Deck 36: Corporate Acquisitions, Takeovers, and Termination

Question 1

A corporation that is acquiring all or substantially all of the assets of another corporation by direct purchase must obtain shareholder approval for the purchase.

Answer 1

False

Question 2

A merger and a consolidation are not two legally distinct proceedings.

Answer 2

False

Question 3

The board of directors of each corporation involved must approve a merger.

Answer 3

True

Question 4

In a consolidation, the consolidating corporations become subsidiaries of the new corporation.

Question 5

In a short-form merger, neither corporation's shareholders need to approve the merger.

Question 6

In most cases, a corporation's common stockholders need to approve a merger.

Question 7

State law establishes the specific procedures for mergers.

Question 8

Generally, an acquiring corporation deals directly with a target company's shareholders in seeking to purchase the shares they hold.

Question 9

Whether a combination is merger or a consolidation, the rights and liabilities of the shareholders are the same.

Question 10

In a share exchange, one corporation will issue shares or pay some fair consideration to the shareholders of another corporation that will then cease to exist.

Question 11

Appraisal rights normally extend to regular mergers and consolidations.

Question 12

A sale of all of a corporation's assets requires the approval of its shareholders.

Question 13

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

Question 14

In a share exchange, some or all of the shares of one corporation are exchanged for the shares of another, and both corporations cease to exist.

Question 15

A short-form merger is the legal combination of two or more corporations online.

Question 16

In a consolidation, two or more corporations combine in such a way that each corpo?ration ceases to exist.

Question 17

When a sale of assets amounts to what in fact is a consolidation, the ac?quiring corporation inherits the selling corporation's liabilities.

Question 18

The officers and other employees of each corporation involved must approve a share exchange plan.

Question 19

Federal securities laws strictly control the terms under which most tender offers are made.

Question 20

A merger involves the legal combination of one or more corporations.

Question 21

Fact Pattern 36-1
Grandview Office Suites, Inc., merges with Hilltop Commercial Properties, Inc. Only Hilltop remains.
Refer to Fact Pattern 36-1. Grandview held rights in certain real property. After the merger, Hilltop acquires the rights

A) automatically.
B) only after completing certain additional statutory procedures.
C) only Grandview's former shareholders expressly approve.
D) only after a required formal transfer.

Question 22

When dissolution takes place by voluntary action, the shareholders are responsible for winding up the affairs of the corporation.

Question 23

A court cannot dissolve a corporation for mismanagement.

Question 24

When deciding which form of business organization to choose, businesspersons normally consider only one factor.

Question 25

Only a board of directors can initiate the dissolution of a corporation.

Question 26

If a corporation is dissolved, its assets can be liquidated without further notice to a party with a claim against the firm.

Question 27

A state court can dissolve a corporation for engaging in ultra vires acts.

Question 28

Natural Laminate Corporation and Oak Wood Flooring Company combine so that all that remains after the papers have been signed is Natural Laminate. This is

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

Question 29

No state has passed an antitakeover statute.

Question 30

When a corporation is dissolved voluntarily, the corporation must file articles of dissolution with the state.

Question 31

Like other corporations, Restwell Hotels Inc. can extend its operations through

A) liquidating and distributing its assets.
B) buying the assets of, or a controlling interest in, another corporation.
C) filing articles of dissolution with the state.
D) appointing a receiver to wind up the corporate affairs.

Question 32

Fact Pattern 36-1
Grandview Office Suites, Inc., merges with Hilltop Commercial Properties, Inc. Only Hilltop remains.
Refer to Fact Pattern 36-1. Grandview owed money to Innovative Décor, Inc., and other creditors. Af?ter the merger, Hilltop must pay

A) all of Grandview's debts.
B) half of Grandview's debts.
C) none of Grandview's debts unless there is a formal transfer of liability.
D) only debts that Grandview incurred after a merger was proposed.

Question 33

Dissolution is the legal death of the artificial "person" of a corporation.

