Chapter 36 - Management Structure of Corporations
If Barker Co. buys 51% of the shares of Carter Co.:
Barker Co.'s board would have to approve the sale.
A "short-form merger" requires shareholder approval of both corporations.
FALSE
Under the Investor Protection and Securities Reform Act of 2010, new corporate governance rules are imposed on publicly and privately held companies.
FALSE
Management buyouts commonly make extensive use of borrowed funds.
TRUE
Appraisal rights:
belong to dissident shareholders.
If Sherman, a shareholder, dissents to a corporate merger, his appraisal remedies will be:
fair value of the shares as of the time immediately before the action to which he objects is taken.
Nonjudicial dissolution may be brought about by:
All of these.
Avins Corporation wishes to acquire all of the shares of Solomon Corporation. Approval would be required of:
Avins' board of directors.
The state may bring an action for involuntary dissolution of a company if the corporation has not paid its annual franchise tax.
TRUE
The state, a shareholder, or a creditor may bring a proceeding seeking judicial dissolution.
TRUE
In many states, dissolution that is nonjudicial may be brought about when:
all the shareholders agree to dissolve, even without action by the board.
A short-form merger:
allows no appraisal rights for the parent's minority shareholders.
AB Corporation consolidates with YZ Corporation to form A-Z Corporation. The debts of AB Corporation are:
assumed by the new corporation.
One method of taking a publicly held corporation private, by forcing minority shareholders to accept cash or property for their shares, is a(n):
cash-out combination.
If Blando Corporation buys all the existing common shares of Ardeaux Corporation, which has no preferred shares, in exchange for a new class of Ardeaux Corporation preferred shares, the transaction is a(n):
compulsory share exchange.
A consolidation:
requires the assent of the board of directors and shareholders of each corporation.
The courts may grant a petition of involuntary dissolution if shareholders:
show that corporate assets are being squandered.
A corporation may accomplish acquiring all or substantially all assets of another corporation by:
All of these.
The Revised Model Business Corporation Act would permit the directors to avoid a shareholder vote for which of the following amendments to the articles of incorporation?
A change from duration of 99 years to perpetual life
Which of the following is true of liquidation of a corporation?
A court-appointed receiver may conduct involuntary liquidation.
Once a corporation becomes publicly held, it cannot return to being private.
FALSE
The 2002 amendments to the Revised Act provide for procedures permitting:
Both of these.
A dissenting shareholder can stop a merger or consolidation.
FALSE
If a shareholder dissents to a proposed business combination, he is entitled to receive the fair value of his shares. In order to do so, the shareholder must do which of the following?
Make a written demand upon the corporation within the set time period
Which of the following is a prerequisite for requesting appraisal rights?
Meet the statutory time limit
If Yeron Corporation buys all of the assets of Aeron Corporation:
None of these.
The remedy of appraisal is allowed to a dissenting shareholder if:
None of these.
A corporation must notify the shareholders of the existence of dissenters' rights before taking the vote on the corporate action.
TRUE
The Revised Act grants dissenters' rights to:
a shareholder when any amendment to the articles of incorporation materially and adversely affects that dissenter's rights regarding his shares.
A shareholder of North Corporation dissents to the corporation's merger with West Corporation. If the appraisal remedy is granted, the shareholders will be paid the:
fair market value of their shares.
A compulsory share exchange:
is a transaction by which the corporation becomes the owner of all the outstanding shares of one or more classes of another corporation by an exchange that is compulsory on all owners of the acquired shares.
The management of Alkort Corporation forms Bortalk Corporation in which management owns some stock and institutional investors own the rest. Bortalk Corporationissues bonds to institutional investors to raise cash, with which it purchases the assets or stock of Alkort Corporation. The assets of Alkort Corporation are used as security for the bonds. This action by management is best described as a:
leveraged buyout.
The combination of two or more corporations' total assets, title to which is vested in one of them, which is known as the surviving corporation, is a:
merger.
Which of the following statements about corporate dissolution is incorrect?
A creditor cannot force a corporation into dissolution.
A corporation may acquire all of the assets, including goodwill, of another corporation and combine them with its own through:
All of these.
A corporation that buys the assets of another corporation does not assume the other's liability unless the:
All of these.
A court may dissolve a corporation in a proceeding by a shareholder if it has established that:
All of these.
A merger of Parker Corporation with Jones Corporation that results in only Parker Corporation surviving normally would require approval of:
All of these.
