Deck 40: Corporations: Mergers, Consolidations, and Termination

Question 1

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

Answer 1

False
Explanation: When an asset purchase occurs, the acquiring corporation (the one purchasing the assets) assumes ownership and control over tangible and intangible assets of the selling corporation.

Question 2

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

Answer 2

False
Explanation: Asset purchases are significantly different from mergers and consolidations because a corporation that purchases the assets of another corporation generally does not acquire its liabilities.

Question 3

The surviving corporation's right to sue for debt and damages on behalf of the absorbed corporation is called which of the following?

A) A right of recovery
B) A right of litigation
C) A course of recovery
D) A chose in action
E) An accord and satisfaction

Answer 3

D
Explanation: The surviving corporation's right to sue for debt and damages on behalf of the absorbed corporation is called a chose in action (chose is French for "thing").

Question 4

In which of the following are two or more corporations combined with neither of the original corporations continuing to exist legally?

A) A merger
B) A consolidation
C) A combination
D) An alteration
E) A reorganization

Question 5

Which of the following is generally false when a consolidation occurs?

A) The new corporation has independent legal status.
B) The original corporations continue to exist legally.
C) The consolidated entity assumes the debts of the original corporations.
D) The consolidated entity obtains the original corporations' assets.
E) The consolidated entity takes on the rights of the original companies.

Question 6

In a merger situation,which of the following is a term for the remaining corporation?

A) The resulting corporation
B) The winning corporation
C) The approved corporation
D) The surviving corporation
E) The remaining corporation

Question 7

Which of the following occurs when a legal contract combines two or more corporations such that only one of the corporations continues to exist?

A) A merger
B) A consolidation
C) A combination
D) An alteration
E) A reorganization

Question 8

Federal securities law does not require that target corporations assist aggressors in any way.

Question 9

Today,consolidations are very rare.

Question 10

Consolidation does not require shareholder approval.

Question 11

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

Question 12

In a merger situation,which of the following is a term for the corporation that does not continue to exist?

A) The declined corporation
B) The removed corporation
C) The absorbed corporation
D) The concealed corporation
E) The deceased corporation

Question 13

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

Question 14

Hostile takeovers are takeovers to which the management of the target corporation objects.

Question 15

Which of the following is generally false regarding the surviving entity in a merger situation?

A) The surviving entity remains a single corporation.
B) The shareholders of the surviving entity must amend its articles of incorporation according to the specific conditions of the merger.
C) The surviving entity does not become liable for debts of the absorbed corporation.
D) The surviving entity obtains the absorbed corporation's assets.
E) The surviving entity obtains the absorbed corporation's rights, powers, and privileges.

Question 16

The boards of directors of all involved corporations must approve a merger or consolidation plan.

Question 17

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

A) 5
B) 10
C) 15
D) 20
E) 30

Question 18

Which of the following was the result in Hartleib v.Sirius Satellite Radio et al.,the case in the text in which shareholders of Sirius sued Sirius XM after a merger claiming that Sirius executives decreased stock prices by entering into agreements with XM to the effect that both companies would refrain from looking at other merger deals?

A) That the plaintiffs' generalized statements failing to identify specific wrongful acts and coming after changes in board membership were insufficient.
B) That the plaintiffs' statements, while generalized, were sufficient but that the plaintiff failed to file the complaint in a timely manner.
C) That the plaintiffs' statements were sufficiently specific, that the complaint was filed in a timely manner, and that a trial would be conducted later.
D) That the plaintiffs' statements were sufficiently specific, that the complaint was filed in a timely manner, and that the plaintiff was entitled to damages as a matter of law.
E) That the plaintiffs had no authority to proceed after the merger.

Question 19

In a consolidation,shareholders of the new corporation create new articles of incorporation called ____.

A) Revised articles of incorporation
B) Merged articles of incorporation
C) Articles of consolidation
D) Revised articles of consolidation
E) Independent articles of combination

Question 20

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

Question 21

In a hostile takeover situation,what does the term "going private" reference?

