved by a majority of shareholders and incorporators
When may a corporation dissolve voluntarily after the issuance of stock?
- The board adopts a proposal for dissolution, and
2. The majority of shareholders approve
Upon dissolution of the corporation, to what are shareholders entitled?
Equal distribution of any assets after remaining corporate debts have been paid
