Deck 41: Mergers and Takeovers

Question 1

If one corporation owns all of the shares of another corporation, it is referred to as the subsidiary corporation.​

Answer 1

False

Question 2

Whether a combination is a merger or a consolidation, the rights and liabilities of the shareholders are the same.

Answer 2

True

Question 3

Mergers between domestic and foreign corporations are not authorized.​

Answer 3

False

Question 4

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

Question 5

Federal law establishes the procedures for asserting appraisal rights.​

Question 6

Shareholders cannot lose their appraisal rights under any circumstances.​

Question 7

Appraisal rights are always the only recourse available to shareholders dissatisfied with the price received for their stock.​

Question 8

A merger involves the division of a corporation into two or more corporations.​

Question 9

Each state establishes specific procedures for a consolidation.​

Question 10

In some states, a consolidation follows the same procedure as the incorporation of any new corporation.

Question 11

A short-form merger is the legal combination of two or more corporations online.

Question 12

​Share exchanges are often used to create holding companies.

Question 13

On a merger, one corporation inherits all of the rights and liabilities of its predecessors.​

Question 14

On a consolidation, one corporation inherits all of the rights and liabilities of its predecessors.​

Question 15

Corporate creditors are required to approve a plan of merger or consolidation, or a share exchange.​

Question 16

Even when, on the legal combination of two or more corporations, shareholder approval is not required, a board of directors may request it.​

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

Like other corporations, Market Sales Corporation can extend its operations through​

A) ​a merger.
B) ​a dissolution.
C) ​a termination.
D) ​a winding up.

Question 22

All forms of business organizations are treated as legal entities separate from their owners.​

Question 23

A firm may respond to a tender offer in only one way.

Question 24

Manmade Products Corporation and Natural Goods Company combine so that all that remains after the papers have been signed is Manmade Goods. This is​

A) ​a consolidation.
B) ​a merger.
C) ​a purchase of assets.
D) ​a share exchange.

Question 25

When deciding which form of business organization to choose, businesspersons normally take into account tax considerations.​

Question 26

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

Question 27

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

Question 28

Fact Pattern 41-1​
Grandview Office Suites, Inc., merges with Hilltop Commercial Properties, Inc. Only Hilltop remains.
Refer to Fact Pattern 41-1. The articles of merger include changes that differ from Hilltop's articles of incorporation. The articles of incorporation​

A) ​are deemed amended to include the changes.
B) ​are replaced by the articles of merger.
C) ​effectively prevent the merger.
D) ​preempt the articles of merge.

Question 29

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

Question 30

Fact Pattern 41-1​
Grandview Office Suites, Inc., merges with Hilltop Commercial Properties, Inc. Only Hilltop remains.
Refer to Fact Pattern 41-1. Grandview owed money to Innovative Décor, Inc., and other creditors. After the merger, Hilltop must pay​

A) ​all of Grandview's debts.
B) ​half of Grandview's debts.
C) ​none of Grandview's debts unless there is a formal transfer of liability.
D) ​only debts that Grandview incurred after a merger was proposed.

Question 31

On dissolution, corporate assets are distributed to shareholders according to their stock rights and any remaining assets are used to pay creditors.​

Question 32

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

Question 33

When a corporation is dissolved voluntarily, the corporation does not need to file articles of dissolution with the state.​

Question 34

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

Question 35

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

Question 36

A court can dissolve a corporation for committing fraud.​

Question 37

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

Question 38

An acquiring corporation deals directly with a target corporation's management in seeking to purchase the target's stock by making a tender offer.​

Question 39

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

Question 40

Fact Pattern 41-1​
Grandview Office Suites, Inc., merges with Hilltop Commercial Properties, Inc. Only Hilltop remains.
Refer to Fact Pattern 41-1. Grandview held rights in certain real property. After the merger, Hilltop acquires the rights​

A) ​automatically.
B) ​only after completing certain additional statutory procedures.
C) ​only Grandview's former shareholders expressly approve.
D) ​only after a required formal transfer.

Question 41

Burst-o'-Flavor Burger Restaurant Corporation merges with Chick-E Chicken Franchise Corporation, with Burst-o'-Flavor absorbing Chick-E Chicken. After the merger​

A) ​a different, new entity is the surviving corporation.
B) ​Burst-o'-Flavor and Chick-E Chick'n are both surviving corporations.
C) ​Burst-o'-Flavor is the surviving corporation.
D) ​Chick-E Chicken is the surviving corporation.

Question 42

Lee files a suit against Memphis Studios Inc. While the suit is pending, Memphis Studios consolidates with Nashville Music Corporation to form Opry Productions, Inc. Now, liability in the suit, if any, rests with​

A) ​Opry Productions.
B) ​Memphis Studios and Nashville Music.
C) ​Lee.
D) ​no one.

Question 43

Ground-Up Construction Corporation has a right of action against Heav-Equip, Inc. Ground-Up Construction merges with Investors Development, Inc., with Investors absorbing Ground-Up. After the merger, Ground-Up's right of action against Heav-Equip can be exercised by​

A) ​Ground-Up.
B) ​Investors.
C) ​Heav-Equip.
D) ​no one.

