Deck 40: Corporations: Mergers, Consolidations, Terminations

Question 1

Mergers and consolidations are considered the same thing under the law.

Answer 1

False

Question 2

When an asset purchase occurs, the acquiring corporation assumes ownership and control over tangible, but not intangible, assets of the selling corporation.

Answer 2

False

Question 3

Asset purchases are similar to mergers and consolidations because a corporation that purchases the assets of another corporation generally acquires its liabilities.

Answer 3

False

Question 4

Target corporations are not required by federal securities law to assist aggressors in any way.

Question 5

In a consolidation, the surviving corporation does not have to compensate the shareholders of the corporation that no longer exists if the compensation would damage the new corporation's bottom line.

Question 6

Dissolution is the process by which a board of directors converts a corporation's assets into cash and distributes them among creditors and shareholders.

Question 7

When merger or consolidation is at issue, some states deny the right to vote and receive dividends to dissenting shareholders who exercise their appraisal rights.

Question 8

Merger cannot occur between foreign (out-of-state) corporations.

Question 9

Shareholder approval is not required for consolidation.

Question 10

An absorbed corporation is a(n)

A) term for a company that does not survive a merger.
B) shell of a corporation after bankruptcy.
C) absorbed corporation that the government controls.
D) the surviving corporation in a merger.
E) a term that the SEC uses to force two companies to merge.

Question 11

A merger or consolidation plan must be approved only by the boards of directors of the most prominent of the merging or consolidating company.

Question 12

Takeovers to which the management of the target corporation objects are called hostile takeovers.

Question 13

Federal regulations prohibit the management of target companies from using corporate funds to educate shareholders on the disadvantages of a takeover.

Question 14

Momentum Inc. and Fellows Inc. execute a legal contract that combines Fellows Inc. into Momentum Inc. What is this called?

A) A merger
B) A consolidation
C) An executed company
D) A contractual company
E) A reorganization

Question 15

When involuntary dissolution occurs, courts automatically appoint a receiver.

Question 16

When two or more corporations merge into one, the ________ is the term for the remaining corporation.

A) resulting corporation
B) standing corporation
C) approved corporation
D) surviving corporation
E) persisting corporation

Question 17

The surviving entity in a merger situation is ________

A) not liable for any of the debts of the absorbed corporations.
B) liable for all debts and obligations of any absorbed corporation.
C) liable for only half of the debts and obligations of any absorbed corporation.
D) liable only for the debts and obligations that are known to the absorbing corporation.
E) liable for the debts that the shareholders agree to pay of the absorbing corporation.

Question 18

A(n) ________ is the right of the surviving corporation's to sue for debt and damages on behalf of the absorbed corporation.

A) right of recovery
B) protected right
C) recovery lawsuit
D) chose in action

Question 19

Although an acquiring corporation can buy another corporation's voting shares, the acquiring corporation cannot buy all of another corporation's voting shares.

Question 20

Aggressors often try to win the favor of a few institutional investors that own large blocs of shares.

Question 21

The aim of merger control statutes in ________ is not to discourage mergers but to ensure that the combination of businesses does not impede competition.

A) China
B) Switzerland
C) England
D) France
E) Canada

Question 22

What key piece of information does an aggressor generally need in order to gain control of a target corporation through proxies?

A) A list of target shareholders
B) A list of target officers
C) A list of members of the board of directors of the target
D) The income statements of the target
E) The balance sheet of the target

Question 23

In a(n) ________, shareholders of the new corporation create new articles of incorporation called articles of consolidation.

A) incorporation
B) merger
C) consolidation
D) bankruptcy
E) renewal

Question 24

To what does the term "going private" refer during a hostile takeover situation?

A) A leveraged buyout
B) A management buyout
C) An approved buyout
D) A corporate buyout
E) A closely managed buyout

Question 25

Which of the following was a finding of the court in Shiftan v. Morgan Joseph Holdings Inc., the case in the text involving stock appraisal rights following a merger?

A) That standard rules of contract interpretation do not apply to the interpretation of certificates of incorporation.
B) That the doctrine of contra proferentem, meaning that contracts are construed in accordance with standard criteria for contract interpretation, is applied when interpreting certificates of incorporation.
C) That parol evidence, while often available, is inadmissible when interpreting certificates of incorporation.
D) That an appraisal proceeding takes into account and considers any relevant element of value arising from the accomplishment or expectation of a merger or consolidation.
E) That in valuing the stock at issue, the fact that the stock would have been entitled to a mandatory redemption a few months after the merger was irrelevant.

Question 26

In a short-form merger, the parent corporation ________

A) must file for bankruptcy within 30 days of the merger.
B) must hire all members of the merged company.
C) must allow for the board of directors to continue to operate the merged corporation's assets.
D) must own at least 90 percent of the outstanding shares of each class of the subsidiary's stock.
E) does not assume any debt, liabilities or assets.

Question 27

In the text case, Parshall v. HCSB Financial Corporation, a plaintiff shareholder sought a preliminary injunction to stop a pending vote by shareholders of the merger between HCSB Financial and United Community Bank, Inc (UBI). Plaintiff alleged that the Registration Statement was misleading and incomplete. Which of the following was the result?

