Deck 35: Corporate Mergers, Takeovers, and Termination

Question 1

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

Answer 1

False

Question 2

A merger will not affect the rights and liabilities of the corporations involved.

Answer 2

False

Question 3

On a consolidation, a new corporation acquires all of the assets and liabilities of the corporations that were consolidated.

Answer 3

True

Question 4

One corporation that owns all of the shares of another corporation is a subsidiary corporation.

Question 5

Appraisal rights do not normally apply to short-form mergers.

Question 6

All states have statutes authorizing share exchanges for domestic corporations.

Question 7

Before a vote is taken on a proposed combination, the shareholders must be given sufficient information to evaluate the deal.

Question 8

In a merger, the surviving corporation assumes all of the assets and liabilities of the disappearing corporation.

Question 9

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

Question 10

A share exchange can be used to create a holding company.

Question 11

A short-form merger is the acquisition of control over a corporation through a purchase of stock.

Question 12

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

Question 13

An appraisal right is available only when a federal statute specifically provides for it.

Question 14

No state allows the combination of domestic and foreign corporations.

Question 15

Corporate creditors are required to approve a plan of consolidation.

Question 16

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

Question 17

Merger and consolidation refer to two legally distinct proceedings, but consolidation is also used to refer to all types of corporate combinations.

Question 18

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

Question 19

All states have statutes authorizing consolidations.

Question 20

Appraisal rights cannot be lost even if the statutory procedures are not followed precisely.

Question 21

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

Question 22

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

Question 23

During the liquidation process, corporate assets are converted into cash.

Question 24

A shareholder may not petition a court for corporate dissolution.

Question 25

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

Question 26

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

Question 27

Through a tender offer, an acquiring corporation deals directly with a target company's management in seeking to purchase the target's stock.

Question 28

Building Corporation and Construction Inc. combine so that only Construction continues to exist. This is

A) a takeover.
B) a merger.
C) a liquidation.
D) a share exchange.

Question 29

A court cannot dissolve a corporation for failure to commence business operations.

Question 30

Outlook Inc. merges with Pinnacle Inc. Only Pinnacle remains. Outlook owed money to Quest Bank and other creditors. With respect to these debts, in the merger Pinnacle assumes

A) none.
B) only those incurred after the merger was proposed.
C) an amount equal to the ratio of the firms' pre-merger market values.
D) all.

Question 31

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

Question 32

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

Question 33

Rock Quarry Inc. merges with Stonework Inc. Only Stonework remains. Rock Quarry held rights in certain real property. With respect to these assets, in the merger Stonework assumes

A) none.
B) only those acquired after the merger was proposed.
C) an amount equal to the ratio of the firms' pre-merger market values.
D) all.

Question 34

Lipstick Inc. merges with Mascara Inc. Only Mascara remains. The articles of merger

A) amend the articles of Mascara.
B) disappear once the merger is complete.
C) create an entirely new organization.
D) take the place of the articles of Mascara.

Question 35

Dissolution of a corporation can be brought about by the shareholders' majority vote to initiate dissolution proceedings.

Question 36

A court can dissolve a corporation for abuse of corporate powers.

Question 37

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

Question 38

When dissolution takes place by voluntary action, the members of the board of directors act as trustees of the corporate assets.

Question 39

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

Question 40

Dynamo Corporation combines its assets and liabilities with those of Energy Company to form Fuel Inc. Dynamo and Energy cease to exist. The formation of Fuel Inc. is

A) a takeover.
B) a consolidation.
C) a liquidation.
D) a share exchange.

Question 41

Beef Inc. merges with Chicken Corporation. Beef absorbs Chicken. After the merger, the surviving corporation is

A) a different, new entity-Diners Choice Inc.
B) Beef and Chicken.
C) Beef only.
D) Chicken only.

Question 42

All of the shares of GMO Inc. are owned by Hybrid Inc. GMO Inc. is

A) a holding company.
B) a parent corporation.
C) a subsidiary corporation.
D) none of the choices.

Question 43

Lender Inc. owns all of the shares of Mortgage Inc. Lender Inc. is

A) a holding company.
B) a parent corporation.
C) a subsidiary corporation.
D) all of the choices.

Question 44

Cloud Inc. merges with Data Corporation. Cloud, the surviving corporation, issues shares or pays fair consideration to

A) Cloud's shareholders.
B) Data's shareholders.
C) the state.
D) no one.

Question 45

Market Company exchanges some of its shares for some of the shares of Niche Corporation. On the exchange of shares between Market and Niche

A) both companies continue to exist.
B) both companies cease to exist.
C) only Market survives.
D) only Niche survives.

Question 46

Lunch Trucks Inc. owns more than 90 percent of the shares of Kitchens Company. A plan for a merger of Lunch Trucks and Kitchens must be approved by the shareholders of

A) both corporations.
B) Lunch Trucks only.
C) Kitchens only.
D) neither corporation.

Question 47

Garden Company and Home Corporation make a plan to consolidate. Once approved, the plan will be filed with

A) a holding company.
B) a parent corporation.
C) the appropriate state's secretary of state.
D) the U.S. Department of Commerce.

Question 48

Quantum Company exchanges some of its shares for some of the shares of Rocket Corporation. The exchange is used to create Space Inc., whose business activity is to hold the shares of the two companies. Space Inc. is

A) a holding company.
B) a parent corporation.
C) a subsidiary corporation.
D) a foreign corporation.

Question 49

Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations. The plan for Bank and Credit's combination must be approved by the board of directors of

A) each corporation.
B) Bank only.
C) Credit only.
D) neither corporation.

