Question 1

a. In general, what is considered a fundamental change in a corporation? Give three examples of a fundamental change. 
b. Who proposes such fundamental changes? Who must approve them? Explain. 
c. Brian is a minority shareholder in Gryath, Inc. He opposes a fundamental change that is approved and implemented. What rights does he have?

Accepted Answer

The answer of a. In general, what is considered a...

Question 2

The board approves a proposed amendment to deny existing preemptive rights to Class A preferred, and to issue stock in a new Class D preferred that would be accorded liquidation preference after all other classes of preferred stock. Preferred Classes B and C would remain the same. Which of the following would be true?

Accepted Answer

Class A shareholders are directly affected by the amendment as it denies them existing rights, and Class B and C are indirectly affected since the introduction of Class D affects the overall preference structure. Therefore, a majority of all classes would typically need to agree for such a significant amendment to pass.

Question 3

A court may dissolve a corporation in a proceeding brought by a shareholder when:

Accepted Answer

All of these situations (A, B, and C) are grounds on which a court may dissolve a corporation in a proceeding brought by a shareholder. Misapplication of corporate assets, deadlock among directors with shareholders unable to break it, and shareholder deadlock leading to a failure to elect directors for two consecutive annual meetings can all justify judicial dissolution of a corporation.

Question 4

a. When may the attorney general of a state seek judicial action to dissolve a corporation? 
b. When may the shareholders of a corporation seek to dissolve it? 
c. When may the creditors of a corporation seek to dissolve it?

Accepted Answer

The answer of a. When may the attorney general of...

Question 5

A creditor may petition the court to judicially dissolve a corporation if he has an unsatisfied judgment against the corporation and:

Accepted Answer

A creditor can petition for judicial dissolution if the corporation is insolvent, meaning it cannot pay its debts as they come due, and the creditor has an unsatisfied judgment against it.

Question 6

Discuss what happens to a corporation after dissolution and what protection is afforded creditors of the corporation.

Accepted Answer

The answer of Discuss what happens to a corporation after...

Question 7

Jasmine owns a controlling interest in the Hardwick Company. Explain her responsibilities if she wants to privately sell her interest.

Accepted Answer

The answer of Jasmine owns a controlling interest in the...

Question 8

If Barker Co. buys 51% of the shares of Carter Co.:

Accepted Answer

Barker Co.'s board would typically need to approve such a significant acquisition, as it involves a substantial investment and could significantly affect the company's financial position and strategic direction. Approval from Carter Co.'s board is not necessarily required for the sale of shares by its shareholders, unless specific agreements or regulations dictate otherwise.

Question 9

The __________ gives shareholders who elect such a right in the articles of incorporation the power to dissolve the corporation.

Accepted Answer

The Statutory Close Corporation Supplement provides this power, allowing shareholders, if they have elected such a right in the articles of incorporation, to dissolve the corporation. This is specifically designed for closely held corporations to give shareholders more control over the decision to dissolve.

Question 10

a. Action Corporation purchases all of the assets of the Bell Corporation. After the purchase, a creditor of the Bell Corporation asserts that, by buying the assets of the Bell Corporation, Action has automatically assumed all of Bell's obligations. Is he correct? Explain. 
b. Dicton Corporation is merged into the Crag Corporation. One of Dicton's creditors was not paid before the merger occurred. The creditor demands payment from the board of directors of the Crag Corporation. The board says that because the Dicton Corporation no longer exists, Crag has no obligation to the creditor. Who is right? Explain your answer.

Accepted Answer

The answer of a. Action Corporation purchases all of the...

Question 11

A corporation may accomplish acquiring all or substantially all assets of another corporation by:

Accepted Answer

All the options listed (A: purchase or lease of other corporations' assets, B: purchase of a controlling stock interest in other corporations, C: merger or consolidation with other corporations) are valid ways a corporation can acquire all or substantially all assets of another corporation.

Question 12

The Revised Model Act would permit the directors to avoid a shareholder vote for which of the following amendments to the articles of incorporation?

Accepted Answer

The answer of The Revised Model Act would permit the...

Question 13

The courts may grant a petition of involuntary dissolution if shareholders:

Accepted Answer

The courts may grant a petition of involuntary dissolution if shareholders can show that corporate assets are being squandered. This is because the courts may see such behavior as a breach of the directors' duty to the corporation and its shareholders. A, B, and C are not valid reasons for involuntary dissolution.

Question 14

A few states and the 1999 amendments to the Revised Act contain provisions authorizing a corporation to merge or convert into another type of business organization, referred to as an eligible entity.  Which of the following is NOT an eligible entity?

Accepted Answer

The answer of A few states and the 1999 amendments...

Question 15

A merger of Parker Corporation with Jones Corporation that results in only Parker Corporation's surviving normally would require approval of:

Accepted Answer

In a merger where one corporation survives (in this case, Parker Corporation), typically, the approval of both corporations' boards of directors and the shareholders of both companies is required. This ensures that all parties involved have agreed to the terms of the merger.

Question 16

The use of cash-out combinations has raised questions concerning both their purpose and their fairness to minority shareholders. In this context, fairness includes:

Accepted Answer

Fairness in the context of cash-out combinations encompasses both fair dealing and fair price, ensuring that minority shareholders are treated equitably in terms of the process and the financial compensation they receive.

Question 17

The Revised Act permits the board of directors to adopt certain amendments without shareholder action, unless the articles of incorporation provide otherwise. These amendments would include:

Accepted Answer

The Revised Act allows the board of directors to make certain amendments without needing shareholder approval, including extending the corporation's duration, reclassifying shares when there's only one class, and making minor name changes, unless restricted by the articles of incorporation.

Question 18

Discuss the similarity between a management buyout and a cash-out combination.

Accepted Answer

The answer of Discuss the similarity between a management buyout...

Quiz 36: Fundamental Changes of Corporations