A) The court held that the plaintiffs' proof was insufficient under the Water's factors to issue the preliminary injunction stopping the merger vote.
B) The court held that the plaintiff had enough proof to stop the merger vote because the defendant HCSB had hidden financial information from the shareholders in regards to the merger.
C) The court held that the defendants according to the evidence had in fact raised issues sufficient to cause the SEC to also question the merger tactics of the companies.
D) The court held that plaintiff was too late in the merger process to stop the vote with a preliminary injunction because the voting proxies had already been sent to hundreds of voters.
E) The court held that the plaintiff was not the proper plaintiff to bring the case and dismissed the case.

Question 28

A(n) ________ is when a group within a corporation (usually management) buys all outstanding corporate stock held by the public.

A) all-purpose purchase
B) leveraged buyout
C) management buyout purchase
D) corporate restructuring plan
E) hostile takeover

Question 29

Which of the following is true regarding the type of intangible item that may constitute an asset?

A) Goodwill, a company name, and a company logo all constitute types of intangible items that may constitute assets.
B) Goodwill and a company name are types of intangible items that may constitute assets, but a company logo is not.
C) Goodwill is a type of intangible item that may constitute an asset, but a company name and a company logo are not.
D) A company name is a type of intangible item that may constitute an asset, but goodwill and a company logo are not.
E) A company name and a company logo are types of intangible items that may constitute assets, but goodwill is not.

Question 30

In the Case Opener, a decision of the Federal Trade Commission blocking a proposed merger between Polypore and Microporous Products was appealed on the basis that it would substantially lessen competition. Which of the following was the result on appeal?

A) That the Federal Trade Commission erred in treating the merger as a vertical merger instead of a horizontal merger and that the proposed merger should have been allowed to proceed.
B) That the Federal Trade Commission erred in determining that the proposed merger would substantially lessen competition and that the merger should have been allowed to proceed.
C) That the Federal Trade Commission erred in asserting jurisdiction over the dispute and that the matter would be remanded to the federal district court.
D) That the Federal Trade Commission properly determined that a horizontal merger was involved that would substantially lessen competition.
E) That although the Federal Trade Commission erred in treating the merger as a horizontal merger rather than as a vertical merger, the Commission properly determined that the proposed merger would substantially lessen competition.

Question 31

Britton Corporation and Sheridan Corporation combine to become a new corporation know as Brisher Corp. This process is known as ________.

A) a merger
B) a consolidation
C) a combination
D) an alteration
E) a reorganization

Question 32

If a merger increases the number of the surviving corporation's shares by no more than 20 percent, most states do not require ________.

A) the approval of the surviving corporation's shareholders
B) SEC approval.
C) any paperwork to be filed with the state's Corporation Commission.
D) that the surviving corporation pay taxes on the merger.
E) property taxes to be paid for two years to allow the merged corporation to become established.

Question 33

When a corporation desires ________, both the shareholders and the board of director's approval must be obtained.

A) to discuss internal business to the corporation
B) to discuss a future merger
C) to sell a majority of its assets
D) to discuss a consolidation
E) to discuss a potential takeover

Question 34

If a dissenting shareholder exercises an appraisal right when a proposed merger is involved, which of the following is generally used to determine the value of stock?

A) The value of shares on the day after the shareholder vote.
B) The value of shares on the day before the shareholder vote.
C) The value of shares on the day of the shareholder vote.
D) The value of shares 10 days before the shareholder vote.
E) The value of shares on the day the proposed merger was announced.

Question 35

When a consolidation occurs, what happens to the original corporations?

A) Nothing, they all continue to exist, the consolidation is for debt purposes only.
B) The original corporations continue to exist legally, but only the profits are shared.
C) The original corporations do not continue to exist.
D) The consolidated entity obtains all the original corporations' assets and assumes the larger of the corporation's name.
E) The consolidated entity takes on the rights and responsibilities of the original companies.

Question 36

In a(n) ________, an aggressor pays cash for stock to target shareholders.

A) hostile tender offer
B) cash tender offer
C) immediate tender offer
D) substantial tender offer
E) asset tender offer

Question 37

Which of the following occurs when a target corporation offers to buy its shareholders' stock?

A) A self-tender offer
B) A leveraged buyout
C) A cross-tender offer
D) A challenge-tender offer
E) An illegal tender offer

Question 38

________ are a type of merger that does not require shareholder approval.

A) Short-form mergers
B) Short-term mergers
C) Minimalist mergers
D) Live-action mergers
E) State controlled mergers

Question 39

What type of acquisition occurs when an aggressor gradually accumulates the target company's shares?

A) Controlled acquisition
B) Aggressor acquisition
C) Belittled acquisition
D) Beachhead acquisition
E) Contemplated acquisition

Question 40

Which of the following is false regarding the merger process in South Africa?

A) Shareholders cannot approve a merger unless 50 percent of all shareholders vote to accept the offer.
B) Minority shareholders have access to South African courts and may employ them when disputes arise.
C) The Companies Act establishes a panel to inquire about mergers or takeovers.
D) The Companies Act and the rules of the Johannesburg Stock Exchange control mergers.
E) If a change of corporate control takes place outside the stock exchange, the initiator of the merger must extend the offer to the shareholders and disclose all pertinent information to them within a reasonable amount of time.

