Deck 29: Corporate Acquisitions and Multinational Corporations

Question 1

A corporation that owns shares of the subsidiary corporation in a share exchange is referred to as the ________ corporation.

A) parent
B) merged
C) sister
D) daughter

Answer 1

A

Question 2

Section 14(a)of the Securities Exchange Act of 1934 is a(n)________.

A) investment provision
B) antifraud provision
C) share exchange provision
D) antitakeover statute

Answer 2

B

Question 3

A ________ is a situation in which one corporation is absorbed into another corporation and ceases to exist.

A) supramajority
B) merger
C) share exchange
D) proxy

Answer 3

B

Question 4

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

A) the formation of the board of directors of a corporation
B) mergers between two or more corporations
C) the issue of shares by a corporation
D) the solicitation of proxies by a corporation

Question 5

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

A) proxy
B) implied warranty
C) tacit contract
D) verdict

Question 6

The corporation that is owned by another corporation in a share exchange is known as a ________ corporation.

A) subsidiary
B) parent
C) merged
D) holding

Question 7

The ________ shareholders offer their own slate of proposed directors to replace the current directors.

A) incumbent
B) inside
C) insurgent
D) outside

Question 8

A valid shareholder resolution ________.

A) submitted by a shareholder will not exceed 500 words in its length
B) can be made by a shareholder who possesses less than 1% of all shares of the company
C) may be submitted by a stockholder who owns less than $2000 worth of shares of the company's stock
D) is submitted by a person after six months of becoming the company's shareholder

Question 9

Nestor,a stockholder of a software firm,is unable to attend the annual shareholders' meeting conducted by the firm.He authorizes his friend,Matt,to attend the meeting on his behalf and vote Nestor's shares in his name.To formalize this,he composes and signs a written document that grants Matt the appropriate privilege.The document is then sent to the software firm.This document is an example of ________.

A) a verdict
B) an implied warranty
C) tacit contract
D) proxy

Question 10

Synesia Infotech acquires Nialand Microchips by absorbing the company and acquiring its title to property.As a result,Nialand ceases to exist as a legal company.This combination is an example of a ________.

A) supramajority
B) merger
C) share exchange
D) proxy

Question 11

A situation in which the articles of incorporation demand the approval of 90 percent of the voting shares instead of the usual 50 percent is known as a ________.

A) supramajority
B) simple majority
C) greenmail
D) standstill agreement

Question 12

Which of the following gives the Securities and Exchange Commission the authority to regulate the solicitation of proxies?

A) Section 11 of the Securities Act of 1933
B) Section 14(a) of the Securities and Exchange Act of 1934
C) Section 13(d) of the Securities and Exchange Act of 1934
D) Section 12 of the Securities Act of 1933

Question 13

Which of the following is a requirement that a shareholder's resolution must satisfy in order for it to be included in the corporation's proxy materials?

A) It must be unrelated to the corporation's business.
B) It should concern a policy issue.
C) It must involve the day-to-day operations of the corporation.
D) It should concern the payment of dividends.

Question 14

Lanuxa is a restaurant that is on the verge of bankruptcy.Gourmet World,a restaurant chain,acquires all the stocks of Lanuxa in an attempt to expand its business.To avoid legal paperwork,Gourmet World decides to retain its separate legal existence from that of Lanuxa's.This is an example of a ________.

A) proxy
B) merger
C) share exchange
D) supramajority

Question 15

Which of the following is a similarity between Section 14(a)of the Securities and Exchange Act and the Williams Act?

A) Both allow the president of the United States to suspend the acquisition of U.S. businesses by a foreign investor.
B) Both prohibit material misrepresentations of material facts in proxy materials.
C) Both establish antifraud provisions for certain corporate actions that prevent fraudulent actions.
D) Both specifically regulate tender offers made by a company to a target company.

Question 16

Which of the following is true of a proxy contest?

A) It involves insurgent shareholders challenging incumbent directors.
B) It forbids solicitation of proxies by the parties involved in such a contest.
C) It requires incumbent directors to replace insurgent directors of the board.
D) It prevents shareholders from opposing actions taken by the board of incumbent directors.

Question 17

Mr.Davidson,who owns 17 percent of his company's shares,is displeased with the six incumbent directors of the corporation.He proposes a slate of directors consisting of five other persons and himself to become members of the board of directors of the corporation and replace the incumbent directors.In the proxy contest,Mr.Davidson manages to acquire proxies from shareholders who control only 35 percent of the company's shares.Which of the following is true in this context?

A) The shareholders who voted for Mr. Davidson's slate of directors will constitute 35 percent of the new board of directors.
B) The incumbent directors will continue to form the board of directors.
C) Since a clear majority was not established by the proxy contest, another proxy contest must be held.
D) The slate of directors proposed by Mr. Davidson will form the new board of directors.

