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Exam 40: Corporations: Mergers, Consolidations, Terminations

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Question 41

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[Corporate Death] Janelle is president and a large shareholder in RecyCALL, a corporation that sells used cellular telephones. Although the company was not insolvent, sales had been significantly down, and Janelle decided that it would be a good idea to discontinue the business. The board of directors agreed with her. The board members presented the proposal to discontinue the corporation to shareholders. Initially, Ahmed, a disgruntled shareholder, opposed ending the corporation. He claimed that the problem was that Janelle had done a poor job in management. Janelle planned to go forward with the termination of the company because a majority of the shareholders agreed. Ahmed, however, came around; and upon a second vote to discontinue the corporation, the vote was unanimous. Tony, a vice president of the corporation, was aware of a few outstanding debts owed by RecyCALL. He suggested hurrying along quietly with ending the corporation because any claims not made before the corporation was dissolved could be avoided. Janelle told him that she was not sure that was a good idea. Therefore, the company proceeded with all appropriate notifications. When the time came to liquidate the corporation, the members of the board did not want to participate. Janelle was concerned about what action to take at that point because she really wanted to be finished with RecyCALL. -Which of the following should occur in the face of the board not wishing to be involved in liquidation proceedings?

A) A court should appoint a bankruptcy trustee to handle liquidation.
B) A court should appoint a receiver not affiliated with the corporation to take over liquidation duties.
C) Janelle, as president, is required to take over liquidation duties.
D) The court should enter an injunction requiring all the directors to proceed with liquidation regardless of whether they want to do so.
E) The court should enter an injunction requiring that at least half of the directors proceed with liquidation regardless of whether they want to do so.

F) C) and D)
G) A) and C)

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Question 42

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What is the difference between the procedures governing mergers and consolidations?

A) With consolidation, the plan need not be submitted to the secretary of state.
B) With consolidation, only the board of directors of both involved corporations must approve the plan; with merger, the shareholders of both involved corporations must also approve the plan.
C) Unlike merger, with consolidation, no approval certificate is necessary.
D) Unlike consolidation, with merger, the shareholders must approve the plan before it goes to the board of directors.
E) The procedures governing mergers and consolidations are the same.

F) C) and D)
G) B) and E)

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Question 43

Multiple Choice

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If Calvin and Daniella cannot reach an agreement with the corporation, how is the value of their shares determined?

In a consolidation, which of the following is true regarding the property of the original corporations?

What key piece of information does an aggressor generally need in order to gain control of a target corporation through proxies?

________ is the process by which the board converts the corporation's assets into cash and distributes them among the corporation's creditors and shareholders.

After acquiring a substantial number of the target corporation's shares, what is generally the next step for an aggressor, and why?

Takeovers to which the management of the target corporation objects are called hostile takeovers.

In the attempt of Grow True Corporation to gain control, which of the following terms describes Grassroots Corporation?

A(n) ________ is the right of the surviving corporation's to sue for debt and damages on behalf of the absorbed corporation.

Aggressors often try to win the favor of a few institutional investors that own large blocs of shares.

[Gaming Merger] Calvin and Daniella each own 5% of GamePower, a video game design company. GamePower is seeking to merge with GameKing, and before a shareholder meeting, Calvin and Daniella email all other shareholders and corporate representatives about their disagreement with the proposed transaction. At the shareholder meeting, they vote against the merger with GameKing, but, 90% of the shareholders vote in favor of the merger. Calvin tells Daniella that it is not fair that they are forced to be part of GameKing. Daniella tells him they have no choice, so get used to it. -Assuming Calvin and Daniella can exercise their appraisal rights in this situation, what must they do?

[Cheeseland Purchase] Cheeseland, Inc., manufactures processed cheese products. BigCheese, Inc., seeks to purchase Cheeseland's well-known trademarks and logos, and its factory and equipment. The Board of Directors of both companies vote in favor of the deal. Alba is a 15% shareholder of Cheeseland. Her grandfather started the business many years ago and she does not want the company to sell off its endearing trademark and the factory her grandfather built. She visits Myron, an attorney, and Myron tells her that the Board's vote is legitimate to finalize the deal with BigCheese and the best she can do is take the money. Cyril is a shareholder in BigCheese, and his grandfather was cheated fifty years ago by Alba's grandfather and he doesn't want BigCheese to be responsible for Cheeseland's enormous liabilities. Cyril threatens to take BigCheese to court because he claims shareholder approval is required to purchase Cheeseland. -Is Cyril correct that BigCheese needs shareholder approval for the deal with Cheeseland?

Which of the following is false regarding involuntary liquidation?

If a dissenting shareholder exercises an appraisal right when a proposed merger is involved, which of the following is generally used to determine the value of stock?

A(n) ________ is when a group within a corporation (usually management) buys all outstanding corporate stock held by the public.

Which of the following describes a plan set up by ABC Company whereby its other shareholders may purchase shares of ABC stock at a significantly reduced price if any individual or entity obtains a majority of ABC Company's stock?

When a consolidation occurs, what happens to the original corporations?

In a(n) ________, an aggressor pays cash for stock to target shareholders.

[Corporate Death] Janelle is president and a large shareholder in RecyCALL, a corporation that sells used cellular telephones. Although the company was not insolvent, sales had been significantly down, and Janelle decided that it would be a good idea to discontinue the business. The board of directors agreed with her. The board members presented the proposal to discontinue the corporation to shareholders. Initially, Ahmed, a disgruntled shareholder, opposed ending the corporation. He claimed that the problem was that Janelle had done a poor job in management. Janelle planned to go forward with the termination of the company because a majority of the shareholders agreed. Ahmed, however, came around; and upon a second vote to discontinue the corporation, the vote was unanimous. Tony, a vice president of the corporation, was aware of a few outstanding debts owed by RecyCALL. He suggested hurrying along quietly with ending the corporation because any claims not made before the corporation was dissolved could be avoided. Janelle told him that she was not sure that was a good idea. Therefore, the company proceeded with all appropriate notifications. When the time came to liquidate the corporation, the members of the board did not want to participate. Janelle was concerned about what action to take at that point because she really wanted to be finished with RecyCALL. -Which of the following is true of Janelle's plan to continue with disbanding the corporation over Ahmed's objection?