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

Question 22

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 rule 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 23

In which of the following does an aggressor pay cash to target shareholders?

A) Hostile tender offer
B) Cash tender offer
C) Immediate tender offer
D) Substantial tender offer
E) Asset tender offer

Question 24

Which of the following was the result on appeal in Royal Crown Companies Inc.,v.McMahon,the case in the text in which the former president of a subsidiary of Royal Crown sued claiming that an agreement regarding severance pay was breached?

A) The court ruled that a golden parachute contract is void as against public policy and, therefore, unenforceable.
B) The court ruled that a severance agreement, regardless of whether it is considered a golden parachute contract, is contrary to the employment at will principle and, therefore, unenforceable.
C) The court ruled that while severance agreements approved by a majority of shareholders are valid, the severance agreement in the case was not so approved and was, therefore, invalid.
D) The court ruled that the agreement would be enforced but only because it was not considered a golden parachute contract.
E) The court ruled that the severance agreement was valid and enforceable and that it made no difference that it was considered a golden parachute agreement.

Question 25

Which of the following occurs when an aggressor gradually accumulates the target company's shares?

A) Controlled acquisition
B) Timed acquisition
C) Gradual acquisition
D) Beachhead acquisition
E) Pirate acquisition

Question 26

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 27

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 28

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

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 29

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 30

Which of the following occurs when a group within a corporation,usually management,buys all outstanding corporate stock held by the public?

A) An asset purchase
B) A leveraged buyout
C) A management buyout
D) A corporate buyout
E) An illegal buyout

Question 31

When voluntary dissolution procedures are initiated,which of the following must occur first?

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 32

Which of the following is true regarding liquidation?

A) Liquidation is another name for dissolution.
B) It is the process by which the board converts the corporation's assets into cash and distributes them among the corporation's creditors and shareholders.
C) It begins immediately prior to dissolution.
D) It is the process by which the board provides notice to the secretary of state that the corporation will no longer remain in existence.
E) Liquidation duties fall upon officers of the corporation.

Question 33

Which of the following is true regarding situations in which a court may order an involuntary dissolution of a corporation?

A) A court may order an involuntary dissolution of a corporation under the following four circumstances: 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) A court may order an involuntary dissolution of a corporation under the following three circumstances: when the corporation obtained its article of incorporation fraudulently, when the directors have abused their power, and when the corporation is insolvent.
C) A court may order an involuntary dissolution of a corporation under the following three circumstances: 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) A court may order an involuntary dissolution of a corporation under the following three circumstances: 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) A court may only order an involuntary dissolution of a corporation when the corporation is insolvent.

Question 34

Which of the following types of mergers does not require shareholder approval?

A) Short-form mergers
B) Short-term mergers
C) Access mergers
D) Required mergers
E) Specific mergers

Question 35

In a short-form merger,the parent corporation must own at least ______ percent of the outstanding shares of each class of the subsidiary's stock.

A) 90
B) 75
C) 50
D) 40
E) 30

Question 36

Which of the following is true regarding approval a corporation desiring to sell a majority of its assets must obtain?

A) A corporation desiring to sell a majority of its assets must obtain approval from officers, its board of directors, and shareholders.
B) A corporation desiring to sell a majority of its assets must obtain approval from officers and its board of directors, but not from shareholders.
C) A corporation desiring to sell a majority of its assets must obtain approval from its board of directors and shareholders, but not from officers.
D) A corporation desiring to sell a majority of its assets must obtain approval from shareholders, but not from officers or its board of directors.
E) A corporation desiring to sell a majority of its assets must obtain approval from its board of directors, but not from shareholders or officers.

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

Which of the following is false regarding merger control in France?