Question 41

[Green Trees] Keith, the president of Grow True Corporation, a company that provides landscaping services, wanted his corporation to purchase Grassroots Corporation, another corporation providing landscaping services. The board of Grassroots Corporation, however, did not wish to sell. The board of Grow True Corporation decided to buy any or all of Grassroots Corporation's stock in order to gain control of Grassroots Corporation. The management of Grassroots Corporation and its board strongly objected to the attempt by Grow True Corporation to take over the company. Grow True Corporation offered to purchase stock held by Grassroots shareholders at a price substantially above the current market value of the stock. When that strategy was not wholly successful, Grow True Corporation offered to give shareholders of Grassroots Corporation stock in Grow True Corporation in return for their Grassroots Corporation stock.
The attempt of Grow True Corporation to take over Grassroots Corporation despite the objection of management and the board of Grassroots Corporation is referred to as which of the following?

A) Under the table takeover
B) Surprise takeover
C) Strategic takeover
D) Hostile takeover
E) Planned takeover

Question 42

Which of the following must a corporation do first when initiating voluntary dissolution procedures?

A) The directors must file articles of dissolution with the secretary of state.
B) The directors must notify the local court with jurisdiction over any claims.
C) The officers must resign.
D) The directors must resign.
E) The court must appoint a receiver.

Question 43

In a merger, which of the following is true regarding the property of the absorbed corporation?

A) It must be sold and distributed to the absorbed corporation's shareholders.
B) It must be held in trust for at least one year to satisfy claims of creditors.
C) It is obtained by the surviving corporation.
D) It must be held in trust for at least six months to satisfy claims of creditors.
E) It must be placed within the jurisdiction of the secretary of state for at least one year in order to satisfy claims of creditors.

Question 44

________ is the process by which the board converts the corporation's assets into cash and distributes them among the corporation's creditors and shareholders.

A) Liquidation
B) Corporate raid
C) Dissolution
D) Turnover
E) Takeover

Question 45

________ of a corporation occurs in two phases: dissolution and liquidation.

A) The incorporation
B) The bankruptcy
C) The "death"
D) The merger
E) The consolidation

Question 46

Which of the following is true regarding state approval of consolidations?

A) There is no requirement that the state approve consolidations.
B) After reviewing the plan to see that legal requirements are met, the secretary of state issues a certificate to grant approval.
C) The secretary of state must approve consolidations so long as the corporate entity at issue has sufficient assets.
D) The secretary of state must approve consolidations so long as creditors of the corporate entity at issue do not remain unpaid.
E) The secretary of state must approve consolidations so long as no more than 10% of either company's shareholders object.

Question 47

In most states, which of the following is true regarding Tyler's concern that Sean could not be sued for the price of the skateboards?

A) Sean cannot be sued if Sean purchased the skateboards within 30 days of the joining of the businesses.
B) Sean can be sued only if Sean purchased the skateboards within 30 days of the joining of the businesses.
C) Sean cannot be sued unless Sean approves in writing the joining of the businesses.
D) Sean can be sued only if Sean is notified by certified letter of the joining of the businesses.
E) The right to sue Sean would not be lost by the joining of the corporations.

Question 48

[Skateboard Growth] Both Tyler and Byron were presidents of small corporations involved with manufacturing and selling skateboards. Tyler's store was called "Thrasher Skateboard" and Byron's business was called "Skateboard for Health." Because a large sports store was coming into town, they, along with the boards of directors of the two companies and all shareholders, decided that it would be a good idea to combine the businesses. They decided to retain the name "Skateboard for Health." However, Tyler was concerned with the change because, on behalf of his company, he was contemplating filing a lawsuit against Sean who had purchased 10 custom skateboards and had not paid for them. He was excited, however, about the prospect of not being liable for a lawsuit he expects to be filed by Alec who fell and sustained a serious ankle sprain and medical bills when a wheel came off of a skateboard sold by Tyler's corporation. After investigation, Tyler is aware that the wheel was negligently attached to the skateboard. Tyler told Byron that one reason he wanted to retain Byron's name was to prevent Alec from being able to recover against him.
Which of the following is the appropriate term for the action contemplated by Tyler and Byron to combine the businesses under the name "Skateboard for Health"?

A) Merger
B) Consolidation
C) Asset purchase
D) Restructuring
E) Reforming

Question 49

Which of the following describes a plan set up by ABC Company whereby its other shareholders may purchase shares of ABC stock at a significantly reduced price if any individual or entity obtains a majority of ABC Company's stock?

A) Protection method
B) Beachhead defense
C) Poison pill
D) Exchange offer
E) Chose in action

Question 50

By offering to give shareholders in Grassroots Corporation stock in Grow True Corporation in return for shares of stock in Grassroots Corporation, Grow True Corporation made a[n] ________.

A) Exchange offer
B) Stock tender offer
C) Hostile offer
D) Illegal offer
E) Control tender offer

Question 51

Which of the following results in a "chose in action"?