Question 50

Code Company combines its assets and liabilities with those of Design Corporation to form Engineer Inc. Code and Design cease to exist. With respect to the assets of Code and Design, Engineer Inc. acquires

A) none.
B) only those acquired after the combination was proposed.
C) an amount equal to the ratio of the firms' pre-merger market values.
D) all.

Question 51

Bus Corporation exchanges some of its shares for some of the shares of Car Company. The exchange is used to create Drive Inc., whose business activity is to hold the shares of the two companies. Once the formalities are satisfied, a certificate of the exchange is issued by

A) Drive Inc.
B) none of the choices.
C) the appropriate state.
D) the U.S. Department of Commerce.

Question 52

Mergers, consolidations, and share exchanges are authorized

A) in all states.
B) in most states.
C) in no states.
D) by the federal government.

Question 53

Revenue Inc. owns more than 90 percent of the shares of Sales Corporation. A copy of a plan for a merger of Revenue and Sales must be sent to each shareholder of

A) both corporations.
B) Revenue.
C) Sales.
D) neither corporation.

Question 54

Farm Inc. combines its assets and liabilities with those of Grain Company to form Harvest Corporation. Farm and Grain cease to exist. With respect to the liabilities of Farm and Grain, Harvest acquires

A) none.
B) only those acquired after the combination was proposed.
C) an amount equal to the ratio of the firms' pre-merger market values.
D) all.

Question 55

Lumber Company owns more than 90 percent of the shares of Mill Corporation. A plan for a merger of Lumber and Mill must be approved by the directors of

A) both corporations.
B) Lumber only.
C) Mill only.
D) neither corporation.

Question 56

Salmon Company decides to combine its operations with Tuna Corporation to form United Seafood Inc. Salmon and Tuna are domestic corporations. The plan for Salmon and Tuna's combination must be approved by the shareholders of

A) each corporation.
B) Salmon only.
C) Tuna only.
D) neither corporation.

Question 57

Carrier Company exchanges some of its shares for some of the shares of Dispatch Corporation. The plan for this exchange must be approved by each corporation's

A) directors only.
B) shareholders only.
C) directors and shareholders.
D) none of the choices.

Question 58

Kudos Corporation combines its assets and liabilities with those of Livestream Company to form MedOnline Inc. Kudos and Livestream cease to exist. The agreement between Kudos and Livestream that sets out the capital structure and other features of MedOnline

A) amends the articles of Kudos and Livestream.
B) disappears once the combination is complete.
C) combines with the articles of Kudos and Livestream.
D) takes the place of the articles of Kudos and Livestream.

Question 59

Through a certain transaction, Café Inc. acquires all of the shares of Diner Corporation for some of Café's shares. Both Café and Diner continue to exist. This is

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

Question 60

Apps Inc. decides to combine its operations with Beta Company to form Computer Software Inc. Apps and Beta are domestic corporations. Before a vote is taken on the proposed combination, sufficient information to evaluate the deal must be given to each corporation's

A) shareholders.
B) creditors.
C) officers and other employees.
D) none of the choices.

Question 61

Repair Inc. issues a plan to combine operations with Service Company. Tom is a shareholder who disapproves of the deal. He may be entitled to an appraisal right if the combination is

A) a merger or a short-form merger.
B) none of the choices.
C) a purchase of substantially all of the assets of either corporation.
D) a dissolution or winding up of either corporation.

Question 62

The sale and distribution of the assets of a business on its termination is

A) a takeover.
B) dissolution.
C) a breach of fiduciary duty.
D) liquidation.

Question 63

Rice Inc. seeks to purchase a substantial number of the voting shares of Sushi Inc. The directors of Sushi resist Rice's takeover attempt. In analyzing whether this is reasonable, a court would apply

A) an appraisal right.
B) a takeover defense.
C) the corporation's policies.
D) the business judgment rule.

Question 64

Business Inc. acquires all of the assets of Commerce Inc. by direct purchase. Dona is a Commerce shareholder who does not approve of the deal. In most states, Dona can

A) reverse the deal so Commerce acquires all of the assets of Business.
B) insist that the companies carry out their corporate purposes.
C) demand appraisal rights.
D) require the parties to cancel the deal.

Question 65

Enchilada Inc. seeks to purchase a substantial number of the voting shares of Fajita Inc. Enchilada deals directly with the shareholders of Fajita. Enchilada offers a price higher than the market price of Fajita's shares. This is

A) a poison pill.
B) a tender offer.
C) a self-tender.
D) a breach of the business judgment rule.

Question 66

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 67

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 68

Dissolution of a corporation can be brought about by

A) any of the choices.
B) competitors.
C) customers, suppliers, and other corporate stakeholders.
D) a court order.

Question 69

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 70

Operation Corporation acquires all of the assets of Process Inc. by direct purchase. Operation assumes the liabilities of Process if

A) a court does not impose the liabilities on Operation.
B) the sale does not amount to a merger or a consolidation.
C) Operation replaces Process's personnel without continuing its business.
D) none of the choices.

Question 71

Sweet Inc. acquires all of the assets of Tart Inc. by direct purchase. Approval of the deal between Sweet and Tart is subject to the approval of the shareholders of

A) both corporations.
B) Sweet.
C) Tart.
D) neither corporation.

Question 72

Natural Food Corporation proposes to combine with Organic Produce Inc., and asks Natural Food shareholders to vote on the proposal. Phoebe, a Natural Food shareholder, votes against it, but is outvoted by the other shareholders. Is there an action that Phoebe can take to avoid being forced to go along with the transaction? If so, what can she do? After the combination, Organic Produce ceases to exist. Natural Food is the surviving firm. What type of combination is this?