BUS 250 CH.34 (worksheets & homework)

In which of the following situations is a self-dealing transaction valid:

- A special committee of disinterested directors approve it - Disinterested shareholders approve it - It was entirely fair to the corporation

Fiduciary Duty: Act in the best interests of the corporation and shareholders - Duty of Care

- Act with the care than an ordinarily prudent person would take in a similar situation -- Rational business purpose -- Legality -- Informed decisions - Act in a manner the manager reasonably believes to be in the best interests of the corporation

Defensive measures that companies take to protect themselves from hostile takeovers are called which of the following?

- Antitakeover devices - Shark repellents

Goals of Shareholders:

- Increase current stoke prices

Goals of Stakeholders:

- Keep the business alive and in their community

Which of the following are goals accomplished by the business judgment rule?

- Keeps judges out of corporate management - Encourages directors to serve - Permits directors to do their jobs

Goals of Managers:

- Maximize their income - Keep their jobs - Build an institution that will survive them

Fiduciary Duty: Act in the best interests of the corporation and shareholders - Duty of Loyalty

- No conflict of interest - No unfair self dealing - Cannot steal corporate opportunity

Ways to Takeover Another Company: Buy the company's assets:

- Requires approval from shareholders and directors of acquired company

Ways to Takeover Another Company: Merge with the company

- Requires approval from shareholders and directors of acquired company

Ways to Takeover Another Company: Buy stock from the company's shareholders (tender offer)

- Requires shareholders to accept offer. Does not require director approval

Courts generally allow directors to take defensive measures against takeovers, as long as which of the following is true?

- Shareholder welfare is the board's primary concern - In cases where the company will ultimately be sold, the board considers factors other than price alone when selecting a bidder

Which antitakeover devices did Airgas use in Airgas, Inc. v. Air Products and Chemicals, Inc.?

- Staggered board of directors - Supermajority voting

Bidder's tender offer to publicly traded company begins. Bidder files disclosure with SEC. Target company must:

- State its position on the offer within 10 days.

Which of the following are holdings of the court in Anderson v. Bellino?

- The defendant breached his duty of loyalty - A corporate officer or director may compete with his corporation under certain circumstances - A corporate officer or director has the burden of establishing that his competition with the corporation was done in good faith and did not harm the corporation or deprive it of business

Which of the following are common scenarios in a hostile takeover?

- The target has assets that the bidder genuinely wants - A speculator plans to resell all or part of the target at a profit

Bidder's tender offer to publicly traded company begins. Bidder files disclosure with SEC. Shareholders may:

- accept and/or withdraw acceptance of tender offer at any time while offer is still open.

Bidder's tender offer to publicly traded company begins. Bidder files disclosure with SEC. Bidder must:

- keep tender offer open for at least 20 business days initially, and at least 10 business days after any substantial change in terms of the offer. - pay all selling shareholders the highest price offered, regardless of when they tendered. - purchase shares pro rata from all selling shareholders if more shares are tendered than bidder wants to buy.

What is a "scorched earth strategy"?

A defensive takeover strategy where the target sells off the assets that the takeover company most wants.

Which of the following statements is correct with respect to state efforts to offer protection to companies targeted for hostile takeovers?

Both statutory law and the state courts have provided some degree of protection for companies.

A manager who engages in self-dealing is automatically liable to the corporation and the shareholders.

False

Courts will protect managers who engage in illegal activity if they did so to benefit the corporation and their actions were entirely fair to the shareholders.

False

Only directors of corporations incorporated in Delaware may consider the interests of stakeholders when making business decisions.

False

States are not involved in the regulation of corporate takeovers.

False

Tender offers are regulated on the federal level by the National Labor Relations Act.

False

The "business judgment rule" has been replaced by "good faith statutes" in most states.

False

Which of the following describes the duty of loyalty?

It prohibits managers from making a decision that benefits them at the expense of the corporation.

Which of the following is NOT a method to acquire control of a company?

Make an initial public offering

Which of the following is correct concerning anti-takeover efforts?

Most states have passed laws to deter hostile takeovers, but these statutes have not totally eliminated hostile takeovers.

_______ occurs when a manager makes a decision _______ either _______ or another company with _______.

Self-dealing; benefitting; herself; with which she has a relationship

Which of the following is a fundamental goal of shareholders?

To have an immediate increase in stock price

A director violates the corporate opportunity doctrine if he or she competes with the corporation, unless the disinterested directors approve of the director's actions.