Question 34

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

Question 35

When dissolution is involuntary, the court will appoint a receiver to wind up the corporate affairs.

Question 36

Winding up is the process by which corporate assets are liquidated.

Question 37

Like other corporations, Western Steel Corporation can extend its opera?tions through

A) a merger.
B) a dissolution.
C) a termination.
D) a winding up.

Question 38

A state court can dissolve a corporation for committing fraud to the state during incorporation.

Question 39

A target corporation is a corporation being acquired through the purchase of a substantial number of the voting shares of its stock.

Question 40

A target corporation's attempted takeover of an acquiring corporation is referred to as the poison pill defense.

Question 41

Fact Pattern 36-1
Grandview Office Suites, Inc., merges with Hilltop Commercial Properties, Inc. Only Hilltop remains.
Refer to Fact Pattern 36-2. United Resources assumes

A) all of Shale's and Tierra's debts.
B) half of Shale's and Tierra's debts.
C) none of Shale's and Tierra's debts unless there is a formal transfer of liability.
D) only debts that Shale and Tierra incurred after a combina?tion was proposed.

Question 42

Raven is a shareholder of Quantum Mechanix Corporation. Raven could normally ex?er?cise appraisal rights if Quantum participated in

A) a consolidation.
B) a dissolution.
C) a liquidation.
D) a winding up.

Question 43

Broncobuster BarBQ Company and Cowpuncher Cuisine, Inc. decide to combine. Deanna, a Cowpuncher shareholder, is dissatisfied with the price that she will receive for her stock. In the absence of fraud or other illegal conduct, Deanna's exclusive remedy is to

A) exercise an appraisal right.
B) file a suit to delay the process.
C) refuse to agree to the deal, which cannot then proceed.
D) acquire stock from the other shareholders and thereby obtain corporate control.

Question 44

Ben is a shareholder of Cotton Fabric, Inc., whose management is con?sider?ing extending its operations through some type of combination or acquisition with Denim Dungaree Corporation. Ben could normally exercise appraisal rights if Cotton Fabric participates in

A) a sale of substantially all of the corporate assets.
B) a dissolution.
C) a tender offer.
D) none of the choices.

Question 45

Eagle Financial Corporation merges with First Bank Corporation, with Eagle Financial absorbing First Bank. After the merger

A) a different, new corporation is the surviving corporation.
B) Eagle Financial and First Bank are both surviving corporations.
C) Eagle Financial is the surviving corporation.
D) First Bank is the surviving corporation.

Question 46

A merger between Blended Coffee Corporation and Cowland Creamery Inc. can be expressed as Blended Coffee + Cowland Creamery =

A) Cowland Creamery.
B) Delite Dairy Corporation.
C) Delite Dairy Corporation + EZ Stir & Sip Inc.
D) EZ Stir & Sip Inc.

Question 47

Fact Pattern 36-1
Grandview Office Suites, Inc., merges with Hilltop Commercial Properties, Inc. Only Hilltop remains.
Refer to Fact Pattern 36-2. The formation of United Resources is

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

Question 48

Mediterranean Herbs Inc. wants to purchase all of the assets of Nature's Spice Company. Olina is a Nature's Spice shareholder. Approval of the deal must be obtained from the shareholders of

A) Mediterranean Herbs only.
B) Nature's Spice only.
C) both corporations.
D) neither corporation.

Question 49

Mall Stores Corporation owns 95 percent of the shares of Niche Retail Corporation. Mall Stores combines with Niche Retail, but only Mall Stores continues to exist. This transaction was

A) a consolidation.
B) a tender offer.
C) a short-form merger.
D) a termination.

Question 50

Ground-Up Construction Corporation (CCC) has a right of action against Heavyquip, Inc. Ground-Up Construction merges with Investors Development, Inc., with Investors absorbing Ground-Up. After the merger, Ground-Up's right of action against Heavyquip can be exercised by

A) Ground-Up.
B) Investors.
C) Heavyquip.
D) no one.

