Deck 38: Mergers and Takeovers

Question 1

A short-form merger is the acquisition of control over a corporation through a purchase of stock.

Answer 1

False

Question 2

All states have statutes authorizing share exchanges for domestic corporations.

Answer 2

True

Question 3

Shareholders are not required to vote to approve a plan of merger.

Answer 3

False

Question 4

Before a vote is taken on a proposed combination, the shareholders must be given sufficient information to evaluate the deal.

Question 5

Corporate creditors are required to approve a plan of consolidation.

Question 6

Merger and consolidation refer to two legally distinct proceedings, but consolidation is also used to refer to all types of corporate combinations.

Question 7

Appraisal rights do not normally apply to short-form mergers.

Question 8

On a consolidation, a new corporation acquires all of the assets and liabilities of the corporations that were consolidated.

Question 9

One corporation that owns all of the shares of another corporation is a subsidiary corporation .

Question 10

In a consolidation , two or more corporations combine in such a way that only one of the corporations continues to exist.

Question 11

A merger will not affect the rights and liabilities of the corporations involved.

Question 12

In a merger, the surviving corporation assumes all of the assets and liabilities of the disappearing corporation.

Question 13

Appraisal rights cannot be lost even if the statutory procedures are not followed precisely.

Question 14

A short-form merger can be accomplished only with the approval of the shareholders .

Question 15

A share exchange can be used to create a holding company.

Question 16

Only one of the boards of directors of the corporations involved must approve a merger .

Question 17

An appraisal right is available only when a federal statute specifically provides for it.

Question 18

All states have statutes authorizing consolidations.

Question 19

The shareholder's appraisal right does not normally apply to sales of substantially all of the corporate assets.

Question 20

No state allows the combination of domestic and foreign corporations.

Question 21

To resist a takeover, a target company may make a self-tender .

Question 22

A takeover is the acquisition of control over a corporation through a purchase of substantially all of its assets.

Question 23

Dynamo Corporation combines its assets and liabilities with those of Energy Company to form Fuel Inc. Dynamo and Energy cease to exist. The formation of Fuel Inc. is

A)a takeover.
B)a consolidation.
C)a liquidation.
D)a share exchange.

Question 24

Through a tender offer, an acquiring corporation deals directly with a target company's management in seeking to purchase the target's stock.

Question 25

Building Corporation and Construction Inc. combine so that only Construction continues to exist. This is

A)a takeover.
B)a merger.
C)a liquidation.
D)a share exchange.

Question 26

The business judgment rule may apply to determine whether directors acted reasonably in resisting a takeover attempt.

Question 27

During the liquidation process, corporate assets are converted into cash.

Question 28

Lipstick Inc. merges with Mascara Inc. Only Mascara remains. The articles of merger

A)amend the articles of Mascara.
B)disappear once the merger is complete.
C)create an entirely new organization.
D)take the place of the articles of Mascara.

Question 29

When a corporation is dissolved voluntarily, its assets can be liquidated without notice to its creditors.

Question 30

Outlook Inc. merges with Pinnacle Inc. Only Pinnacle remains. Outlook owed money to Quest Bank and other creditors. With respect to these debts, in the merger Pinnacle assumes

A)none.
B)only those incurred after the merger was proposed.
C)an amount equal to the ratio of the firms' pre-merger market values.
D)all.

Question 31

A shareholder may not petition a court for corporate dissolution.

Question 32

Generally, a corporation that acquires any assets of another corporation needs to obtain shareholder approval for the purchase.

Question 33

A court cannot dissolve a corporation for failure to commence business operations.

Question 34

All forms of business organizations limit the liability of their owners.

Question 35

Dissolution of a corporation can be brought about by an agreement between the shareholders and the board of directors.

Question 36

Dissolution of a corporation can be brought about by the shareholders' majority vote to initiate dissolution proceedings.

Question 37

A court can dissolve a corporation for abuse of corporate powers.

Question 38

When dissolution takes place by voluntary action, the members of the board of directors act as trustees of the corporate assets.

Question 39

Generally, a corporation that is selling all of its assets must obtain the approval of the shareholders.

Question 40

Rock Quarry Inc. merges with Stonework Inc. Only Stonework remains. Rock Quarry held rights in certain real property. With respect to these assets, in the merger Stonework assumes

A)none.
B)only those acquired after the merger was proposed.
C)an amount equal to the ratio of the firms' pre-merger market values.
D)all.