Question 44

Ramon is a shareholder of Quantum Mechanix Corporation. Ramon could normally exercise appraisal rights if Quantum participated in​

A) ​a consolidation.
B) ​a dissolution.
C) ​a liquidation.
D) ​none of the choices.

Question 45

Through a certain transaction, Coffee Bean Cafés, Inc., acquires all of the shares of Deli Dining Corporation for some of Coffee Bean's shares. Both Coffee Bean and Deli Dining continue to exist. This is​

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

Question 46

Fact Pattern 41-2​
Shale Oil Corporation combines its assets and debts with those of Tierra Frakking Company to form Unified Resources, Inc. Shale and Tierra cease to exist.
Refer to Fact Pattern 41-2. The formation of Unified Resources is​

A) ​a consolidation.
B) ​a merger.
C) ​a purchase of assets.
D) ​a share exchange.

Question 47

Omni Trax Inc. owns 95 percent of the shares of Pinpoint App Inc. Through a certain transaction, Omni combines with Pinpoint, but only Omni continues to exist. This is​

A) ​a consolidation.
B) ​a share exchange.
C) ​a short-form merger.
D) ​a termination.

Question 48

Fact Pattern 41-2​
Shale Oil Corporation combines its assets and debts with those of Tierra Frakking Company to form Unified Resources, Inc. Shale and Tierra cease to exist.
Refer to Fact Pattern 41-2. Unified Resources acquires​

A) ​all of Shale's and Tierra's assets.
B) ​half of Shale's and Tierra's assets.
C) ​none of Shale's and Tierra's assets unless there is a formal transfer.
D) ​only assets that Shale and Tierra acquired after a combination was proposed.

Question 49

Garden Supply Company and Home & Lawn Corporation plan to consolidate. Most likely, the articles of consolidation will be filed with​

A) ​the county recording office.
B) ​the local retailers' association.
C) ​the state's secretary of state.
D) ​the U.S. Department of Commerce.

Question 50

B-Sharp Corporation and Coding Company wish to combine all assets, stock, and personnel into a new firm to be called DigiSongs Inc. This is​

A) ​a consolidation.
B) ​a merger.
C) ​a share exchange.
D) ​a takeover.

Question 51

Broncobuster BarBQ Company and Cowpuncher Cuisine, Inc. decide to combine. Deanna, a Cowpuncher shareholder, is dissatisfied with the price that she will receive for her stock. In the absence of fraud or other illegal conduct, Deanna's exclusive remedy is to​

A) ​exercise an appraisal right.
B) ​file a suit to delay the process.
C) ​refuse to agree to the deal, which cannot then proceed.
D) ​acquire stock from the other shareholders and thereby obtain corporate control.

Question 52

Scuba Adventures Inc. and Tours of the Sea Company decide to consolidate. This corporate combination does not require the approval of​

A) ​Scuba and Tours directors.
B) ​Scuba and Tours officers.
C) ​Scuba shareholders.
D) ​Tours shareholders.

Question 53

Fact Pattern 41-3​
DIY Fasteners Company decides to consolidate its operations with Evergrip Studs, Inc., to form Fit-Rite Bolts & Screws Inc.
Refer to Fact Pattern 41-3. Evergrip had rights in certain property. After the consolidation, Fit-Rite acquires the rights​

A) ​automatically.
B) ​only after completing certain additional statutory procedures.
C) only if Evergrip's former shareholders expressly approve.
D) only if the acquisition is a specified result of the consolidation.

Question 54

Fact Pattern 41-2​
Shale Oil Corporation combines its assets and debts with those of Tierra Frakking Company to form Unified Resources, Inc. Shale and Tierra cease to exist.
Refer to Fact Pattern 41-2. Unified Resources assumes​

A) ​all of Shale's and Tierra's debts.
B) ​half of Shale's and Tierra's debts.
C) ​none of Shale's and Tierra's debts unless there is a formal transfer of liability.
D) ​only debts that Shale and Tierra incurred after a combination was proposed.

Question 55

Ilene is a shareholder of Jazz Street Studios, Inc. Ilene could normally exercise appraisal rights if Jazz Street participated in​

A) ​a share exchange.
B) ​none of the choices.
C) ​a takeover.
D) ​a winding up.

Question 56

Beth is a shareholder of Cotton Clothes, Inc., whose management is considering extending its operations through some type of combination or acquisition with Denim Jeans Corporation. Beth could normally exercise appraisal rights if Cotton participates in​

A) ​a sale of substantially all of the corporate assets.
B) ​a termination.
C) ​a tender offer.
D) ​none of the choices.

Question 57

Like other corporations, Cable Media Inc. can extend its operations through​

A) ​liquidating and distributing its assets.
B) ​buying the assets of, or a controlling interest in, another corporation.
C) ​filing articles of dissolution with the state.
D) ​appointing a receiver to wind up the corporate affairs.