Question 51

Eye Appliance Company and Fresh Views, Inc., wish to combine all of their assets, stock, and personnel into a new firm to be called Goggles Corporation. This is

A) a consolidation.
B) a merger.
C) an exchange of assets.
D) a takeover.

Question 52

Jen files a suit against Kopper Kettle Company. While the suit is pending, Kopper Kettle merges with Luminous Pans, Inc., with Luminous absorbing Kopper Kettle. Now, liability in the suit, if any, rests with

A) Jen.
B) Kopper Kettle.
C) Luminous.
D) no one.

Question 53

Precise Device Corporation and Quality Instruments, Inc., decide to merge. This corporate combination does not require the approval of

A) Precise and Quality's directors.
B) Precise and Quality's officers and employees.
C) Precise's shareholders.
D) Quality's shareholders.

Question 54

Realty Credit Company and Second Mortgage Corporation plan to con?solidate. Most likely, the articles of consolidation will be filed with

A) the county recording office.
B) the Securities and Exchange Commission.
C) the state's secretary of state.
D) the local chamber of commerce.

Question 55

Algorhythm Stock Trades, Inc., and Big Data Market Analyses, Inc., plan to merge. Most likely, the ar?ticles of merger will be filed with

A) the county recording office.
B) the local chamber of commerce.
C) the state's secretary of state.
D) the Securities and Exchange Commission.

Question 56

Giant Lift Corporation purchases all of the assets of Heavy Hydraulics Corporation. With respect to Heavy Hydraulics's liabilities, Giant Lift is

A) automatically responsible.
B) not responsible under any circumstances.
C) responsible if Heavy Hydraulics is a competitor of Giant Lift.
D) responsible if the sale is in fact a merger or consolidation.

Question 57

Fact Pattern 36-1
Grandview Office Suites, Inc., merges with Hilltop Commercial Properties, Inc. Only Hilltop remains.
Refer to Fact Pattern 36-2. United Resources acquires

A) all of Shale's and Tierra's assets.
B) half of Shale's and Tierra's assets.
C) none of Shale's and Tierra's assets unless there is a formal transfer.
D) only assets that Shale and Tierra acquired after a combina?tion was proposed.

Question 58

Lorelei files a suit against Memphis Recording Company. While the suit is pend?ing, Memphis Recording consolidates with Nashville Music Corporation to form Omni Productions, Inc. Now, liability in the suit, if any, rests with

A) Omni.
B) Memphis Recording and Nashville Music.
C) Lorelei.
D) no one.

Question 59

Through a certain transaction, Coffee Bean Cafés, Inc., acquires all of the shares of Deli Dining Corporation for some of Coffee Bean's shares. Both Coffee Bean and Deli Dining continue to exist. This is

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

Question 60

Fact Pattern 36-1
Grandview Office Suites, Inc., merges with Hilltop Commercial Properties, Inc. Only Hilltop remains.
Refer to Fact Pattern 36-1. The articles of merger include changes that differ from Hilltop's articles of incor?poration. The articles of incorporation

A) are deemed amended to include the changes.
B) are replaced by the articles of merger.
C) effectively prevent the merger.
D) preempt the articles of merge.

Question 61

Ruff Games, Inc., wishes to ac?quire a controlling interest in Smart Toy Com?pany by buying its stock. Smart Toy is

A) an alien corporation.
B) an acquiring corporation.
C) a receiver.
D) a target corporation.

Question 62

Corporate Properties, Inc., attempts to acquire a substantial number of the shares of Downtown Investment Corporation through a public offer to Downtown's shareholders. This is

A) a consolidation.
B) a tender offer.
C) a short-form merger.
D) a termination.