A) The surviving corporation's right to sue Sean for amounts owed.
B) The right of Alec to sue the surviving corporation for damages.
C) The right of Tyler to a golden parachute if he is terminated after the joining.
D) The right of Byron to fire Tyler after the merger.
E) The right of shareholders to dissent from the joining of the corporations for 30 days following.

Question 52

Which of the following is false regarding involuntary liquidation?

A) The state may initiate dissolution procedures.
B) Individual shareholders may not petition the state to order dissolution.
C) The secretary of state can compel involuntary dissolution if the corporation failed to pay taxes within 60 days of the due date.
D) The secretary of state can compel involuntary dissolution if the corporation did not have a registered agent or office in the state for 60 days or more.
E) The secretary of state can compel involuntary dissolution of the corporation if the corporation's duration as specified in its articles of incorporation has expired.

Question 53

[Green Trees] Keith, the president of Grow True Corporation, a company that provides landscaping services, wanted his corporation to purchase Grassroots Corporation, another corporation providing landscaping services. The board of Grassroots Corporation, however, did not wish to sell. The board of Grow True Corporation decided to buy any or all of Grassroots Corporation's stock in order to gain control of Grassroots Corporation. The management of Grassroots Corporation and its board strongly objected to the attempt by Grow True Corporation to take over the company. Grow True Corporation offered to purchase stock held by Grassroots shareholders at a price substantially above the current market value of the stock. When that strategy was not wholly successful, Grow True Corporation offered to give shareholders of Grassroots Corporation stock in Grow True Corporation in return for their Grassroots Corporation stock.
Which of the following terms describes Grow True Corporation in its attempt to buy any or all of Grassroots Corporation's voting shares

A) Bully
B) Aggressor
C) Pusher
D) Demander
E) Incentive giver

Question 54

By offering to purchase the stock of Grassroots Corporation at a price above its current market value, Grow True Corporation made a[n] ________.

A) Cash purchase offer
B) Above market offer
C) Substantial offer
D) Hostile offer
E) Tender offer

Question 55

Which of the following is true regarding Tyler's belief that Alec will be unable to collect anything for the accident after the joining of the businesses?

A) Tyler is correct that Alec will be unable to win in litigation against him so long as the joining is completed before Alec files the lawsuit.
B) Tyler is correct that Alec will be unable to win in litigation against him regardless of whether the lawsuit is filed before or after the joining so long as no judgment is entered prior to the joining.
C) Tyler is correct that Alec will be unable to sue him unless Alec files in court an objection to the joining and prevails.
D) Tyler is correct that Alec will be unable to win in litigation against him unless Alec can establish fraud in connection with the joining.
E) Tyler is incorrect, and the joining will have no effect on the lawsuit.

Question 56

Ana is the president of PJL Corporation. In November, her assistant Damon tells her that B2B Corporation is planning a tender offer and that it has presented an offer to shareholders. Ana tells him that they should keep information regarding PJL Corporation as quiet as possible until the end of the year because she does not want shareholders to find out any negative information regarding PJL Corporation's poor performance in the last few months. Which of the following is true regarding Ana's plan?

A) It is a good plan only if a close corporation is involved; otherwise, Ana has a duty to reveal all pertinent facts to shareholders.
B) It is a good plan only if an S Corporation is involved; otherwise, Ana has a duty to reveal all pertinent facts to shareholders.
C) It is a good plan only if the corporation is new, meaning that it has been incorporated under one year; otherwise, Ana has a duty to reveal all pertinent facts to shareholders.
D) It is a bad plan because Ana must at least inform the shareholders that she is withholding information until the end of the year.
E) It is a bad plan because once an aggressor has presented its offer to the target corporation's shareholders, the target corporation's board of directors must inform shareholders of all facts pertinent to voting.

Question 57

In a consolidation, which of the following is true regarding the property of the original corporations?

A) It must be sold and distributed to the respective shareholders.
B) It must be held in trust for at least one year to satisfy claims of creditors.
C) It must be held in trust for at least six months to satisfy claims of creditors.
D) It must be placed within the jurisdiction of the secretary of state for at least one year in order to satisfy claims of creditors.
E) It is acquired by the new corporation.

Question 58

Under what circumstances may a court order an involuntary dissolution of a corporation?

A) When the corporation has failed to show a profit for over two years, when the corporation obtained its article of incorporation fraudulently, when the directors have abused their power, and when the corporation is insolvent.
B) When the corporation obtained its article of incorporation fraudulently, when the directors have abused their power, and when the corporation is insolvent.
C) When the corporation has failed to show a profit for over two years, when the corporation obtained its article of incorporation fraudulently, and when the directors have abused their power.
D) When the corporation has failed to show a profit for over two years, when the corporation obtained its article of incorporation fraudulently, and when the corporation is insolvent.
E) Only when the corporation is insolvent.

Question 59

In the attempt of Grow True Corporation to gain control, which of the following terms describes Grassroots Corporation?

