Question 1

Fact Pattern 31-7 Enchilada Inc. seeks to purchase a substantial number of the voting shares of Fajita Inc .
Refer to Fact Pattern 31-7. The directors of Fajita resist Enchilada's takeover attempt. In analyzing whether this is reasonable, a court would apply

Accepted Answer

The business judgment rule is applied by courts to determine if the directors' resistance to a takeover attempt is reasonable, as it protects directors' decisions made in good faith and in the best interest of the corporation.

Question 2

Dissolution of a corporation can be initiated by

Accepted Answer

A court order can initiate the dissolution of a corporation, typically due to legal issues or disputes that require judicial intervention.

Question 3

Fact Pattern 31-7 Enchilada Inc. seeks to purchase a substantial number of the voting shares of Fajita Inc .
Refer to Fact Pattern 31-7. Enchilada deals directly with the shareholders of Fajita. Enchilada offers a price higher than the market price of Fajita's shares. This is

Accepted Answer

A tender offer is when a company offers to buy shares from shareholders at a premium over the market price, often to gain control of the company.

Question 4

Fact Pattern 31-6 Sweet Inc. acquires all of the assets of Tart Inc . by direct purchase.
Refer to Fact Pattern 31-6. Upton is a Tart shareholder who does not approve of the deal. In most states, Upton can

Accepted Answer

In most states, shareholders who do not approve of a significant transaction like an asset acquisition have the right to demand appraisal rights, which allows them to receive payment for their shares at a fair value.

Question 5

Fact Pattern 31-6 Sweet Inc. acquires all of the assets of Tart Inc . by direct purchase.
Refer to Fact Pattern 31-6. Approval of the deal between Sweet and Tart is subject to the approval of the shareholders of

Accepted Answer

The approval of the shareholders of Tart Inc. is required because they are selling all of the company's assets, which is a significant corporate action. Sweet Inc.'s shareholders typically do not need to approve asset purchases unless it significantly affects the company.

Question 6

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

Accepted Answer

Liquidation refers to the process of selling off the assets of a business when it is terminating its operations. This is usually done to pay off any outstanding debts and distribute any remaining funds to shareholders or owners. A takeover involves the acquisition of one business by another, dissolution is the act of formally ending a business, and a breach of fiduciary duty refers to a violation of the trust and loyalty owed by a person in a position of authority towards the business and its stakeholders.

Question 7

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?

Accepted Answer

The answer of Alice and Bernie pool their money and...

Question 8

Fact Pattern 31-5 Lender Inc. owns more than 90 percent of the stock of Mortgage Inc .
Refer to Fact Pattern 31-5. A plan for a merger of Lender and Mortgage must be approved by the directors of

Accepted Answer

When a parent company owns more than 90% of a subsidiary, a short-form merger can occur, which typically requires approval only from the parent company's board of directors.

Question 9

Fact Pattern 31-6 Sweet Inc. acquires all of the assets of Tart Inc . by direct purchase.
Refer to Fact Pattern 31-6. Sweet assumes the liabilities of Tart if

Accepted Answer

A court can impose liabilities on Sweet if it determines that the acquisition effectively amounts to a continuation of Tart's business or if other legal grounds exist for such imposition.

Question 10

The directors of Natural Food Corporation and the directors of Organic Produce, Inc. work together to develop a combination plan. They have several options. In one option, Natural Food continues to exist but Organic Produce does not. In another option, both companies cease to exist and a new company, Natural Organic, is created. In the final option, both companies continue to exist but are wholly owned by a new company, NFOP. Describe in legal terms the different options and who must approve each option.

Accepted Answer

The answer of The directors of Natural Food Corporation and...

Question 11

Fact Pattern 31-5 Lender Inc. owns more than 90 percent of the stock of Mortgage Inc .
Refer to Fact Pattern 31-5. A plan for a merger of Lender and Mortgage must be approved by the shareholders of

Accepted Answer

The answer of Fact Pattern 31-5 Lender Inc. owns more...

Question 12

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

Accepted Answer

Tom may be entitled to an appraisal right if the combination is a merger or a short-form merger, as these actions typically trigger appraisal rights for dissenting shareholders.

Quiz 31: Combining and Dissolving a Corporation

Fact Pattern 31-7 Enchilada Inc. seeks to purchase a substantial number of the voting shares of Fajita Inc . Refer to Fact Pattern 31-7. The directors of Fajita resist Enchilada's takeover attempt. In analyzing whether this is reasonable, a court would apply

Dissolution of a corporation can be initiated by

Fact Pattern 31-7 Enchilada Inc. seeks to purchase a substantial number of the voting shares of Fajita Inc . Refer to Fact Pattern 31-7. Enchilada deals directly with the shareholders of Fajita. Enchilada offers a price higher than the market price of Fajita's shares. This is

Fact Pattern 31-6 Sweet Inc. acquires all of the assets of Tart Inc . by direct purchase. Refer to Fact Pattern 31-6. Upton is a Tart shareholder who does not approve of the deal. In most states, Upton can

Fact Pattern 31-6 Sweet Inc. acquires all of the assets of Tart Inc . by direct purchase. Refer to Fact Pattern 31-6. Approval of the deal between Sweet and Tart is subject to the approval of the shareholders of

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

Fact Pattern 31-5 Lender Inc. owns more than 90 percent of the stock of Mortgage Inc . Refer to Fact Pattern 31-5. A plan for a merger of Lender and Mortgage must be approved by the directors of

Fact Pattern 31-6 Sweet Inc. acquires all of the assets of Tart Inc . by direct purchase. Refer to Fact Pattern 31-6. Sweet assumes the liabilities of Tart if

Fact Pattern 31-5 Lender Inc. owns more than 90 percent of the stock of Mortgage Inc . Refer to Fact Pattern 31-5. A plan for a merger of Lender and Mortgage must be approved by the shareholders of

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