Question 41

Bus Corporation exchanges some of its shares for some of the shares of Car Company. The exchange is used to create Drive Inc., whose business activity is to hold the shares of the two companies. Once the formalities are satisfied, a certificate of the exchange is issued by

A)Drive Inc.
B)none of the choices.
C)the appropriate state.
D)the U.S. Department of Commerce.

Question 42

Revenue Inc. owns more than 90 percent of the shares of Sales Corporation. A copy of a plan for a merger of Revenue and Sales must be sent to each shareholder of

A)both corporations.
B)Revenue.
C)Sales.
D)neither corporation.

Question 43

Salmon Company decides to combine its operations with Tuna Corporation to form United Seafood Inc. Salmon and Tuna are domestic corporations. The plan for Salmon and Tuna's combination must be approved by the shareholders of

A)each corporation.
B)Salmon only.
C)Tuna only.
D)neither corporation.

Question 44

All of the shares of GMO Company are owned by Hybrid Inc. GMO Inc. is

A)a holding company.
B)a parent corporation.
C)a subsidiary corporation.
D)none of the choices.

Question 45

Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations. The plan for Bank and Credit's combination must be approved by the board of directors of

A)each corporation.
B)Bank only.
C)Credit only.
D)neither corporation.

Question 46

Lumber Company owns more than 90 percent of the shares of Mill Corporation. A plan for a merger of Lumber and Mill must be approved by the directors of

A)both corporations.
B)Lumber only.
C)Mill only.
D)neither corporation.

Question 47

Mergers, consolidations, and share exchanges are authorized by

A)all states.
B)most states.
C)no states.
D)the federal government.

Question 48

Lunch Truck Inc. owns more than 90 percent of the shares of Meal Prep Company. A plan for a merger of Lunch Truck and Meal Prep must be approved by the shareholders of

A)both corporations.
B)Lunch Truck only.
C)Meal Prep only.
D)neither corporation.

Question 49

Code Company combines its assets and liabilities with those of Design Corporation to form Engineer Inc. Code and Design cease to exist. With respect to the assets of Code and Design, Engineer Inc. acquires

A)none.
B)only those acquired after the combination was proposed.
C)an amount equal to the ratio of the firms' pre-merger market values.
D)all.

Question 50

Quantum Company exchanges some of its shares for some of the shares of Rocket Corporation. The exchange is used to create Space Inc., whose business activity is to hold the shares of the two companies. Space Inc. is

A)a holding company.
B)a parent corporation.
C)a subsidiary corporation.
D)a foreign corporation.

Question 51

Carrier Company exchanges some of its shares for some of the shares of Dispatch Corporation. The plan for this exchange must be approved by each corporation's

A)directors only.
B)shareholders only.
C)directors and shareholders.
D)none of the choices.

Question 52

Market Company exchanges some of its shares for some of the shares of Niche Corporation. On the exchange of shares between Market and Niche

A)both companies continue to exist.
B)both companies cease to exist.
C)only Market survives.
D)only Niche survives.

Question 53

Lender Inc. owns all of the shares of Mortgage Company. Lender Inc. is

A)a holding company.
B)a parent corporation.
C)a subsidiary corporation.
D)all of the choices.

Question 54

Through a certain transaction, Café Inc. acquires all of the shares of Diner Corporation for some of Café's shares. Both Café and Diner continue to exist. This is

A)a consolidation.
B)a share exchange.
C)a short-form merger.
D)a purchase of assets.

Question 55

Kudos Corporation combines its assets and liabilities with those of Livestream Company to form MedOnline Inc. Kudos and Livestream cease to exist. The agreement between Kudos and Livestream that sets out the capital structure and other features of MedOnline

A)amends the articles of Kudos and Livestream.
B)disappears once the combination is complete.
C)combines with the articles of Kudos and Livestream.
D)takes the place of the articles of Kudos and Livestream.

Question 56

Farm Inc. combines its assets and liabilities with those of Grain Company to form Harvest Corporation. Farm and Grain cease to exist. With respect to the liabilities of Farm and Grain, Harvest acquires

A)none.
B)only those acquired after the combination was proposed.
C)an amount equal to the ratio of the firms' pre-merger market values.
D)all.