Question 58

Fact Pattern 41-3​
DIY Fasteners Company decides to consolidate its operations with Evergrip Studs, Inc., to form Fit-Rite Bolts & Screws Inc.
Refer to Fact Pattern 41-3. The articles of consolidation differ from Fit-Rite's articles of incorporation. The articles​

A) ​are replaced by Evergrip's articles of incorporation.
B) ​are replaced by the articles of consolidation.
C) ​effectively prevent the consolidation.
D) ​prevail.

Question 59

Fact Pattern 41-3​
DIY Fasteners Company decides to consolidate its operations with Evergrip Studs, Inc., to form Fit-Rite Bolts & Screws Inc.
Refer to Fact Pattern 41-3. Evergrip owed money to Guaranty Bank and other creditors. After the consolidation, Fit-Rite must pay​

A) ​all of Evergrip's debts.
B) ​half of Evergrip's debts.
C) ​none of Evergrip's debts.
D) ​only debts that Evergrip incurred after consolidation was proposed.

Question 60

A merger between Blended Beverage Corporation and Cowland Creamery Inc. can be expressed as Blended Beverage + Cowland Creamery =​
a.
​Cowland Creamery.
b.
​Delite Dairy Corporation.
c.
​Delite Dairy Corporation + EZ Stir & Sip Inc.
d.
​EZ Stir & Sip Inc.

Question 61

Avery wants to go into business as Boom! to make and market fireworks. When deciding which form of business organization would be most appropriate, Avery 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 62

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 63

Brite Cosmetics Corporation purchases all of the assets of Color-All Lipsticks Corporation. With respect to Brite's liabilities, Color-All is​

A) ​automatically responsible.
B) ​not responsible under any circumstances.
C) ​responsible if Color-All is Brite's competitor.
D) ​responsible if the sale is actually a merger or consolidation.

Question 64

OnSite Business Inc. can be compelled to dissolve by​

A) ​any of the choices.
B) ​its competitors.
C) ​dissatisfied clients and customers.
D) ​a court order.

Question 65

Alice and Bernie 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 66

Fact Pattern 41-4​
Diversified Corporation's articles of incorporation prohibit a sale of its assets without a vote of the board of directors. Diversified's officers sell some assets to Enterprise Company without notice to the board. The officers also fail to pay Diversified's taxes on time, and some Diversified funds are not accounted for.
Refer to Fact Pattern 41-4. In these circumstances, the appropriate remedy is most likely​

A) ​a sale of the rest of Diversified's assets to its directors and shareholders.
B) ​Diversified's consolidation or merger with Enterprise.
C) ​Diversified's dissolution.
D) ​payment of damages to Diversified's officers.

Question 67

AgroChem, Inc., attempts to acquire a substantial number of the shares of Beanfield Seed Company through a public offer to shareholders. This is​

A) ​a consolidation.
B) ​a tender offer.
C) ​a short-form merger.
D) ​a dissolution.

Question 68

BMX Corp. wants to acquire all the assets of Cycle Racing Corp. BMX plans to pay for the assets by issuing its own corporate stock. BMX's board of directors has already approved the merger. In what circumstances would the approval of BMX's shareholders be required for this merger? Is the approval of Cycle Racing's shareholders necessary? Explain.​

Question 69

Bagels & Donuts Corporation wants to purchase all of the assets of Coffee & Tea Inc. Dana is a Coffee & Tea shareholder. The approval of Dana and other Coffee & Tea shareholders is necessary​

A) ​in all circumstances.
B) ​in no circumstances.
C) ​only if Coffee & Tea will be paid with unauthorized, unissued stock.
D) ​only if Bagels & Donuts agrees to assume Coffee & Tea's liabilities.

Question 70

Fact Pattern 41-4​
Diversified Corporation's articles of incorporation prohibit a sale of its assets without a vote of the board of directors. Diversified's officers sell some assets to Enterprise Company without notice to the board. The officers also fail to pay Diversified's taxes on time, and some Diversified funds are not accounted for.
Refer to Fact Pattern 41-4. With respect to Diversified's shareholders, this conduct is most likely​

A) ​not oppressive because it is undertaken by Diversified's officers.
B) ​oppressive because Diversified's directors may be personally liable.
C) ​oppressive because Diversified's shareholders may be personally liable.
D) ​oppressive because it departs from the standards of fair dealing.

Question 71

Ribeye Restaurants Inc. wants to acquire or merge with SteakHouse Corporation. Ribeye should​
a.
​file a plan of merger with the secretary of state.
b.
​file an article of merger with SteakHouse.
c.
​make a tender offer to SteakHouse shareholders.
d.
​make a tender offer to Ribeye shareholders.

Question 72

Mediterranean Herbs Inc. wants to purchase all of the assets of Nature's Spice Company. Approval of the deal must be obtained from the shareholders of​

A) ​Mediterranean Herbs only.
B) ​Nature's Spice only.
C) ​both corporations.
D) ​neither corporation.