A) Target corporation
B) Vulnerable corporation
C) Accessible corporation
D) Hostile corporation
E) Weak corporation

Question 60

[Corporate Death] Janelle is president and a large shareholder in RecyCALL, a corporation that sells used cellular telephones. Although the company was not insolvent, sales had been significantly down, and Janelle decided that it would be a good idea to discontinue the business. The board of directors agreed with her. The board members presented the proposal to discontinue the corporation to shareholders. Initially, Ahmed, a disgruntled shareholder, opposed ending the corporation. He claimed that the problem was that Janelle had done a poor job in management. Janelle planned to go forward with the termination of the company because a majority of the shareholders agreed. Ahmed, however, came around; and upon a second vote to discontinue the corporation, the vote was unanimous. Tony, a vice president of the corporation, was aware of a few outstanding debts owed by RecyCALL. He suggested hurrying along quietly with ending the corporation because any claims not made before the corporation was dissolved could be avoided. Janelle told him that she was not sure that was a good idea. Therefore, the company proceeded with all appropriate notifications. When the time came to liquidate the corporation, the members of the board did not want to participate. Janelle was concerned about what action to take at that point because she really wanted to be finished with RecyCALL.
Which of the following is the proper term for the plan to discontinue RecyCALL?

A) Voluntary corporate discontinuance
B) Involuntary corporate discontinuance
C) Voluntary relinquishment
D) Voluntary dissolution
E) Involuntary dissolution

Question 61

[Corporate Death] Janelle is president and a large shareholder in RecyCALL, a corporation that sells used cellular telephones. Although the company was not insolvent, sales had been significantly down, and Janelle decided that it would be a good idea to discontinue the business. The board of directors agreed with her. The board members presented the proposal to discontinue the corporation to shareholders. Initially, Ahmed, a disgruntled shareholder, opposed ending the corporation. He claimed that the problem was that Janelle had done a poor job in management. Janelle planned to go forward with the termination of the company because a majority of the shareholders agreed. Ahmed, however, came around; and upon a second vote to discontinue the corporation, the vote was unanimous. Tony, a vice president of the corporation, was aware of a few outstanding debts owed by RecyCALL. He suggested hurrying along quietly with ending the corporation because any claims not made before the corporation was dissolved could be avoided. Janelle told him that she was not sure that was a good idea. Therefore, the company proceeded with all appropriate notifications. When the time came to liquidate the corporation, the members of the board did not want to participate. Janelle was concerned about what action to take at that point because she really wanted to be finished with RecyCALL.
Which of the following should occur in the face of the board not wishing to be involved in liquidation proceedings?

A) A court should appoint a bankruptcy trustee to handle liquidation.
B) A court should appoint a receiver not affiliated with the corporation to take over liquidation duties.
C) Janelle, as president, is required to take over liquidation duties.
D) The court should enter an injunction requiring all the directors to proceed with liquidation regardless of whether they want to do so.
E) The court should enter an injunction requiring that at least half of the directors proceed with liquidation regardless of whether they want to do so.

Question 62

When dissenting shareholders do not properly invoke their appraisal rights, will they be forced to comply with the majority of the corporations' shareholders?

A) No, dissenting shareholders are never forced to comply with the decision of the majority of the corporations' shareholders.
B) Yes, in such a situation, dissenting shareholders must comply with the decision of the majority of the corporations' shareholders.
C) Yes, although the dissenting shareholders cannot exercise their appraisal rights if not properly invoked, a court will not force them to comply with the decision of the majority of the corporations' shareholders
D) No, dissenting shareholders need not comply as long as they adequately communicate their appraisal rights.
E) No, dissenting shareholders need not comply because the procedures governing appraisal rights need not be strictly followed.

Question 63

[Corporate Death] Janelle is president and a large shareholder in RecyCALL, a corporation that sells used cellular telephones. Although the company was not insolvent, sales had been significantly down, and Janelle decided that it would be a good idea to discontinue the business. The board of directors agreed with her. The board members presented the proposal to discontinue the corporation to shareholders. Initially, Ahmed, a disgruntled shareholder, opposed ending the corporation. He claimed that the problem was that Janelle had done a poor job in management. Janelle planned to go forward with the termination of the company because a majority of the shareholders agreed. Ahmed, however, came around; and upon a second vote to discontinue the corporation, the vote was unanimous. Tony, a vice president of the corporation, was aware of a few outstanding debts owed by RecyCALL. He suggested hurrying along quietly with ending the corporation because any claims not made before the corporation was dissolved could be avoided. Janelle told him that she was not sure that was a good idea. Therefore, the company proceeded with all appropriate notifications. When the time came to liquidate the corporation, the members of the board did not want to participate. Janelle was concerned about what action to take at that point because she really wanted to be finished with RecyCALL.
Which of the following is true regarding Tony's suggestion that dissolution be implemented quickly in order to avoid claims by creditors?

A) His suggestion was a good one because in that way, the claims could likely be avoided.
B) His suggestion would not avoid claims because the law requires that creditors be allowed at least 120 days after dissolution in order to make a claim.
C) Whether or not his suggestion will help depends on the corporation's articles of incorporation which set forth the time period during which creditors may file claims following dissolution.
D) Whether or not his suggestion will help depends on the corporation's bylaws which set forth the time period during which creditors may file claims following dissolution.
E) His suggestion was a good one only for debts outstanding for over 1 year; otherwise, the creditors have at least six months following dissolution in which to make claims.