Question 57

Cloud Inc. merges with Data Corporation. Cloud, the surviving corporation, issues shares or pays fair consideration to

A)Cloud's shareholders.
B)Data's shareholders.
C)the state.
D)no one.

Question 58

Beef Inc. merges with Chicken Corporation. Beef absorbs Chicken. After the merger, the surviving corporation is

A)a different, new entity-Diners Choice Inc.
B)Beef and Chicken.
C)Beef only.
D)Chicken only.

Question 59

Garden Company and Home Corporation make a plan to consolidate. Once approved, the plan will be filed with

A)a holding company.
B)a parent corporation.
C)the appropriate state's secretary of state.
D)the U.S. Department of Commerce.

Question 60

Apps Inc. decides to combine its operations with Beta Company to form Computer Software Inc. Apps and Beta are domestic corporations. Before a vote is taken on the proposed combination, sufficient information to evaluate the deal must be given to each corporation's

A)shareholders.
B)creditors.
C)officers and other employees.
D)none of the choices.

Question 61

Operation Corporation acquires all of the assets of Process Inc. by direct purchase. Operation assumes the liabilities of Process if

A)a court does not impose the liabilities on Operation.
B)the sale does not amount to a merger or a consolidation.
C)Operation replaces Process's personnel without continuing its business.
D)none of the choices.

Question 62

Business Inc. acquires all of the assets of Commerce Corporation by direct purchase. Dot is a Commerce shareholder who does not approve of the deal. In most states, Dot can

A)reverse the deal so Commerce acquires all of the assets of Business.
B)insist that the companies carry out their corporate purposes.
C)demand appraisal rights.
D)require the parties to cancel the deal.

Question 63

Doris wants to form a new firm-eBeats-to market a new app. Fees are required to form all of the following business organizations except

A)a sole proprietorship.
B)a corporation.
C)a limited partnership.
D)a limited liability company.

Question 64

The sale and distribution of the assets of a business on its termination is

A)a takeover.
B)dissolution.
C)a breach of fiduciary duty.
D)liquidation.

Question 65

Natural Food Corporation proposes to combine with Organic Produce Inc., and asks Natural Food shareholders to vote on the proposal. Pi, a Natural Food shareholder, votes against it, but is outvoted by the other shareholders. Is there an action that Pi can take to avoid being forced to go along with the transaction? If so, what can he do? After the combination, Organic Produce ceases to exist. Natural Food is the surviving firm. What type of combination is this?

Question 66

Dissolution of a corporation can be brought about by

A)any of the choices.
B)competitors.
C)customers, suppliers, and other corporate stakeholders.
D)a court order.

Question 67

Enchilada Inc. seeks to purchase a substantial number of the voting shares of Fajita Company. Enchilada deals directly with the shareholders of Fajita. Enchilada offers a price higher than the market price of Fajita's shares. This is

A)a poison pill.
B)a tender offer.
C)a self-tender.
D)a breach of the business judgment rule.

Question 68

Rice Inc. seeks to purchase a substantial number of the voting shares of Sushi Company. The directors of Sushi resist Rice's takeover attempt. In analyzing whether this is reasonable, a court would apply

A)an appraisal right.
B)a takeover defense.
C)the corporation's policies.
D)the business judgment rule.

Question 69

Afton wants to go into business as Boom! to make and market fireworks. When deciding which form of business organization would be most appropriate, Afton would normally take into account all of the following except

A)the liability of the owners.
B)the forms of competitors' business organizations.
C)tax considerations.
D)the need for capital.

Question 70

Sweet Company acquires all of the assets of Tart Inc. by direct purchase. Approval of the deal between Sweet and Tart is subject to the approval of the shareholders of

A)both corporations.
B)Sweet.
C)Tart.
D)neither corporation.

Question 71

Alys and Bern pool their money and talents to form Cutting Edge Corporation, a precision tooling company. They are the firm's only shareholders, directors, and officers. After five years of declining home prices, they decide to cease business. Can they simply dissolve their corporation at will? If so, what are the steps in the process?

Question 72

Repair Inc. issues a plan to combine operations with Service Company. A shareholder who disapproves of the deal may be entitled to an appraisal right if the combination is

A)a merger or a short-from merger.
B)none of the choices.
C)a purchase of substantially all of the assets of either corporation.
D)a dissolution or winding up of either corporation.