V. Fundamental Corporate Changes

Question 1

Requirements for a Fundamental Corporate change

Answer 1

1. BOard action adopting a resolution of fudnamental change
2. board submits proposal to sahreholders with written notice
3. must get shareholder approval by majority of shares entitled to vote
4. Most of the time, need to deliver document to Secretary of State

Question 2

Dissenting Shareholder’s right of appraisal

Answer 2

Right to force the corp to buy their stock at fair market value

WHen will this right be available:

• Triggered by the following events: 1) amendemnts to articles; 2) merger; 3) disposition of substantially all asssets not in the ordinary course of business; OR 4) tnrasfers of shares in a ashare exchange
• NOt avaialbe if stock is listed on national exchange or has 2000+ shareholders (easier to sell on market)
• Only applies to close corps in practice
• Exclusive remedy unless vote was obtained by faud or decepvite means
• TO perfect right of appraisal:
  
  • 1) before vote, file with corporation wirtten notice of objection and intent to demand payment
  • 2) abstain or vote against propose change AND
  • 3) after vote, within time set by corp, make written demand to be bought out and deposit sock w/ corp
• Court may appoint appraiser if they disagree as to FMV

Question 3

Amendment of the Articles

Answer 3

• Requires board action and notice to sharehodlers AND THEN
  
  • Shareholde approval (majority of outstanding shares entitled to vote)
  • If approved, deliver certificate of amendment to SoS

Question 4

Merger Procedures

Answer 4

• Must have board of director action emanating from both corporations and notice to shareholders THEN
• Shareholder approval (genearlly both), majority of shares entitled to vote
• If approved, deliver articles of merger on secretary of state
• Dissenting shareholders have right of appraisal–both sides

Question 5

Short form merger

Answer 5

• no shareholder approval required if a 90%+ owned subsidiary merged into parnt corp

Question 6

Effect of Merger

Answer 6

• the surviving company accedes to all rights and liabilities of diapprearing company
• SUCCESSOR liability, creditor of constituent corporation can sue the new company.

Question 7

Disposition of all or substnatially all of the assests not in the Ordinary Course of Business Or Share excahnge

Answer 7

usually occurs where one comapny acquires all the stock of another

• Fundamental changes for the selling company only
• Procedure:
  
  • Board of director action and notice selling corps shareholders
    
    • majority entiteld to vote
    • Buying does not need to vote b/c not fundamental change
  • Selling shareholders have rights of appraisal
  • Deliver articles to SecofState
• No Successor liability b/c previous corp still exists unless the buyer of assets is a mere continuation of selling corp

Question 8

Voluntary Dissolution

Answer 8

• Board of Directors action and approval by a majority of the shares entitled to vote
• file notice of intent to disolve with sos
• Stays in existience during wind up
• Notify creditors so they can make claim

Question 9

Involuntary Dissolution

Answer 9

• A present shareholder can petition because of:
  
  • director deadlock causing irreparable harm to corp
  • waste of assets
  • shareholders have failed at two consecutive annual meetings to fill a vacant board position OR
  • 20 % of outstanding shares petition b/c of illegal, oppressive or fradulent acts by directors
• Alternative to ordering dissolution is to order buyout of objecting shareholder–used in close corp
• Creditor can [petion b/c corp is insovlent and 1) he has an unsatisfied judgment; OR 2) corp admits debt in writing
• Attorney General can seek dissolution for procuring incroporation through fraud or abusing authority

Question 10

Administrative Dissolution

Answer 10

• SoS gives not ice of failure to pay license tax for one year, to maintain registered office, etc.
• IF corp does not remedy w/ 60 days, can sign certificate of dissolution
• Corp may apply for reinstatement

Question 11

Winding Up a Corporation

Answer 11

Must liquidate after being dissolved

Wind up:

1. gather assets
2. convert to cash
3. pay creditors (if give’s money to shareholders before creditors, they can usue shareholders to recover)
4. and distribute remainder to sharehodlers pro rata by share unless there is a liquidation preference (usually said in share)