Question 64

[Cheeseland Purchase] Cheeseland, Inc., manufactures processed cheese products. BigCheese, Inc., seeks to purchase Cheeseland's well-known trademarks and logos, and its factory and equipment. The Board of Directors of both companies vote in favor of the deal. Alba is a 15% shareholder of Cheeseland. Her grandfather started the business many years ago and she does not want the company to sell off its endearing trademark and the factory her grandfather built. She visits Myron, an attorney, and Myron tells her that the Board's vote is legitimate to finalize the deal with BigCheese and the best she can do is take the money. Cyril is a shareholder in BigCheese, and his grandfather was cheated fifty years ago by Alba's grandfather and he doesn't want BigCheese to be responsible for Cheeseland's enormous liabilities. Cyril threatens to take BigCheese to court because he claims shareholder approval is required to purchase Cheeseland.
What type of transaction is the deal contemplated by BigCheese and Cheeseland?

A) Purchase of assets.
B) Purchase of stock.
C) Merger.
D) Consolidation.
E) Hostile Takeover.

Question 65

[Gaming Merger] Calvin and Daniella each own 5% of GamePower, a video game design company. GamePower is seeking to merge with GameKing, and before a shareholder meeting, Calvin and Daniella email all other shareholders and corporate representatives about their disagreement with the proposed transaction. At the shareholder meeting, they vote against the merger with GameKing, but, 90% of the shareholders vote in favor of the merger. Calvin tells Daniella that it is not fair that they are forced to be part of GameKing. Daniella tells him they have no choice, so get used to it.
Assuming Calvin and Daniella can exercise their appraisal rights in this situation, what must they do?

A) They must issue a statement demanding the merger be declared null and void.
B) They must issue a statement demanding the vote be re-cast.
C) They must issue a statement demanding adequate compensation for their shares.
D) They must file a demand with a court for fair market value for their shares.
E) They must file a notice with the Secretary of State objecting to the merger and demanding fair market value for their shares.

Question 66

After reviewing the plan to ensure that the corporations have satisfied all legal requirements,

A) the secretary of state issues a certificate to grant approval for the merger
B) the SEC must issue a certificate of acceptance of a merger.
C) The courts must approve the legal plans of the merger.
D) The creditors must approve the merger of the assets.
E) The Governor of the incorporating state must approve the merger.

Question 67

[Battle for the Board] The Board of Directors of InfoHub, an internet service provider, contains 9 directors. Two of the directors, Jude and Rostan, decide they want to replace several of the directors with individuals who support their position and then take over the Board and control the company. Jude thinks it's a long shot, but Rostan tells him they could do it because Rostan has gradually been accumulating shares and they can get a majority of proxies on their side. Jude says the proxies are not important, because it's the shareholders that vote for the members of the board but it is difficult for them to find the names of shareholders. Rostan tells him not to worry, because he will get the shareholder list and focus only a few key shareholders, then get their proxies on his side before the next shareholder meeting.
What type of takeover is contemplated in this situation?

A) Beachhead offer
B) Exchange tender offer.
C) Cash tender offer.
D) Beachhead acquisition.
E) Takeover acquisition.

Question 68

[Cheeseland Purchase] Cheeseland, Inc., manufactures processed cheese products. BigCheese, Inc., seeks to purchase Cheeseland's well-known trademarks and logos, and its factory and equipment. The Board of Directors of both companies vote in favor of the deal. Alba is a 15% shareholder of Cheeseland. Her grandfather started the business many years ago and she does not want the company to sell off its endearing trademark and the factory her grandfather built. She visits Myron, an attorney, and Myron tells her that the Board's vote is legitimate to finalize the deal with BigCheese and the best she can do is take the money. Cyril is a shareholder in BigCheese, and his grandfather was cheated fifty years ago by Alba's grandfather and he doesn't want BigCheese to be responsible for Cheeseland's enormous liabilities. Cyril threatens to take BigCheese to court because he claims shareholder approval is required to purchase Cheeseland.
Is Cyril correct that BigCheese needs shareholder approval for the deal with Cheeseland?

A) No, acquiring corporations never need the approval of the shareholders.
B) No, unless the asset purchase changes the legal status of BigCheese.
C) Yes, but only if Cyril owns at least 20% of BigCheese's stock.
D) Yes, because it is a hostile takeover.
E) Yes, acquiring corporations always need the approval of the shareholders.

Question 69

Which of the following is true about acquisitions of domestic and foreign corporations?

A) Acquisitions between domestic corporations are very different from acquisitions between corporations from different states.
B) Acquisitions between domestic corporations and acquisitions between foreign corporations are governed by federal law.
C) Acquisitions between domestic corporations and acquisitions between foreign corporations are governed by the same law.
D) Though there are some minor differences in procedure, acquisitions between domestic corporations are very similar acquisitions between corporations from different states.,
E) Federal statutes govern all mergers and consolidations.

