At December 31, 20X0, Crowe Company has 80,000 common shares outstanding while Dylan Inc. has 40,000 common shares outstanding. Crowe wishes to gain control over Dylan and will enter into a reverse takeover of Dylan to gain Dylan's listing on the stock exchange. In order to facilitate the reverse takeover, which of the following would have to occur?

Question

Quizplus · Accepted Answer

In order for Crowe to gain control over Dylan, Crowe would need to acquire a majority of Dylan's outstanding common shares. Since Dylan currently has 40,000 common shares outstanding, Crowe would need to acquire at least 20,001 of these shares (50% + 1). Therefore, Dylan would need to issue more than 40,000 shares to allow for Crowe to acquire a controlling interest in the company. Option A is the correct answer.

At December 31, 20X0, Crowe Company Has 80,000 Common Shares