Question 18

Which of the following is true of proxies?

A) They arise from tacit oral contracts between shareholders.
B) They are signed by a corporation and sent to its shareholders.
C) They authorize proxies to vote in place of the proxy holders.
D) They are permitted to be submitted electronically.

Question 19

A ________ is usually made when a corporation solicits proxies from its stockholders.

A) shareholder resolution
B) codicil
C) greenmail
D) poison pill

Question 20

A shareholder resolution is best defined as a resolution submitted by ________.

A) a shareholder for a vote of the board of directors
B) the board of directors requiring the reorganization of shares held by shareholders
C) a shareholder for a vote of other shareholders
D) the board of directors requiring the forced liquidation of shares held by shareholders

Question 21

Which of the following is true of a merger?

A) It results in the continued legal existence of every corporation involved in the process.
B) It occurs when one corporation is absorbed into another corporation.
C) It requires any transfer of title to property between corporations to be formally conducted by drafting deeds.
D) It arises when one corporation splits into two sister corporations independent of each other.

Question 22

Which of the following is true of a surviving corporation?

A) It releases its title to property to the merged corporation.
B) It gains all the rights and privileges of the merged corporation.
C) It relieves itself of all its liabilities that are transferred to the merged corporation.
D) It survives during the merger and ceases to do so after the merger.

Question 23

A ________ is made by an acquirer directly to a target corporation's shareholder,without the knowledge of the board of directors,in an effort to acquire the target corporation.

A) share exchange
B) tender offer
C) proxy
D) shareholder resolution

Question 24

Which of the following is true of an ordinary merger?

A) The recommendation of the board of directors of each corporation is not required.
B) The articles of merger must be filed with the secretary of state of the surviving corporation.
C) The approval of the surviving corporation's shareholders is required if the total voting share increases by 20 percent.
D) The affirmative vote of the majority of shares of only the surviving corporation is required.

Question 25

A(n)________ refers to the purchase by a target corporation of its stock from an actual or perceived tender offeror at a premium.

A) proxy
B) appraisal
C) flip-over rights plan
D) greenmail

Question 26

Penta Timber plans on taking over Treerings Furniture.Penta acquires a block of stock in Treerings and then makes a tender offer to Treerings' shareholders.After a week,Penta decides to give up the tender offer if Treerings agrees to buy back the stock at a 5% premium over the fair market value.This payment is an example of a(n)________.

A) proxy
B) appraisal
C) greenmail
D) flip-over rights plan

Question 27

Which of the following is a similarity between a merger and a share exchange?

A) Both involve the splitting of a single company into multiple smaller companies.
B) Both require the complete absorption of one company and the sacrifice of its legal existence.
C) Both involve the continued legal existence of every company involved in the processes.
D) Both require the recommendation of the board of directors of the companies involved.

Question 28

________ are often used to create holding company arrangements.

A) Acquisitions
B) Mergers
C) Share exchanges
D) Takeovers

Question 29

In a ________,a target corporation is acquired by a friendly party that promises to leave the target corporation or its management intact.

A) flip-in rights plan
B) flip-over rights plan
C) reverse tender offer
D) white knight merger

Question 30

The ________ 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.

A) pro rata
B) fair price
C) business judgment
D) perfect tender

Question 31

The ________ is an amendment to the Securities Exchange Act of 1934 that specifically regulates tender offers.

A) Gramm-Leach-Bliley Act
B) Financial Services Modernization Act
C) Williams Act
D) Exon-Florio Foreign Investment Provision

Question 32

A short-form merger between a parent corporation and its subsidiary only requires the approval of ________.

A) shareholders of the parent corporation
B) shareholders of the subsidiary corporation
C) the board of directors of the parent corporation
D) the board of directors of the subsidiary corporation

Question 33

________ rights are the rights of shareholders who object to a proposed merger to have their shares valued by the court and receive cash payment of this value from the corporation.

A) Subscription
B) Liquidation
C) Preemptive
D) Appraisal

Question 34

The ________ protects the decisions of a board of directors that acts on an informed basis,in good faith,and in the honest belief that the action taken was in the best interests of the corporation and its shareholders.

A) Williams Act
B) antifraud provision of the SEC
C) pro rata rule
D) business judgment rule

Question 35

A surviving corporation is one that ________.

A) continues to exist after a merger
B) is absorbed by the merged corporation in a merger
C) orchestrates the merger of two separate companies
D) is bought by a merged corporation in a merger

Question 36

Enworth Pharma conducts a comprehensive study,which suggests high success rates for a project aiming to develop a strong anti-lymphoma drug.Trusting the experts who conducted the study,Enworth invests large amounts of financial capital into the project.The project fails and Enworth,along with its shareholders,incur massive losses.Which of the following protects Enworth Pharma from litigation by its unhappy shareholders?