Question 70

[Cheeseland Purchase] Cheeseland, Inc., manufactures processed cheese products. BigCheese, Inc., seeks to purchase Cheeseland's well-known trademarks and logos, and its factory and equipment. The Board of Directors of both companies vote in favor of the deal. Alba is a 15% shareholder of Cheeseland. Her grandfather started the business many years ago and she does not want the company to sell off its endearing trademark and the factory her grandfather built. She visits Myron, an attorney, and Myron tells her that the Board's vote is legitimate to finalize the deal with BigCheese and the best she can do is take the money. Cyril is a shareholder in BigCheese, and his grandfather was cheated fifty years ago by Alba's grandfather and he doesn't want BigCheese to be responsible for Cheeseland's enormous liabilities. Cyril threatens to take BigCheese to court because he claims shareholder approval is required to purchase Cheeseland.
Is Myron correct that the vote by Cheeseland's Board of Directors is legitimate to finalize the deal between the two companies?

A) Yes, Cheeseland only needs the approval of its board of directors before it can sell its assets.
B) Yes, Cheeseland only needs the approval of its board of directors for a merger.
C) No, Cheeseland needs the approval of its shareholders for a merger
D) No, Cheeseland needs the approval of both its board of directors and its shareholders before it can sell its assets.
E) No, Cheeseland only needs the approval of its shareholders before it can sell its assets.

Question 71

[Cheeseland Purchase] Cheeseland, Inc., manufactures processed cheese products. BigCheese, Inc., seeks to purchase Cheeseland's well-known trademarks and logos, and its factory and equipment. The Board of Directors of both companies vote in favor of the deal. Alba is a 15% shareholder of Cheeseland. Her grandfather started the business many years ago and she does not want the company to sell off its endearing trademark and the factory her grandfather built. She visits Myron, an attorney, and Myron tells her that the Board's vote is legitimate to finalize the deal with BigCheese and the best she can do is take the money. Cyril is a shareholder in BigCheese, and his grandfather was cheated fifty years ago by Alba's grandfather and he doesn't want BigCheese to be responsible for Cheeseland's enormous liabilities. Cyril threatens to take BigCheese to court because he claims shareholder approval is required to purchase Cheeseland.
Is Cyril correct that BigCheese will be responsible for Cheeseland's liabilities?

A) Yes, like a merger or consolidation, corporations that purchase the assets of another corporation generally acquire its liabilities.
B) Yes, unless the contract between BigCheese and Cheeseland states otherwise.
C) Yes, because asset purchases are treated like a merger.
D) No, the liabilities of one corporation do not transfer to the other unless there is an express agreement otherwise.
E) No, corporations that purchase the assets of another corporation generally do not acquire its liabilities.

Question 72

[Gaming Merger] Calvin and Daniella each own 5% of GamePower, a video game design company. GamePower is seeking to merge with GameKing, and before a shareholder meeting, Calvin and Daniella email all other shareholders and corporate representatives about their disagreement with the proposed transaction. At the shareholder meeting, they vote against the merger with GameKing, but, 90% of the shareholders vote in favor of the merger. Calvin tells Daniella that it is not fair that they are forced to be part of GameKing. Daniella tells him they have no choice, so get used to it.
What, if any, option do Calvin and Daniella have if they do not want to be part of the merged corporation?

A) As dissenting shareholders, they cannot overrule the majority's vote.
B) They have no options because the law does not protect shareholders from one another.
C) They have no options because 90% of the shareholders voted in favor of the merger, thus, they cannot exercise their appraisal rights.
D) They can exercise their appraisal rights and receive monetary compensation from the corporation for their value.
E) Because 90% of the shareholders voted in favor of the merger, there are no other steps Calvin and Daniella can take.

Question 73

Stacia, a shareholder in ZipCorp, learns that ZipCorp's Board of Directors have voted for ZipCorp to merge with ZenCorp. Stacia objects to the merger because the shareholders did not vote to approve the merger. Under which of the following scenarios would a shareholder, like Stacia, not have a right to vote for a merger?

A) If ZenCorp were a foreign corporation.
B) If ZipCorp were a foreign corporation.
C) If the FCC approved ZenCorp's plan.
D) If ZenCorp owned at least three-fifths of ZipCorp's stock.
E) If ZenCorp owns at least 90% of the outstanding shares of ZipCorp stock.

Question 74

[Battle for the Board] The Board of Directors of InfoHub, an internet service provider, contains 9 directors. Two of the directors, Jude and Rostan, decide they want to replace several of the directors with individuals who support their position and then take over the Board and control the company. Jude thinks it's a long shot, but Rostan tells him they could do it because Rostan has gradually been accumulating shares and they can get a majority of proxies on their side. Jude says the proxies are not important, because it's the shareholders that vote for the members of the board but it is difficult for them to find the names of shareholders. Rostan tells him not to worry, because he will get the shareholder list and focus only a few key shareholders, then get their proxies on his side before the next shareholder meeting.
Is Jude correct that the proxies do not really matter?

