Deck 38: Corporate Acquisitions and Multinational Corporations

Question 1

A proxy statement only requires the name of the proxy holder and the proxy.

Answer 1

False

Question 2

Incumbent directors are the former directors of a corporation.

Answer 2

False

Question 3

Section 14(a)of the Securities Exchange Act of 1934 is a(n)________.

A)investment provision
B)antifraud provision
C)share exchange provision
D)antitakeover statute

Answer 3

B

Question 4

A proxy contest is one in which incumbent directors are impeached.

Question 5

Section 14(a)of the Securities Exchange Act prohibits omissions of material facts in proxy materials.

Question 6

In a proxy contest,only the incumbent directors are permitted to solicit proxies from shareholders.

Question 7

Shareholder approval is not required to make any changes in a corporation.

Question 8

Mr.Davidson,who owns 17 percent of his company's shares,is displeased with the six incumbent directors of the corporation.He proposes a slate of directors consisting of five other persons and himself to become members of the board of directors of the corporation and replace the incumbent directors.In the proxy contest,Mr.Davidson manages to acquire proxies from shareholders who control only 35 percent of the company's shares.Which of the following is true in this context?

A)The shareholders who voted for Mr. Davidson's slate of directors will constitute 35 percent of the new board of directors.
B)The incumbent directors will continue to form the board of directors.
C)The proxy contest did not establish a clear majority, so another proxy contest must be held.
D)The slate of directors proposed by Mr. Davidson will form the new board of directors.

Question 9

A friendly merger of two corporations is not considered an acquisition.

Question 10

Which of the following is true of proxies?

A)Proxies are not permitted to be submitted electronically.
B)Proxies are signed by a corporation and sent to shareholders.
C)Directors or officers of a corporation cannot hold proxies.
D)Corporations are permitted to solicit proxies from shareholders.

Question 11

A(n)________ refers to a written document signed by a shareholder that authorizes another person to vote the shareholder's shares.

A)deputation
B)proxy
C)easement
D)title

Question 12

The federal proxy rules promote ________ during proxy solicitation.

A)full disclosure of the proxy
B)forfeiture of shares
C)meeting of all shareholders
D)direct representation of shareholders

Question 13

In the context of proxy solicitation information,which of the following is prohibited by Section 14(a)of the Securities Exchange Act?

A)solicitation of proxies by a corporation
B)transfer of proxies from one shareholder to another
C)omission of material facts in the proxy material
D)proxy contests between shareholders and directors

Question 14

Insurgent shareholders are shareholders who propose a slate of directors to replace the incumbent directors.

Question 15

A proxy card authorizes another person to vote the shareholder's shares.

Question 16

Section 14(a)of the Securities Exchange Act prohibits the solicitation of proxies.

Question 17

Which of the following defines a proxy contest?

A)an instance of proxies awarded to the shareholder with the highest bid
B)an event in which insurgent shareholders and incumbent directors solicit proxies from other shareholders
C)an event in which proxies are chosen by voting between different factions of shareholders
D)an event in which a corporation seeks affirmative majority from its shareholders in the event of a hostile tender

Question 18

Courts are permitted to order a new election in case of fraudulent proxy solicitation.

Question 19

________ shareholders are shareholders who propose a slate of directors to replace the incumbent directors.

A)Exultant
B)Internal
C)Insurgent
D)External

Question 20

Section 14(a)of the Securities Exchange Act gives the Securities and Exchange Commission (SEC)the authority to regulate ________.

A)the formation of the board of directors of a corporation
B)mergers between two or more corporations
C)issues of shares by a corporation
D)the solicitation of proxies by a corporation

Question 21

A shareholder has a right to have the shareholder resolution included in the corporation's proxy materials if it ________.

A)does not relate to the corporation's business
B)does not concern the payment of dividends
C)concerns the day-to-day operations of the corporation
D)does not concern a policy issue

Question 22

A(n)________ is a situation in which one corporation is absorbed into another corporation and ceases to exist.

A)alliance
B)merger
C)share exchange
D)coalition

Question 23

Which of the following best defines a shareholder resolution?

A)a document submitted by insurgent shareholders formally announcing forfeiture of shares
B)an issue submitted by the board of directors requiring the reorganization of shares held by shareholders
C)an issue submitted by a shareholder for a vote of other shareholders
D)a document that authorizes another person to vote the shareholder's shares

Question 24

A ________ is a situation in which one corporation acquires all the shares of another corporation,and both corporations retain their separate legal existence.

A)reverse takeover
B)merger
C)share exchange
D)spin-off

Question 25

Shareholder resolutions cannot be made when a corporation is soliciting proxies from its shareholders.

Question 26

The corporation that owns the shares of the subsidiary corporation in a share exchange is known as the ________.

A)surviving corporation
B)parent corporation
C)sole proprietor
D)primary partner

Question 27

A ________ is a merger between a parent corporation and a subsidiary corporation that does not require the approval of the board of directors of the subsidiary corporation.

A)share exchange
B)short-form merger
C)short-term merger
D)reverse takeover

Question 28

Which of the following is required for a short-form merger?