True

A manager may take advantage of business opportunities in the same type of business as her corporation if she offers the opportunity to disinterested directors and shareholders and they turn it down.

True

A manager who has engaged in self-dealing has violated the duty of loyalty to the corporation, unless the self-dealing was entirely fair to the corporation.

True

A public offer to buy a block of stock directly from shareholders is called a tender offer.

True

A speculator plans to acquire control of Kelp Corporation and then resell it at a profit. A speculator is sometimes known as a corporate raider.

True

Adopting supermajority voting makes it more difficult for a shark to acquire control of a company, primarily by making the process take longer.

True

Courts generally give managers wide latitude when determining whether a business decision had a rational business purpose.

True

Directors and officers are both corporate managers.

True

Directors have the authority to manage the corporate business.

True

Generally, managers that make informed decisions will not be liable even if their decision turned out badly.

True

In order to use poison pills, staggered boards of directors, and supermajority voting as takeover defenses, they must first be authorized by the shareholders.

True

Sometimes target companies will simply buy back a shark's stock in the target at a premium price to regain control of the company.

True

On the day a tender offer begins,

a bidder must file a disclosure statement with the SEC.

The business judgment rule is

a common law concept that has achieved national acceptance.

A shareholder rights plan, or poison pill, protects a company from a takeover by

diluting the value of shares once an outsider acquires more than a certain percentage of company stock.

Generally, courts will protect managers who make informed decisions

even if the decision ultimately harms the company.

Alex is a director of ABC, Inc. Alex wants to personally make a major purchase from Bravo Co. If it knew of the opportunity, ABC might be also interested in making that same purchase. Alex must

first offer the opportunity to make the purchase to the disinterested directors of ABC or its shareholders.

Hostile takeovers have been a feature of American corporate life

for more than 30 years.

Which of the following takeover defenses is evidenced by the target buying back the shark's stock at a premium price?

greenmail

For the business judgment rule to apply, the manager must

have acted in the best interests of the corporation.

The Williams Act

is designed to regulate the conduct of those attempting to take over a company.

The business _______ rule protects both the _______ and her _______. If a manager acted _______, a court will not hold her _______ for any harm her decision causes the company, nor will it _______ her decision. If the manager breached her _______, then she _______ her decision was _______ to the _______.

judgment; manager; decision; in good faith; personally liable; rescind; fiduciary duty; has the burden of proving that; entirely fair; shareholders

Anti-takeover tactics include all EXCEPT

negative tender offers.

The Unocal decision is significant because the Court:

permitted directors to consider the interests of stakeholders when making business decisions, whereas previously directors could only consider the corporation's shareholders' interests.

A tender offer is an offer from an acquirer to

purchase a the from a target company's shareholders.

The _______ is designed to prevent managers from _______ their companies into _______ deals. The _______ achieves the opposite, prohibiting managers and _______ from _______ their companies from _______ deals.

self-dealing rule; forcing; unfair; corporate opportunity doctrine; controlling shareholders; excluding; favorable

If a company is using a scorched earth strategy to defend against a hostile takeover, it will

sell off the assets that the shark most wants.

_______ must authorize new classes of stock, but many companies have _______ preferred stock in their charters, which is _______ with its _______ left blank, to be filled in by _______ upon issuance.

shareholders; blank check; authorized; characteristics; the board of directors

_______ elect _______ who set _______ and then directors appoint _______ to _______ these corporate goals.

shareholders; directors; policy; officers; implement

State statutes governing takeovers tend to protect

target companies, because legislators fear the impact on the local economy if a major employer leaves.

If a court determines that a manager's corporate decision amounted to self-dealing,

the business judgment rule will not apply.

In re S. Peru Copper Corp. Shareholder Derivative Litig. involved a transaction between

the controlling shareholder of SPC and SPC.

The Anderson v. Bellino case held that

the defendant did not act in good faith and violated the corporate opportunity doctrine.

Amy is on the board of directors of Computers Plus. Computers Plus is looking for a warehouse to purchase. Amy owns a warehouse. In order for Amy to sell her warehouse to Computers Plus

the disinterested members of the board of directors must approve the transaction.

The formation of larger manufacturing enterprises during the Industrial Revolution required greater capital investments, leading to

the separation of business ownership and management in many cases.

The Williams Act regulates tender offers to shareholders of companies

with publicly traded stock.