A) If it is determined that a proposed merger exceeds a reasonable concentration of power, the minister for the economy can enjoin the companies from completing the merger.
B) If it is determined that a proposed merger exceeds a reasonable concentration of power, the minister for the economy can alter the merger's value.
C) If it is determined that a proposed merger exceeds a reasonable concentration of power, the minister for the economy can make provisions to ensure higher degrees of competition in the market.
D) The goal of merger control statutes in France is to discourage mergers.
E) The French government, specifically the minister for the economy, uses the Commission for Competition as a resource when determining whether a proposed merger will benefit the French economy or whether the resulting concentration of power will decrease competition.

Question 39

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 40

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

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 41

Which of the following terms describes Tree Corporation in the attempt of Green Corporation to gain control?

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

Question 42

Which of the following is true of Barbara's plan to continue with disbanding the corporation over Willy'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 Willy'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 Willy'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 Willy's agreement was essential if he owned more than 10% of the company's shares.

Question 43

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

A) Bernie is correct that Greg will be unable to win in litigation against him so long as the joining is completed before Greg files the lawsuit.
B) Bernie is correct that Greg 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) Bernie is correct that Greg will be unable to sue him unless Greg files in court an objection to the joining and prevails.
D) Bernie is correct that Greg will be unable to win in litigation against him unless Greg can establish fraud in connection with the joining.
E) Bernie is incorrect, and the joining will have no effect on the lawsuit.

Question 44

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

A) There is no requirement that the state approve mergers.
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 mergers so long as corporate entity at issue has sufficient assets.
D) The secretary of state must approve mergers so long as creditors of the corporate entity at issue do not remain unpaid.
E) The secretary of state must approve mergers so long as no more than 10% of either company's shareholders object.

Question 45

In a consolidation,what happens to 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) None of these.

Question 46

By offering to give shareholders in Tree Corporation stock in Green Corporation in return for shares of stock in Tree Corporation,Green Corporation made a[n] ____.

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

Question 47

Which of the following is the proper term for the plan to discontinue Reuse It?

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

Question 48

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 49

Which of the following results in a chose in action?

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

Question 50

In a merger,what happens to 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 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) None of these.

Question 51

Which of the following is a term for the attempt of Green Corporation to take over Tree Corporation over the objection of management and the board of Tree Corporation?

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

Question 52

Which of the following is a term used to describe Green Corporation in its attempt to buy any or all of Tree Corporation's voting shares?

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

Question 53

By offering to purchase the stock of Tree Corporation at a price above its current market value,Green Corporation made a[n] ____.

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

Question 54

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

A) It is a good plan only if a close corporation is involved; otherwise, Sally has a duty to reveal all pertinent facts to shareholders.
B) It is a good plan only if an S Corporation is involved; otherwise, Sally 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, Sally has a duty to reveal all pertinent facts to shareholders.
D) It is a bad plan because Sally 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 55

Death of a corporation occurs in which of the following phases?

A) Dissolution and trial
B) Dissolution and proceedings
C) Dissolution and liquidation
D) Reforming and liquidation
E) Notification and liquidation

Question 56

Which of the following is true regarding Quill'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 57

Which of the following is the appropriate term for the action contemplated by Bernie and John to combine the businesses under the name "Skateboard for Health"?

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

Question 58

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 59

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) Barbara, 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 60

Which of the following is true in most states regarding Bernie's concern that Hank could not be sued for the price of the skateboards?

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

Question 61

Set forth the three circumstances listed in the text under which a corporation acquiring assets assumes the liabilities of the selling corporation.

Question 62

Two security services,ABC Security and R.Knight Security,propose to merge.Each corporation has fewer than 10 shareholders.The proposed merger receives majority shareholder approval.Richard,a minority shareholder who owns 10% of the stock in Knight Security,however,is very much opposed to the merger.He tells the other shareholders in Knight Security that unless they convince him otherwise,he will block the merger.What are Richard's rights as a dissenting shareholder,and does he have the power to block the merger?

Question 63

What steps must a target corporation take once an aggressor has presented its offer to the target corporation's shareholders?

Question 64

What is generally the next step for an aggressor after acquiring a substantial number of the target corporation's shares and why?

Question 65

Set forth the universal requirements for a merger or acquisition including what most states require in regard to shareholder approval.