Question 1

Salmon Company decides to combine its operations with Tuna Corporation to form United Seafood Inc. Salmon and Tuna are domestic corporations. The plan for Salmon and Tuna's combination must be approved by the shareholders of

Accepted Answer

A)   each corporation.
B)   Salmon only.
C)   Tuna only.
D)   neither corporation.E) None of the above
F) A) and D)

Question 2

Dissolution of a corporation can be brought about by the shareholders' majority vote to initiate dissolution proceedings.

Accepted Answer

A) True 
 B)False

Question 3

Rock Quarry Inc. merges with Stonework Inc. Only Stonework remains. Rock Quarry held rights in certain real property. With respect to these assets, in the merger Stonework assumes

Accepted Answer

A)   none.
B)   only those acquired after the merger was proposed.
C)   an amount equal to the ratio of the firms' pre-merger market values.
D)   all.E) All of the above
F) A) and B)

Question 4

Through a tender offer, an acquiring corporation deals directly with a target company's management in seeking to purchase the target's stock.

Accepted Answer

A) True 
 B)False

Question 5

Generally, a corporation that is selling all of its assets must obtain the approval of the shareholders.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)   a takeover.
B)   dissolution.
C)   a breach of fiduciary duty.
D)   liquidation.E) B) and C)
F) A) and B) D

Question 7

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 transaction? 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?

Accepted Answer

Phoebe, and any other shareholder who disapproves of a merger (or a consolidation), may seek, and may be entitled to be paid, fair value for his or her shares. This right to seek fair value is known as appraisal rights. It constitutes the exclusive remedy for shareholders that are dissatisfied with the price that they received for their stock in the circumstances in this problem, and exists only in those states that specifically provide for it.
The procedure for asserting this right varies. Generally, the corporation must notify the shareholders of the right's availability, and the dissenting shareholders must file a notice of intent to demand payment with the corporation before the shareholders vote on the transaction. The corporation must make a written offer to buy the shares, accompanying the offer with a current balance sheet and income statement. The "fair value" is normally the value on the day before the date on which the shareholders' vote is taken. If the parties do not agree on "fair value," however, a court may determine it. These rights will be lost if they are not adhered to strictly.
The combination between Natural Food and Organic Produce is a merger, in which one of the previously existing corporations (Natural Food) absorbed the other and the absorbed corporation (Organic Produce) ceased to exist.

Question 8

Dynamo Corporation combines its assets and liabilities with those of Energy Company to form Fuel Inc. Dynamo and Energy cease to exist. The formation of Fuel Inc. is

Accepted Answer

A)   a takeover.
B)   a consolidation.
C)   a liquidation.
D)   a share exchange.E) B) and C)
F) A) and C)

Question 9

In a consolidation, two or more corporations combine in such a way that only one of the corporations continues to exist.

Accepted Answer

A) True 
 B)False

Question 10

All states have statutes authorizing consolidations.

Accepted Answer

A) True 
 B)False

Question 11

Outlook Inc. merges with Pinnacle Inc. Only Pinnacle remains. Outlook owed money to Quest Bank and other creditors. With respect to these debts, in the merger Pinnacle assumes

Accepted Answer

A)   none.
B)   only those incurred after the merger was proposed.
C)   an amount equal to the ratio of the firms' pre-merger market values.
D)   all.E) B) and C)
F) A) and D)

Question 12

Cloud Inc. merges with Data Corporation. Cloud, the surviving corporation, issues shares or pays fair consideration to

Accepted Answer

A)   Cloud's shareholders.
B)   Data's shareholders.
C)   the state.
D)   no one.E) A) and C)
F) All of the above

Question 13

Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations. The plan for Bank and Credit's combination must be approved by the board of directors of

Accepted Answer

A)   each corporation.
B)   Bank only.
C)   Credit only.
D)   neither corporation.E) None of the above
F) C) and D)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Carrier Company exchanges some of its shares for some of the shares of Dispatch Corporation. The plan for this exchange must be approved by each corporation's

Accepted Answer

A)   directors only.
B)   shareholders only.
C)   directors and shareholders.
D)   none of the choices.E) None of the above
F) All of the above

Question 16

Appraisal rights cannot be lost even if the statutory procedures are not followed precisely.

Accepted Answer

A) True 
 B)False

Question 17

Rice Inc. seeks to purchase a substantial number of the voting shares of Sushi Inc. The directors of Sushi resist Rice's takeover attempt. In analyzing whether this is reasonable, a court would apply

Accepted Answer

A)   an appraisal right.
B)   a takeover defense.
C)   the corporation's policies.
D)   the business judgment rule.E) A) and B)
F) None of the above

Question 18

Sweet Inc. acquires all of the assets of Tart Inc. by direct purchase. Approval of the deal between Sweet and Tart is subject to the approval of the shareholders of

Accepted Answer

A)   both corporations.
B)   Sweet.
C)   Tart.
D)   neither corporation.E) A) and B)
F) B) and C)

Question 19

A merger will not affect the rights and liabilities of the corporations involved.

Accepted Answer

A) True 
 B)False

Question 20

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

Alice and Bernie can dissolve their corporation at will acting as directors or, in some states, as shareholders.
The process will include notifying the state and the firm's creditors, liquidating the firm's assets, and making distributions. Procedures for voluntary dissolution vary in different states. Generally, the directors can vote to submit a proposal of dissolution to the shareholders for a vote at a shareholders' meeting, or in some states shareholders acting unanimously can vote to initiate dissolution proceedings for a corporation. The corporation must file articles of dissolution with the state and notify its creditors of the dissolution. The directors act as trustees of the corporate assets in winding up the firm's affairs for the benefit of the creditors and shareholders.
In the facts of this question, the directors and shareholders are the same persons, but they may be held accountable for any breach of a trustee's fiduciary duty to the creditors. The corporation's assets will be liquidated (converted into cash) and distributed among its creditors and shareholders according to the applicable rules of preference.