A)approval of shareholders of the parent corporation alone
B)approval of shareholders of the subsidiary corporation alone
C)approval of the board of directors of the parent corporation alone
D)approval of the board of directors of the subsidiary corporation alone

Question 29

A shareholder can only submit a resolution to be considered by other shareholders if he or she has one percent or more of the total shares of the company.

Question 30

Explain the factors that lead to a proxy contest.What is its outcome?

Question 31

Which of the following best defines a surviving corporation?

A)a corporation that continues its operations after filing for bankruptcy
B)a corporation that has been in existence for at least 50 years
C)a proprietorship or partnership that evolved into a corporation
D)a corporation that continues to exist after a merger

Question 32

What is a proxy? State the federal rules that govern a proxy statement.

Question 33

Which of the following best defines a merged corporation?

A)a corporation that is absorbed in the merger and ceases to exist after the merger
B)a corporation that is absorbed in the merger and continues to exist after the merger
C)a corporation that is not absorbed in the merger but acquired stake in the surviving corporation
D)a corporation that is not absorbed in the merger but is owned by a parent company

Question 34

A merger increases the number of voting shares of the surviving corporation by 23 percent.Which of the following is required in this context?

A)a unanimous vote by the incumbent directors
B)a majority vote of the board of directors
C)a majority vote of the shareholders
D)an affirmative vote by at least 30 percent of the shareholders

Question 35

A shareholder is permitted to submit a resolution to be considered by other shareholders only if he or she ________.

A)owns at least one percent of all shares of the company
B)owns at least $1,000 worth of shares of the company's stock
C)has served as a former member of the company's board of directors
D)has owned shares of the company of any amount for longer than five years

Question 36

Shareholders are permitted to submit issues for a vote to other shareholders.

Question 37

Which of the following is true of a share exchange?

A)The subsidiary corporation ceases to exist after the share exchange.
B)The legal existence of both corporations is retained after the exchange.
C)The shares of both parent and subsidiary corporations are divided equally between themselves.
D)The subsidiary corporation can have a maximum of three shareholders in the exchange.

Question 38

Karlovsky and Sons Inc.,a retail corporation,reports financial losses for three years in a row.Two larger corporations,Gatsby Retail Inc.and Chelsea Sales Corp.compete to acquire Karlovsky and Sons.Initially,Chelsea places a higher bid than Gatsby Retail but eventually backs out of the merger.In the end,a Boston-based multinational company (MNC)named J.Y.Corp.acquires Karlovsky and Sons and permits the latter to expand as a wholesaler.Which of the following is the surviving corporation in this scenario?

A)Gatsby Retail Inc.
B)Chelsea Corp.
C)J.Y. Corp.
D)Karlovsky and Sons

Question 39

Which of the following best defines a subsidiary corporation?

A)a corporation that is absorbed into a merger
B)a corporation that continues to exist after a merger
C)a corporation that has bought all the shares of another corporation
D)a corporation that is owned by the parent corporation in a share exchange

Question 40

A shareholder resolution must be dropped if it is not favored by the management.

Question 41

Section 14(e)of the Williams Act is a(n)________ regarding tender offers.

A)antifraud provision
B)shareholders rights provision
C)merger provision
D)acquisition provision

Question 42

Distinguish between a merger and a share exchange.

Question 43

The corporation that is owned by the parent corporation in a share exchange is known as the surviving corporation.

Question 44

A subsidiary corporation ceases to exist after a share exchange.

Question 45

Which of the following is a valid tender offer rule?

A)The offer cannot be closed after 20 business days after the commencement of the tender offer.
B)The offer cannot be extended if the tender offeror increases the number of shares it will take or the price it will pay for the shares.
C)Any increase in price paid for shares tendered must be offered to all shareholders, including those who have previously tendered their shares.
D)A shareholder who tenders his or her shares loses the right to withdraw them prior to the closing of the tender offer.

Question 46

The ________ is a federal law that mandates the president of the United States to suspend,prohibit,or dismantle the acquisition of U.S.businesses by foreign investors if there is credible evidence that the foreign investor might take action that threatens to impair the "national security."

A)Williams Act
B)Securities Exchange Act of 1934
C)Investment Company Act of 1940
D)Exon-Florio Foreign Investment Provision

Question 47

________ are the rights of shareholders who object to a proposed merger to have their shares valued by the court and receive cash payment of this value from the corporation.

A)Appraisal rights
B)Liquidation rights
C)Anti-acquisition rights
D)Anti-merger rights

Question 48

A short-form merger does not require the approval of the board of directors of the subsidiary corporation.

Question 49

The approval of the surviving corporation's shareholders is not required if the merger or share exchange increases the number of voting shares of the surviving corporation by 20 percent or less.

Question 50

An ordinary merger or share exchange requires the recommendation of the board of directors of each corporation.

Question 51

A ________ is a defensive strategy built into the target corporation's articles of incorporation,corporate bylaws,or contracts and leases that can be adopted to defeat a tender offer.

A)greenmail agreement
B)Pac-Man tender offer
C)white knight merger
D)poison pill

Question 52

A merger occurs when one corporation enters into a permanent business partnership with another corporation.

