Question 1

Under what circumstances can management recover from the corporation the costs it incurs in a proxy contest?

Accepted Answer

Management can recover the costs it incurs in a proxy contest involving an issue of policy, even if it does not win the proxy contest. However, the recovery of costs is not possible in contests concerning personal matters, even if management wins. Therefore, option C is the most appropriate choice.

Question 2

One corporation can acquire all the shares of another corporation through a share ________.In this arrangement,both corporations retain their separate legal existence,with the parent corporation owning all the shares of the subsidiary corporation.

Accepted Answer

The phrase "share exchange" indicates that two corporations are exchanging shares, with one acquiring all of the shares of the other. This is a common method of corporate acquisition, where the acquiring corporation becomes the sole owner of the subsidiary corporation, without having to merge or dissolve the subsidiary.

Question 3

A transaction in which two corporations combine,such that afterwards only one of them still exists and owns all the assets previously owned by either corporation,is called a:

Accepted Answer

In a merger, two corporations combine, and only one corporation continues to exist, owning all the assets of both original corporations.

Question 4

If a dissenting shareholder who has exercised his or her appraisal right is dissatisfied with the corporation's determination of the fair market value of the shares,then:

Accepted Answer

If a dissenting shareholder is dissatisfied with the corporation's determination of the fair market value, the corporation is typically required to petition the court to determine the fair value of the shares.

Question 5

Share exchanges are often used to create:

Accepted Answer

The answer of Share exchanges are often used to create:
...

Question 6

In a "short form" merger,which approvals are needed?

Accepted Answer

In a "short form" merger, only the board of directors of the surviving corporation needs to approve the merger.

Question 7

A transaction in which two corporations combine,such that afterwards neither of the combining corporations continues to exist,but instead a new corporation is formed,is called a:

Accepted Answer

In a consolidation, two corporations combine to create a new corporation, resulting in the dissolution of both original corporations. A merger, on the other hand, can result in the survival of one of the original corporations, with the other being absorbed into it. Purchase of assets and share exchange are different kinds of transactions, and a hostile takeover does not necessarily involve the creation of a new corporation.

Question 8

Under the Securities Exchange Act of 1934 and applicable rules,a shareholder may submit a resolution to be considered by other shareholders if:

Accepted Answer

Under the Securities Exchange Act of 1934, Rule 14a-8 allows a shareholder to submit a proposal if they have continuously held at least $2,000 in market value, or 1% of the company's securities entitled to vote on the proposal, for at least one year.

Question 9

The form of business combination seldom used today because of the advantages of other forms is the:

Accepted Answer

Consolidation involves the creation of a new company, requiring the dissolution of the original companies. This process is rigid and complex. As a result, it is seldom used today because other forms of business combination such as mergers, purchase of assets, and share exchanges provide more flexibility and advantages in terms of legal and tax considerations. Hostile takeovers, on the other hand, are aggressive and controversial tactics that involve the acquisition of a company without the approval of its management or board of directors.

Question 10

In a proxy contest,what obligation does management have to the dissenting group of shareholders?

Accepted Answer

In a proxy contest, management has an obligation to either mail the proxy solicitation materials of the dissenting group or provide the dissenting group with a list of all shareholders. This ensures that the dissenting group has an opportunity to present their case to all shareholders and that all shareholders have access to information from both sides before making their voting decision. Management does not have to provide false or misleading information about the dissenting group or the issue in controversy in its own proxy solicitation materials, but otherwise has no obligation to the dissenting group. They also do not necessarily have to identify the leading representative(s) of the dissenting group in their own proxy materials, although this may be a good practice for transparency.

Question 11

Under what circumstances can a dissenting group of shareholders recover from the corporation the costs it incurs in a proxy contest?

Accepted Answer

A dissenting group of shareholders can recover costs in a proxy contest involving an issue of policy if they win, but not for contests involving personal issues.

Question 12

Under what circumstances must a dissenting shareholder pay for the court costs and appraisal costs in connection with a corporation's petition of the court to determine the value of the shares?

Accepted Answer

A dissenting shareholder may be required to pay for court costs and appraisal costs if they acted arbitrarily or in bad faith in disputing the fair value of the shares determined by the corporation. Otherwise, they are not typically responsible for these costs. Choices A, C, D, and E are incorrect.

Question 13

In an ordinary merger,what approvals are needed?

Accepted Answer

In an ordinary merger, the approval of both boards of directors and the votes of the shareholders of both corporations are necessary. This is also known as a "recommended merger."

Question 14

If the number of voting shares of the surviving corporation in a merger increases by twenty percent or less,this eliminates which needed approvals when compared to ordinary mergers,where the number of shares of the surviving corporation increases by more than twenty percent?

Accepted Answer

In a merger where the increase in voting shares of the surviving corporation is twenty percent or less, the approval of the shareholders of the surviving corporation is typically not required, unlike in ordinary mergers where the increase is more than twenty percent.

Question 15

Which of the following best describes a merger?

Accepted Answer

A merger typically involves two corporations combining, with one corporation surviving and the other ceasing to exist.

Question 16

In a merger,a dissenting shareholder may elect to receive the fair value of his or her shares instead of being part of the restructuring.What is this right called?

Accepted Answer

This right is called the appraisal right. It allows a shareholder to dissent from a proposed merger or consolidation and demand to be paid the fair value of their shares. The company must comply with this demand and pay the shareholder the fair value determined by a court or an independent appraiser.

Question 17

Even if management is not in favor of a shareholder resolution,a shareholder has a right to have the resolution included in the corporation's proxy materials if it:

Accepted Answer

The answer of Even if management is not in favor...

Question 18

If a parent corporation owns ________ percent or more of the outstanding shares of a subsidiary corporation,a ________ -form merger procedure may be followed to merge the two corporations.

Accepted Answer

A short-form merger can be used when a parent corporation owns 90% or more of the subsidiary's outstanding shares, allowing the merger without the approval of the subsidiary's shareholders.

Question 19

In a proxy contest involving management on one side and dissenting shareholders on the other side,what is true about the right to recover the costs incurred in conducting the proxy fight?

Accepted Answer

In a proxy contest involving a policy issue, the victorious side can recover its costs from the corporation. This is because the winning side's actions are seen as benefiting the corporation by aligning its policies with shareholder interests.

Question 20

A corporation may sell,lease,or otherwise dispose of all or substantially all of its property in other than the usual and regular course of business.Such a sale or lease of assets requires:

Accepted Answer

According to corporate law, a sale or lease of assets that is not in the usual and regular course of business requires the recommendation of the board of directors and an affirmative vote of the majority of the shares of the selling or leasing corporation that are entitled to vote, unless a greater vote is required by the corporation's bylaws or state law. The approval of the SEC is not required unless the sale or lease involves securities registration or is subject to a federal regulatory requirement. Therefore, the best choice is E, which correctly summarizes the required actions for such a transaction.

Quiz 29: Corporate Acquisitions and Multinational Corporations