A) pro rata rule
B) crashworthiness doctrine
C) Williams Act
D) business judgment rule

Question 37

A ________ is a valuable asset of a target corporation that the tender offeror particularly wants to acquire in a tender offer.

A) greenmail
B) white knight
C) poison pill
D) crown jewel

Question 38

Instaworks,Inc.wants to acquire IOK Corp.Instaworks makes a tender offer to the shareholders of IOK to acquire their shares of IOK without the permission of the latter corporation's board of directors.This is an example of a ________.

A) sale of assets
B) share exchange
C) merger
D) hostile tender offer

Question 39

Anenta Energy is looking to take over Futurum Windpower largely in order to procure Futurum's state of the art windmill design.In an attempt to defend itself from this takeover,Futurum sells its windmill design to another company.In this scenario,the windmill design is an example of a ________.

A) greenmail
B) white knight
C) poison pill
D) crown jewel

Question 40

The corporation that is absorbed in an acquisition and ceases to exist after the acquisition is a ________ corporation.

A) parent
B) surviving
C) merged
D) share

Question 41

With respect to the Williams Act,the pro rata rule holds that ________.

A) a parent company must purchase shares from its subsidies on a pro rata basis if there are too many subsidies involved
B) a target company must sell its crown jewels to multiple friendly parties on a pro rata basis if too many crown jewels are owned by it
C) stock holders of a company must be apportioned voting power on a pro rata basis if there are too many candidates to choose
D) a target company's shares must be purchased by an acquiring company on a pro rata basis if too many shares are tendered

Question 42

Redstone Enterprises wishes to take over Artemia Industries.To do this,Redstone offers Artemia's shareholders a hostile tender offer.Which of the following resulting scenarios is an example of a reverse tender offer?

A) Artemia creates an employee stock ownership plan that aims to sabotage Redstone's shareholders.
B) Artemia merges with friendly parties that protect it from Redstone's hostile takeover plans.
C) Artemia offers a tender offer to Redstone's shareholders in order to buy Redstone.
D) Artemia issues a tender offer to its own shareholders to relieve them of the collateral damage resulting from the takeover.

Question 43

Tom,an investor from the Republic of Senborgia,acquires a large American company in Delaware.He closes down the company's branches in the state and moves the business elsewhere.This results in a heavy layoff of employees who are Delaware citizens.Delaware also suffers a decrease in tax revenues.Which of the following allows the president of the United States to suspend Tom's acquisition?

A) Williams Act
B) Securities Exchange Act of 1934
C) Investment Company Act of 1940
D) Exon-Florio Foreign Investment Provision

Question 44

Which of the following is a difference between an international branch office of a corporation and an international subsidiary of the corporation?

A) The branch office is a separate legal entity from the corporation, while the subsidiary does not have such a legal existence.
B) The branch office has a liability shield between itself and the corporation, while the subsidiary does not possess such a shield.
C) The corporation is liable for the contracts of the branch office, while it is not liable for contracts of the subsidiary.
D) The corporation is not liable for the torts committed by the branch office, while it is liable for torts committed by the subsidiary.

Question 45

Archman Stationeries is looking to takeover Linegraph Pens.In its bid to make a tender offer,it begins acquiring stock from Linegraph.While purchasing the shares,Archman realizes that the shares tendered are far too many in number.However,it illicitly does not purchase the shares on a pro rata basis.This is a violation as defined by the ________.

A) Williams Act
B) Lanham Act
C) Investment Company Act of 1940
D) Exon-Florio Foreign Investment Provision

Question 46

The ________ plan provides that existing shareholders of the target corporation may convert their shares for a greater number of shares of the acquiring corporation.

A) employee stock ownership
B) flip-in rights
C) flip-over rights
D) voting rights

Question 47

Luminax Electric,in its bid to take over Greenwave Electric,buys a block of stock from Greenwave before making a tender offer.After a month,Luminax decides to give up its tender offer and agrees not to purchase any further shares if Greenwave agrees to buy back the stock at a premium over fair market value.Luminax's agreement is an example of a(n)________ agreement.

A) plea bargaining
B) operating
C) standstill
D) settlement

Question 48

Which of the following is true of a subsidiary of a multinational corporation present in a foreign country?

A) The subsidiary corporation is organized under the laws of the home country where the corporation is located.
B) There is a liability shield between the parent company and the subsidiary.
C) The parent company is liable for torts committed by the subsidiary.
D) The subsidiary corporation along with its parent corporation is considered a single legal entity.

Question 49

In a tender offer situation,the party that is proposed to be acquired is referred to as the ________.

A) target corporation
B) tender offeror
C) white knight
D) black knight

Question 50

Which of the following is a similarity of a flip-over rights plan and a flip-in rights plans with respect to a target company?