Question 53

A merged corporation ceases to exist after the merger.

Question 54

Appraisal rights require shareholders who object to the sale of the property of a company to forfeit their shares.

Question 55

Instaworks Inc.wants to acquire IOK Corp.Instaworks makes a tender offer to the shareholders of IOK to acquire their shares of IOK without the permission of the latter corporation's board of directors.This is a ________ tender offer.

A)cogent
B)single-point
C)persuasive
D)hostile

Question 56

The ________ states that any increase in price paid for shares tendered must be offered to all shareholders,even those who have previously tendered their shares.

A)pro rate rule
B)fair price rule
C)Williams Act
D)antifraud provision of the Securities and Exchange Commission

Question 57

The ________ is an amendment to the Securities Exchange Act of 1934 that specifically regulates tender offers.

A)Gramm-Leach-Bliley Act
B)Financial Services Modernization Act
C)Williams Act
D)Exon-Florio Foreign Investment Provision Act

Question 58

________ are made without the permission of the target company's management.

A)Merger offers
B)Hostile tender offers
C)Share exchange offers
D)Share acquisition offers

Question 59

Which of the following is true of defensive measures against a tender offer?

A)A company is not permitted to use media campaigns to convince shareholders against the tender offer.
B)A company can file a lawsuit alleging violation of antitrust laws against the tender offer to gain time.
C)A reverse tender offer cannot be made as long as a tender offer is active.
D)A company can adopt only a flip-over and not a flip-in rights plan against the tender offer.

Question 60

In a share exchange,one corporation ends up owning all the shares of the other.

Question 61

Which of the following is true of a subsidiary of a multinational corporation present in a foreign country?

A)The subsidiary corporation is organized under the laws of the foreign country.
B)There is no liability shield between the parent company and the subsidiary.
C)The parent company is wholly responsible for torts committed by the subsidiary.
D)The subsidiary corporation is not considered a separate legal entity.

Question 62

The incumbent management cannot issue additional shares in the market to defeat a hostile tender offer.

Question 63

Hostile tender offers are tender offers made without the permission of the target company's management.

Question 64

What does the Delaware antitakeover statute provide? How can an acquirer evade the restrictions imposed by this statute?

Question 65

The Williams Act is an amendment to the Securities Exchange Act that specifically regulates tender offers.

Question 66

The ________ protects the decisions of a board of directors that acts on an informed basis,in good faith,and in the honest belief that the action taken was in the best interests of the corporation and its shareholders.

A)Williams Act
B)antifraud provision of the Securities and Exchange Commission
C)pro rata rule
D)business judgment rule

Question 67

Antitakeover statutes are model acts and do not become laws until a state legislature adopts them.

Question 68

Greenmail refers to a target corporation's purchase of its stock from an actual or perceived tender offeror at a premium.

Question 69

The Delaware antitakeover statute provides that an acquirer of a Delaware corporation cannot complete a merger with the acquired corporation for three years after purchasing 15 percent or more of the Delaware corporation's shares.

Question 70

Section 14(a)of the Securities Exchange Act of 1934 requires the disclosure of the identities of the parties involved in a tender offer.

Question 71

What is a similarity between a branch office and a subsidiary of a multinational corporation?

A)Both are considered separate legal entities.
B)Both have limited liability shields with the parent company.
C)Both can be setup in a foreign land to run the parent company's business.
D)Both are wholly liable for their torts.

Question 72

A corporation that uses subsidiary corporations to operate in more than one country cannot be termed as a multinational corporation.

Question 73

________ refers to the purchase by a target corporation of its stock from an actual or perceived tender offeror at a premium.

A)White knight merger
B)Appraisal
C)Share exchange
D)Greenmail

Question 74

The pro rata rule states that any increase in price paid for shares tendered must be offered to all shareholders,even those who have previously tendered their shares.

Question 75

State antitakeover statutes apply to ________.

A)corporations that are incorporated in the state
B)foreign corporations that operate in the state
C)U.S. corporations incorporated in other states operating in the state
D)corporations that export to the state

Question 76

Which of the following is provided by the Delaware antitakeover statute?

A)An acquirer of a Delaware corporation cannot complete a merger with the acquired corporation unless it receives an affirmative vote from at least 35 percent shareholders of the acquired corporation.
B)An acquirer of a Delaware corporation located outside Delaware cannot complete a merger with the acquired corporation until it has operated in Delaware for three years.
C)An acquirer of a Delaware corporation must be incorporated in the state of Delaware or have its principal office in the state of Delaware.
D)An acquirer of a Delaware corporation cannot complete a merger with the acquired corporation for three years after purchasing 15 percent or more of the Delaware corporation's shares.

Question 77

Section 14(e)protects shareholders from fraud committed in connection with a tender offer.

Question 78

Which of the following is true of a branch office of a multinational corporation?

A)Branch offices cannot be setup in foreign countries.
B)Branch offices are considered separate legal entities.
C)There is no liability shield between the corporation and the branch office.
D)The corporation is not liable for the torts committed by personnel of the branch office.

Question 79

List out the strategies that a company can use in defending against hostile tender offers.

Question 80

A tender offer targets the board of directors of the target corporation.