Question 63

Brock is a shareholder of Competent Homebuilders Corporation (CHC). For the last few years, business has not been profitable for CHC. The firm has lost money on its operations. There has been some profit through sales of company assets, but the board of directors has refused to declare a dividend. This last year, the firm's accountants failed to file fed?eral in?come tax returns and the board refused to pay the tax. Brock takes a close look at the firm and protests to the board, in particular over the fail?ure to declare a dividend, but the board ignores the complaint. Which of these events, if any, would form a ground for a court to order the dissolu?tion of CHC, on Brock's petition? If the court denies the petition, could Brock and the other shareholders dissolve CHC?

Question 64

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 transac?tion? 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?

Question 65

Bread & Bagels Corporation wants to purchase all of the assets of Coffee & Tea Inc. Dolly is a Coffee & Tea shareholder. The approval of Dolly and other Coffee & Tea shareholders is necessary

A) in all circumstances.
B) in no circumstances.
C) only if Coffee & Tea will be paid with unauthorized, unissued stock.
D) only if Bread & Bagels agrees to assume Coffee & Tea's liabilities.

Question 66

Fact Pattern 36-3
Popular Movies Corporation wants to gain control of Quality Films, Inc. The companies negoti?ate for several months, without coming to terms. Popular Movies decides to pursue a takeover at?tempt. Quality Films decides to resist.
Refer to Fact Pattern 36-3. Quality Films issues shares that its shareholders can exchange for cash if a takeover is successful, intending to make Popular Movies's takeover attempt too expensive. This is a

A) crown jewel defense.
B) Pac-Man defense.
C) poison pill defense.
D) white knight defense.

Question 67

Salt Corporation wants to acquire or merge with Pepper Corporation. Salt should

A) file a plan of merger with the secretary of state.
B) file an article of merger with Pepper.
C) make a tender offer to the shareholders of Pepper.
D) make a tender offer to the shareholders of Salt.

Question 68

Fact Pattern 36-4
Diversified Corporation's articles of incorporation prohibit a sale of its assets with?out a vote of the board of directors. Diversified's officers sell some assets to Enterprise Company without notice to the board. The officers also fail to pay Diversified's taxes on time, and some Diversified funds are not accounted for.
Refer to Fact Pattern 36-4. The appropriate remedy is most likely

A) a sale of the rest of Diversified's assets to its directors and shareholders.
B) Diversified's consolidation or merger with Enterprise.
C) Diversified's dissolution.
D) payment of damages to Diversified's officers.

Question 69

Continental Capital, Inc., increases its holdings, making ten?der of?fers in many states. These offers are subject to

A) federal securities laws only.
B) state antitakeover statutes only.
C) no specific statutory requirements or limitations.
D) state antitakeover statutes and federal securities laws.

Question 70

Fact Pattern 36-4
Diversified Corporation's articles of incorporation prohibit a sale of its assets with?out a vote of the board of directors. Diversified's officers sell some assets to Enterprise Company without notice to the board. The officers also fail to pay Diversified's taxes on time, and some Diversified funds are not accounted for.
Refer to Fact Pattern 36-4. With respect to Diversified's share?holders, this conduct is most likely

A) not oppressive because it is undertaken by Diversified's officers.
B) oppressive because Diversified's directors may be personally liable.
C) oppressive because Diversified's shareholders may be personally liable.
D) oppressive because it departs from the standards of fair dealing.

Question 71

Sangfroid Business Corporation can be compelled to dissolve by

A) its creditors only.
B) itself, through its shareholders and directors, only.
C) itself, through its shareholders and directors, or the state.
D) the state only.

Question 72

Fact Pattern 36-3
Popular Movies Corporation wants to gain control of Quality Films, Inc. The companies negoti?ate for several months, without coming to terms. Popular Movies decides to pursue a takeover at?tempt. Quality Films decides to resist.
Refer to Fact Pattern 36-3. Quality Films solicits a merger with Real2Reel Corporation, a third party, which makes a better offer to Quality Films's share?holders. Real2Reel is a

A) crown jewel.
B) Pac-Man.
C) poison pill.
D) white knight.