Question 1

In states following the Model Business Corporation Act, the shareholders of a corporation need not approve the restatement of the articles of incorporation if no amendment to provisions of the articles is included.

Accepted Answer

Under the Model Business Corporation Act, if a restatement of the articles of incorporation does not include any amendments to the provisions, it generally only requires approval by the board of directors and not the shareholders. This process is used for clarity or to consolidate changes made over time without altering the substance of the articles.

Question 2

Shareholder approval would not be required to amend a corporation's articles of incorporation to change the

Accepted Answer

Changing the authorized stock of the corporation before any stock is issued typically does not require shareholder approval, as there are no shareholders yet to approve such changes.

Question 3

The________ allows courts to consider a certain transaction with characteristics of a merger to be considered a merger, regardless of what it is called, to prevent an injustice to third parties.

Accepted Answer

The de facto merger doctrine allows courts to treat certain transactions that are not formally mergers but share similar characteristics as mergers, to ensure fairness and prevent harm to third parties. This doctrine is applied to prevent companies from circumventing legal and financial obligations by structuring a transaction to avoid the formalities and consequences of a statutory merger.

Question 4

Most statutory mergers must be approved by the

Accepted Answer

Shareholders of both the merging and surviving corporations typically must approve statutory mergers, as they are significant corporate changes.

Question 5

When a merger becomes effective, the

Accepted Answer

The separate existence of every corporation or eligible entity that is merged into the survivor ceases, except for the surviving corporation. This means that the merged entities lose their individual legal identities and become part of the surviving entity.

Question 6

In states following the Model Business Corporation Act, the articles of merger must include

Accepted Answer

The Model Business Corporation Act requires that the articles of merger include information concerning the approval of the shareholders of all corporations that are parties to the merger. This ensures that the merger has been approved by the appropriate stakeholders in accordance with the corporation's governance requirements.

Question 7

The triangle merger involves a parent corporation, a subsidiary of the parent corporation, and a target corporation.

Accepted Answer

In a triangle merger, a subsidiary of the parent corporation merges with the target corporation, allowing the target to become a subsidiary of the parent corporation or integrate into the subsidiary.

Question 8

The Hart-Scott-Rodino Antitrust Improve- ments Act of 1976 gives the Federal Trade Commission the authority to review certain merger and acquisition transactions prior to their closing.

Accepted Answer

The Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires parties to large mergers and acquisitions to file a report with the Federal Trade Commission and the Department of Justice, allowing them to review the transaction for antitrust concerns before it can be completed.

Question 9

A__________ is a combination of two or more corporations, whereby one of the corporations survives and absorbs one or more other corporations, which cease to exist.

Accepted Answer

A merger is the process where two or more corporations combine, with one corporation surviving and absorbing the other(s), which then cease to exist.

Question 10

The purchasers in an asset acquisition will generally not be held liable for undisclosed liabilities and obligations of the target corporation stemming from prior transactions.

Accepted Answer

In an asset acquisition, the buyer typically acquires specific assets and does not automatically assume the liabilities of the seller unless specifically agreed upon, thereby generally not being held liable for undisclosed liabilities and obligations of the target corporation stemming from prior transactions.

Question 11

If a merger has no clear business purpose other than to eliminate the minority shareholders, it may be found invalid.

Accepted Answer

Courts may scrutinize mergers without a clear business purpose, especially if they appear designed solely to eliminate minority shareholders, as potentially oppressive or unfair, potentially rendering them invalid.

Question 12

A___________ is a transaction whereby onecorporation acquires all of the outstanding shares of one or more classes or series of another corporation by an exchange that is compulsory on the shareholders of the target corporation.

Accepted Answer

A statutory share exchange is a transaction where one corporation acquires all the outstanding shares of another corporation through a compulsory exchange, as described in the statement.

Question 13

State entity conversion statutes generally provide for the conversion of

Accepted Answer

State entity conversion statutes typically allow for the conversion of a corporation into a noncorporate entity, such as a limited liability company (LLC) or partnership, facilitating changes in the business structure.

Question 14

In states following the Model Business Corporation Act, shareholder approval of a statutory plan of exchange

Accepted Answer

In states following the Model Business Corporation Act, shareholder approval of a statutory plan of exchange must be accomplished in the same manner as shareholder approval of a statutory merger, which typically involves a vote by the shareholders.

Question 15

In a stock acquisition, the acquiring corporation becomes a subsidiary of the target corporation.

Accepted Answer

In a stock acquisition, the target corporation becomes a subsidiary of the acquiring corporation, not the other way around.

Question 16

There is no difference in the end results between an asset acquisition and a statutory merger.

Accepted Answer

In an asset acquisition, a company purchases the assets of another company, but not its legal entity, potentially avoiding the liabilities of the seller. In a statutory merger, one company absorbs another, including its liabilities, resulting in a single surviving legal entity. The end results differ in terms of legal and financial implications for both parties involved.

Question 17

In a stock purchase agreement, it is not necessary to identify in detail the exact assets and liabilities of the selling corporation.

Accepted Answer

In a stock purchase agreement, the buyer is purchasing the entire company, including all of its assets and liabilities. Therefore, it is not necessary to identify each individual asset and liability in the agreement.

Question 18

The terms merger and consolidation are interchangeable.

Accepted Answer

A merger typically involves one company absorbing another, whereas a consolidation creates a new entity from the combining companies.

Question 19

The type of merger whereby the parent corporation is merged into a subsidiary is referred to as a(n)

Accepted Answer

A downstream merger is when the parent company is merged into a subsidiary, effectively making the subsidiary the surviving entity.

Question 20

Due diligence work is completed after the closing of mergers and acquisitions.

Accepted Answer

Due diligence is a critical process completed before the closing of mergers and acquisitions to assess the value of the target company and identify any risks or liabilities.

Quiz 12: Mergers, Acquisitions, and Other Changes to the Corporate Structure