A) Yes, the proxies do not have a right to vote at shareholder meetings.
B) Yes, only shareholders have a right to vote at shareholder meetings.
C) No, the holder of a proxy has the right to vote at shareholder meetings.
D) No, although only shareholders have a right to vote at shareholder meetings, the proxies can influence the shareholders.
E) Yes, proxies have no rights under the law.

Question 75

Which of the following statements is true about procedures for appraisal rights of dissenting shareholders?

A) The procedures governing appraisal rights are minimal.
B) Dissenting shareholders need only express their dissent the procedures do not need to be strictly followed.
C) Depending on the jurisdiction, dissenting shareholders may be stripped of their rights, including the right to vote.
D) The legal status of dissenting shareholders never changes.
E) Shareholders who lose their legal status also lose their right to sue.

Question 76

If Calvin and Daniella cannot reach an agreement with the corporation, how is the value of their shares determined?

A) The Secretary of State of the state where GamePower is incorporated will intervene to determine the shares' value.
B) The FCC is required to establish the shares' value.
C) By vote of the shareholders of GamePower.
D) By vote of the Board of Directors of GamePower.
E) A court may intervene to establish the shares' value.

Question 77

What is the difference between the procedures governing mergers and consolidations?

A) With consolidation, the plan need not be submitted to the secretary of state.
B) With consolidation, only the board of directors of both involved corporations must approve the plan; with merger, the shareholders of both involved corporations must also approve the plan.
C) Unlike merger, with consolidation, no approval certificate is necessary.
D) Unlike consolidation, with merger, the shareholders must approve the plan before it goes to the board of directors.
E) The procedures governing mergers and consolidations are the same.

Question 78

[Gaming Merger] Calvin and Daniella each own 5% of GamePower, a video game design company. GamePower is seeking to merge with GameKing, and before a shareholder meeting, Calvin and Daniella email all other shareholders and corporate representatives about their disagreement with the proposed transaction. At the shareholder meeting, they vote against the merger with GameKing, but, 90% of the shareholders vote in favor of the merger. Calvin tells Daniella that it is not fair that they are forced to be part of GameKing. Daniella tells him they have no choice, so get used to it.
Assuming Calvin and Daniella properly exercise their appraisal rights, how is the value of their shares generally determined?

A) By the value of the shares on the day following the shareholder vote.
B) By the value of the shares on the day of the shareholder vote.
C) By the value of the shares on the day before the shareholder vote.
D) By the value of the shares on the day the merger is finalized.
E) By the value of the shares of similarly sized corporations.

Question 79

[Corporate Death] Janelle is president and a large shareholder in RecyCALL, a corporation that sells used cellular telephones. Although the company was not insolvent, sales had been significantly down, and Janelle decided that it would be a good idea to discontinue the business. The board of directors agreed with her. The board members presented the proposal to discontinue the corporation to shareholders. Initially, Ahmed, a disgruntled shareholder, opposed ending the corporation. He claimed that the problem was that Janelle had done a poor job in management. Janelle planned to go forward with the termination of the company because a majority of the shareholders agreed. Ahmed, however, came around; and upon a second vote to discontinue the corporation, the vote was unanimous. Tony, a vice president of the corporation, was aware of a few outstanding debts owed by RecyCALL. He suggested hurrying along quietly with ending the corporation because any claims not made before the corporation was dissolved could be avoided. Janelle told him that she was not sure that was a good idea. Therefore, the company proceeded with all appropriate notifications. When the time came to liquidate the corporation, the members of the board did not want to participate. Janelle was concerned about what action to take at that point because she really wanted to be finished with RecyCALL.
Which of the following is true of Janelle's plan to continue with disbanding the corporation over Ahmed's objection?

A) She could not continue with her plan because unanimous approval of shareholders was required.
B) She could proceed with her plan.
C) It is unknown if she could proceed with her plan because Ahmed's agreement was essential if he owned more than 30% of the company's shares.
D) It is unknown if she could proceed with her plan because Ahmed's agreement was essential if he owned more than 20% of the company's shares.
E) It is unknown if she could proceed with her plan because Ahmed's agreement was essential if he owned more than 10% of the company's shares.

Question 80

[Battle for the Board] The Board of Directors of InfoHub, an internet service provider, contains 9 directors. Two of the directors, Jude and Rostan, decide they want to replace several of the directors with individuals who support their position and then take over the Board and control the company. Jude thinks it's a long shot, but Rostan tells him they could do it because Rostan has gradually been accumulating shares and they can get a majority of proxies on their side. Jude says the proxies are not important, because it's the shareholders that vote for the members of the board but it is difficult for them to find the names of shareholders. Rostan tells him not to worry, because he will get the shareholder list and focus only a few key shareholders, then get their proxies on his side before the next shareholder meeting.
Is InfoHub likely to refuse to provide the shareholder list?

A) Probably not. Most companies provide them voluntarily because federal law requires target corporations to assist aggressors in some ways.
B) Probably not, since companies are required to provide them.
C) Yes, corporations always refuse to provide shareholder lists because of the threat of takeovers.
D) Yes, although federal law requires target corporations to assist aggressors in some ways, aggressors are prohibited from access to shareholder lists.
E) Yes, federal securities law protects target corporations from aggressors.