Exam 35: Corporate Mergers, Takeovers, and Termination

Salmon Company decides to combine its operations with Tuna Corporation to form United Seafood Inc. Salmon and Tuna are domestic corporations. The plan for Salmon and Tuna's combination must be approved by the shareholders of

Correct Answer
verified

Dissolution of a corporation can be brought about by the shareholders' majority vote to initiate dissolution proceedings.

Correct Answer
verified

Rock Quarry Inc. merges with Stonework Inc. Only Stonework remains. Rock Quarry held rights in certain real property. With respect to these assets, in the merger Stonework assumes

Correct Answer
verified

Through a tender offer, an acquiring corporation deals directly with a target company's management in seeking to purchase the target's stock.

Correct Answer
verified

Generally, a corporation that is selling all of its assets must obtain the approval of the shareholders.

Correct Answer
verified

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

Correct Answer
verified
D

Dynamo Corporation combines its assets and liabilities with those of Energy Company to form Fuel Inc. Dynamo and Energy cease to exist. The formation of Fuel Inc. is

Correct Answer
verified

In a consolidation, two or more corporations combine in such a way that only one of the corporations continues to exist.

Correct Answer
verified

All states have statutes authorizing consolidations.

Correct Answer
verified

Outlook Inc. merges with Pinnacle Inc. Only Pinnacle remains. Outlook owed money to Quest Bank and other creditors. With respect to these debts, in the merger Pinnacle assumes

Correct Answer
verified

Cloud Inc. merges with Data Corporation. Cloud, the surviving corporation, issues shares or pays fair consideration to

Correct Answer
verified

Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations. The plan for Bank and Credit's combination must be approved by the board of directors of

Correct Answer
verified

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

Correct Answer
verified

Carrier Company exchanges some of its shares for some of the shares of Dispatch Corporation. The plan for this exchange must be approved by each corporation's

Correct Answer
verified

Appraisal rights cannot be lost even if the statutory procedures are not followed precisely.

Correct Answer
verified

Rice Inc. seeks to purchase a substantial number of the voting shares of Sushi Inc. The directors of Sushi resist Rice's takeover attempt. In analyzing whether this is reasonable, a court would apply

Correct Answer
verified

Sweet Inc. acquires all of the assets of Tart Inc. by direct purchase. Approval of the deal between Sweet and Tart is subject to the approval of the shareholders of

Correct Answer
verified

A merger will not affect the rights and liabilities of the corporations involved.

Correct Answer
verified

Exam 35: Corporate Mergers, Takeovers, and Termination

Salmon Company decides to combine its operations with Tuna Corporation to form United Seafood Inc. Salmon and Tuna are domestic corporations. The plan for Salmon and Tuna's combination must be approved by the shareholders of

Correct AnswerverifiedShow Answer

Dissolution of a corporation can be brought about by the shareholders' majority vote to initiate dissolution proceedings.

Correct AnswerverifiedShow Answer

Rock Quarry Inc. merges with Stonework Inc. Only Stonework remains. Rock Quarry held rights in certain real property. With respect to these assets, in the merger Stonework assumes

Correct AnswerverifiedShow Answer

Through a tender offer, an acquiring corporation deals directly with a target company's management in seeking to purchase the target's stock.

Correct AnswerverifiedShow Answer

Generally, a corporation that is selling all of its assets must obtain the approval of the shareholders.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedD

Dynamo Corporation combines its assets and liabilities with those of Energy Company to form Fuel Inc. Dynamo and Energy cease to exist. The formation of Fuel Inc. is

Correct AnswerverifiedShow Answer

In a consolidation, two or more corporations combine in such a way that only one of the corporations continues to exist.

Correct AnswerverifiedShow Answer

All states have statutes authorizing consolidations.

Correct AnswerverifiedShow Answer

Outlook Inc. merges with Pinnacle Inc. Only Pinnacle remains. Outlook owed money to Quest Bank and other creditors. With respect to these debts, in the merger Pinnacle assumes

Correct AnswerverifiedShow Answer

Cloud Inc. merges with Data Corporation. Cloud, the surviving corporation, issues shares or pays fair consideration to

Correct AnswerverifiedShow Answer

Bank Company decides to combine its operations with Credit Corporation to form Debit Finance Inc. Bank and Credit are domestic corporations. The plan for Bank and Credit's combination must be approved by the board of directors of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Carrier Company exchanges some of its shares for some of the shares of Dispatch Corporation. The plan for this exchange must be approved by each corporation's

Correct AnswerverifiedShow Answer

Appraisal rights cannot be lost even if the statutory procedures are not followed precisely.

Correct AnswerverifiedShow Answer

Rice Inc. seeks to purchase a substantial number of the voting shares of Sushi Inc. The directors of Sushi resist Rice's takeover attempt. In analyzing whether this is reasonable, a court would apply

Correct AnswerverifiedShow Answer

Sweet Inc. acquires all of the assets of Tart Inc. by direct purchase. Approval of the deal between Sweet and Tart is subject to the approval of the shareholders of

Correct AnswerverifiedShow Answer

A merger will not affect the rights and liabilities of the corporations involved.

Correct AnswerverifiedShow Answer

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D

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