Question 1

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

Accepted Answer

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

Question 2

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

Accepted Answer

An ordinary merger or share exchange typically requires the approval and recommendation of the board of directors of each corporation involved in the transaction.

Question 3

Which of the following is true of proxies?

Accepted Answer

Corporations are allowed to solicit proxies from their shareholders. Proxies are typically used in voting processes and allow shareholders to authorize another person or organization to vote on their behalf. It is a common practice in corporate meetings, and corporations may engage in solicitation campaigns to encourage shareholders to submit their proxies. Option A is false as proxies can be submitted electronically, B is incorrect as proxies are signed by shareholders, not the corporation, and C is incorrect as directors or officers can hold proxies as long as they are not being used to vote on their own behalf.

Question 4

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

Accepted Answer

The incumbent management can issue additional shares in the market to increase their ownership percentage and make the company less attractive to the bidder, which is known as the "poison pill" defense strategy.

Question 5

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

Accepted Answer

In a short-form merger, the parent company can merge with its subsidiary directly without the approval of the subsidiary's board of directors. However, the parent company's board of directors must approve the merger.

Question 6

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

Accepted Answer

A tender offer targets the shareholders of the target corporation, not the board of directors.

Question 7

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

Accepted Answer

A multinational corporation is defined as a corporation that operates in multiple countries, often with a centralized management structure. The use of subsidiary corporations is a common strategy for multinational corporations to manage their operations in different countries.

Question 8

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.

Accepted Answer

According to the Model Business Corporation Act, 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 9

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

Accepted Answer

Hostile tender offers are made without the permission of the target company's management, and often involve direct communication with the target company's shareholders instead.

Question 10

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.

Accepted Answer

The statement accurately describes the provision of the Delaware antitakeover statute.

Question 11

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

Accepted Answer

Greenmail involves a target corporation repurchasing its stock from someone who has made a tender offer, often at a premium price to prevent a takeover.

Question 12

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

Accepted Answer

The answer of Antitakeover statutes are model acts and do...

Question 13

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

Accepted Answer

Section 14(a) of the Securities Exchange Act gives the SEC the authority to regulate the solicitation of proxies by a corporation. This includes regulations on the content of proxy statements, the timing and dissemination of information, and the disclosure of material information. It is important for investors to receive accurate and complete information when asked to vote by proxy, and the SEC plays a crucial role in ensuring that this information is provided.

Question 14

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

Accepted Answer

A proxy is a written document signed by a shareholder that authorizes another person to vote the shareholder's shares at a shareholder meeting.

Question 15

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.

Accepted Answer

The pro rata rule refers to the proportional allocation of shares or assets among participants, such as when a company issues dividends or when shares are oversubscribed in a tender offer. It does not specifically state that any increase in price paid for shares tendered must be offered to all shareholders, even those who have previously tendered their shares. This concept is more closely related to the rules governing tender offers and fair treatment of shareholders rather than the pro rata principle itself.

Question 16

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

Accepted Answer

In a share exchange, the corporation that is owned by the parent corporation is known as the subsidiary corporation, not the surviving corporation. The term "surviving corporation" typically refers to the entity that continues to exist after a merger, not a share exchange.

Question 17

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

Accepted Answer

Section 14(a) of the Securities Exchange Act prohibits the omission of material facts in the proxy material. This means that all important information must be disclosed to the shareholders in the proxy solicitation information. A, B, and D are not prohibited by Section 14(a) and are common practices in proxy solicitation.

Question 18

The federal proxy rules promote ________ during proxy solicitation.

Accepted Answer

The federal proxy rules are designed to promote full disclosure of the proxy by companies during proxy solicitation. This includes providing shareholders with all relevant information about matters to be voted on, as well as information about the company's management and financial position. The rules aim to ensure that shareholders are fully informed and able to make informed decisions about how to vote their shares. Forfeiture of shares and meeting of all shareholders are not promoted by the federal proxy rules, and direct representation of shareholders is not a requirement but may be allowed in certain situations.

Question 19

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

Accepted Answer

Appraisal rights allow shareholders to receive the fair value of their shares in a company that is being sold without their approval. Shareholders do not forfeit their shares, but they may be required to give up their right to vote on the sale in order to exercise appraisal rights.

Question 20

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

Accepted Answer

Section 14(e) of the Securities Exchange Act of 1934 does indeed protect shareholders from fraudulent activities that may occur in association with a tender offer. This section mandates that all participants in the offer comply with the regulations and guidelines under the Securities and Exchange Commission (SEC) and avoid making misleading statements, omissions, or any fraudulent activity that may result in distorted facts or false impressions for shareholders. Failure to adhere to these rules would lead to legal action against the perpetrator.

Quiz 38: Corporate Acquisitions and Multinational Corporations