The Revised Act permits the board of directors to adopt certain amendments without shareholder action. These amendments would include:
All of these.
Which of the following is NOT a basis for involuntary dissolution?
By the shareholders, if they dissent to a merger and are asserting their appraisal rights
The RMBCA (without the 1999 amendments) grants dissenters' rights to all but which of the following?
Dissenters' rights exist under the RMBCA in all of these situations.
Dissolution of a corporation does not terminate its existence and does not require that it liquidate its assets.
FALSE
If Able Corporation purchases all of the stock of Beta Corporation rather than all of its assets, there is now a change in Beta Corporation's legal status.
FALSE
If Comet Corporation buys substantially all the assets of Daimark Corporation, a new corporation will result.
FALSE
Shareholder approval of a fundamental change in a corporation would normally need to be unanimous.
FALSE
Shareholders have a vested property right resulting from the provisions in the articles of incorporation and therefore must give approval for any amendments to the articles.
FALSE
Statutory provisions do not protect creditors upon the dissolution of a corporation.
FALSE
The 1999 amendments to the RMBCA create an appraisal remedy for charter amendments.
FALSE
The Action Corporation and the Braker Corporation combine into the Action Corporation. This is a consolidation.
FALSE
The Action Corporation and the Braker Corporation combine to form the Cable Corporation. This is a merger.
FALSE
The Revised Act, as amended in 2002, provides for domestication procedures which permit a foreign business corporation to become a domestic partnership or LLC.
FALSE
Under the CFPA of 2010, publicly held companies must, on their proxy solicitations, disclose and provide shareholders with a binding vote to approve any type of compensation based on or relating to mergers, consolidations, or the proposed sale of all of the assets of the company.
FALSE
When purchasers are willing to pay a premium for a block of shares that conveys control, almost all courts today require the controlling shareholders to turn over this control premium to the corporation's treasury.
FALSE
A sale of substantially all of the assets of a corporation in the ordinary course of business of the corporation will not require shareholder approval.
TRUE
A tender offer is a general invitation to all the shareholders of a target company to tender their shares for sale at a specified price.
TRUE
After an amendment to the corporate charter has been approved, it must be filed with the Secretary of State.
TRUE
Brown Corporation purchased all of the stock of Grey Corporation. The appraisal remedy is not available to a dissenting shareholder of Brown Corporation.
TRUE
If Able Corporation buys all the assets of Beta Corporation in a merger, Able Corporation also assumes Beta Corporation's liabilities.
TRUE
If Jax Corporation and Kaz Corporation combine all of their assets and create a consolidated corporation, Jax Corporation and Kaz Corporation will cease to exist.
TRUE
Odele Corporation transfers one third of its assets to Eledo Co., a wholly owned subsidiary. Under the Revised Act, this transfer is considered to be a sale in the regular course of business.
TRUE
The Revised Act permits the board of directors to make minor corporate name changes without shareholder action.
TRUE
The attorney general of the state of incorporation may bring a court action to dissolve a corporation if the corporation obtained its charter by fraud or if the corporation continues to exceed or abuse the authority that was conferred on it.
TRUE
The RMBCA provides what period of time within which an otherwise barred claim may be enforced for a claimant who did not receive notice of dissolution and liquidation?
Three years
Larson & Son manufactured welders that frequently malfunctioned, setting clothing on fire and causing serious burns. Larson & Son sold all of its assets to Argo Co., which continued to manufacture the Larson welder product line. Eighteen months after Argo's purchase, one of Larson's customers sued Argo for injuries caused by a welder purchased from Larson, one year prior to the purchase by Argo. Under the circumstances, Argo Co.:
might be held liable for this debt in some states under strict tort liability.
Fundamental changes to a corporation:
need to be approved by shareholders, by a majority of the shares present at a meeting at which a quorum is present, under the 1999 amendments to the Revised Act.
If a company owns 90 percent or more of the outstanding shares of each class of a subsidiary company's stock, a merger may be effected with approval of the parent's board of directors alone, without resort to shareholders. This is called a:
short-form merger.
The consolidation of AB Corporation and YZ Corporation requires the affirmative majority vote of:
the boards of directors and shareholders of both corporations.
A creditor may petition the court to judicially dissolve a corporation if he has an unsatisfied judgment against the corporation and:
the corporation is insolvent.