A) Both help an acquiring firm in a smooth, cost-efficient takeover of the target firm.
B) Both allow the target company's shareholders to convert their shares for a greater number of debt securities of the target company.
C) Both make it expensive for an acquiring firm to take over the target corporation.
D) Both allow the target company's shareholders to convert their shares for a greater number of shares of the acquiring company.

Question 51

Which of the following is true of a tender offer?

A) It can be closed before 20 days after the commencement of the tender offer.
B) It need not be notified to the management of the target company until the offer is made.
C) It need not be extended if the tender offeror increases the number of shares it will take.
D) It can be subjected to dissenting shareholder rights that are available to the shareholders.

Question 52

Xanasoft Technologies wishes to acquire Mauvestone Computers.Aware of Xanasoft's plans,Mauvestone protects itself by letting Tenetric Solutions,a friendly company,acquire it under the condition that Tenetric would leave Mauvestone uncompromised in every way.This scenario is an example of a ________.

A) flip-in rights plan
B) reverse tender offer
C) white knight merger
D) flip-over rights plan

Question 53

The ________ plan provides that existing shareholders of the target corporation may convert their shares for a greater number of debt securities of the target organization.

A) voting rights
B) flip-over rights
C) employee stock ownership
D) flip-in rights

Question 54

The ________ is a federal law that mandates the president of the United States to suspend the acquisition of U.S.businesses by foreign investors if there is credible evidence that the foreign investor might take action that threatens to impair the "national security."

A) Williams Act
B) Securities Exchange Act of 1934
C) Investment Company Act of 1940
D) Exon-Florio Foreign Investment Provision

Question 55

An employee stock ownership plan (ESOP)is expected to ________.

A) vote the shares it possesses against a potential acquirer in a proxy contest
B) help shareholders of the target corporation convert their shares for a greater number of shares of the acquiring corporation
C) aid shareholders of the target corporation convert their shares for a greater number of debt securities of the target corporation
D) sell the crown jewels it owns to friendly parties in order to distract a potential acquirer

Question 56

________ are defensive strategies that are built into the target corporation's articles of incorporation,corporate bylaws,or contracts and leases.

A) White knights
B) Proxies
C) Poison pills
D) Crown jewels

Question 57

Which of the following is a corporation's defense against a hostile takeover?

A) proxy statement
B) poison pill
C) shareholder resolution
D) lien

Question 58

What is a similarity between a branch office and a subsidiary of a multinational corporation?

A) Both are considered as separate legal entities by the laws of the countries involved.
B) Both have liability shields present between them and the parent company.
C) Both can be setup in a foreign land to run the parent company's business.
D) Both are wholly liable for their torts.

Question 59

Which of the following is true of a branch office of a multinational corporation?

A) The branch office can be setup in a foreign country separate from the corporation.
B) The corporation and the branch office are considered to be separate legal entities by law.
C) The branch office and the corporation are separated by a liability shield that exists between them.
D) The corporation is liable for contracts of the branch office.

Question 60

The agreement of a tender offeror to abandon its tender offer and not purchase any additional stock is called a(n)________ agreement.

A) plea bargaining
B) standstill
C) settlement
D) operating

Question 61

Title to property owned by the merged corporation transfers to the surviving corporation,without formality or deeds.

Question 62

In a share exchange,the subsidiary corporation becomes the sole shareholder of the parent corporation.

Question 63

Shareholder resolutions are usually made when the corporation is soliciting proxies from its shareholders.

Question 64

A shareholder's resolution must discuss day-to-day operations of a corporation.

Question 65

A proxy is a written document that is completed and signed by a shareholder and sent to the corporation.

Question 66

Share exchanges are used to create holding company arrangements.

Question 67

The Williams Act is an amendment to the Securities Exchange Act of 1934 made in 1968 that specifically regulates tender offers.

Question 68

In a share exchange between two companies,one company loses its legal existence.

Question 69

A proxy contest happens when insurgent shareholders challenge the incumbent directors.

Question 70

The insurgent shareholders of a corporation support the current or incumbent directors of a corporation.

Question 71

Insurgent directors are the current directors of a corporation.

Question 72

White knight mergers are mergers with friendly parties.

Question 73

If the parent corporation owns 90 percent or more of the outstanding shares of the subsidiary corporation,a short-form merger procedure may be followed to merge the two corporations.

Question 74

The pro rata rule holds that any increase in price paid for shares tendered must be offered to all shareholders,even those who have previously tendered their shares.

Question 75

A shareholder may not submit a resolution when it concerns the payment of dividends.

Question 76

The corporation that continues to exist after a merger is called the merged corporation.

Question 77

Federal proxy rules require proxies to be confidential documents.

Question 78

A tender offer made without the permission of the target company's management is a hostile tender offer.

Question 79

A shareholder resolution may exceed 500 words.

Question 80

The corporation that is proposed to be acquired in a tender offer situation is called tender offeror.