Mergers & dissenters' rights

Question 1

Introduction

Answer 1

Merger is considered a fundamental change in the corp. Fundamental changes must be both proposed by directors and voted upon by a majority of all shares.

Mergers also give rise to shareholder protection known as dissenter rights

Question 2

Merger

Answer 2

Merger - combindation of two corps, with only one of the corps surviving who assumes the assets and liabilities of the corp it acquires

Consolidation - similar to merger except that neither corp survives and a new corp is created instead

Procedural Requirement - for both corps in a merger, both must:

1. a resolution by the directors approving and proposing the mergers to the shareholders
2. written notice to shareholders and approval from shareholders
3. required docs (plan of merger, amended articles of incorp) must be filed with state

Question 3

Other Merger-Like Transactions

Answer 3

1. Asset Sales/Acquistions - if corp sells all or substantiall al of its assets, the selling corp must follow the same procedure as merger but buying corp need not do same

Note - corp acquiring assets of another is not liable for all the debts or liablity of the prior corp unless it agrees it is continuation of its predecessor corp

2. Share Exchanges - one corp also can buy all of the stock of another corp prusuant to a share exchange plan and procedures for a merger must be followed

Question 4

Dissenter Rights

Answer 4

Generally - shareholder have right to vote on a merger, asset sale, share exchange, or amendment and gives shareholder right to have her shares purchased by the corporation at a fair value determined by the court

Procedural Req - to invoke dissenters’ rights, a shareholder must

1. be the record holder of the shares on the date of the meeting the proposal will be presented
2. either abstain or vote no on the proposal and
3. within 10 days, make a written demand for fair market value after the action has been approved

Next - corp must then pay the shareholder what they estimate to be a fair market value

FMV - what a willing seller who is under no compulsion to sell would be willing to accept and what a willing buyer would be wiling to pay; cannot exceed amount specified in demand from shareholder

Disagreement - if within 3 months after demand is made, shareholder disagrees with the FMV, then shareholder must file a lawsuit to have the value determined by the court

Question 5

Dissolution - Voluntary Dissolution

Answer 5

How - requires a resolution by the direcotrs and a shareholder vote for approval

Winding up - dissolved corp may continue to exist as a corp for the limted purpose of winding up its affairs and liquidating its business

Liablity - directors are responsible for distribution of corporate assets during the winding up period and may be liable for improper distribution

Question 6

Dissolution - Involuntary Dissolution

Answer 6

How - occures at the requirest of a creditor, shareholder, direcotr, or governmental enforcement authority

Creditor - must show the corp is not pay debts

Shareholder - must show

1) corp artciels have been canceld or its period of existence has expired or
2) the corp is insolvent or
3) the objectives of the corp have wholly failed, abandoned

Governmental - must show copr was organized or used to futher criminal purposes

Question 7

Dissolution - Dissolution by Court

Answer 7

Court may dissolve a corp if corp

1. violated a statute concerning the creation of the corp
2. has failed to use its privileges of incorp
3. has surrendered its corporate rights
4. has misused its corporate rights

5 its articles of incorp were improperly approved and filed with the state