Miscellaneous Flashcards
Merger
Need board of director action and written notice to SH
SH approval of disappearing company always required
SH of surviving company generally will not vote
If approved, certificate of merger delivered to the secretary of state for filing
Short-form merger
when 90% or more owned subsidiary is merged into a parent corporation
No SH approval is required
Effects of a merger
Surviving corp succeeds to all rights and liabilities of the constituents.
This makes sense because the constituent corporation disappeared.
So a creditor of that corporation can sue the survivor. This is successor liability.
Conversion
When corporation converts to another form of business organization
Transfer of All or Substantially All of Assets Not in the Ordinary Course of Business or Share Exchange
What constitutes substantially all of the assets varies from state to state. A rule of thumb is that it requires transfer of at least 75% of the assets. Most important point is that these are fundamental corporate changes for the seller corporation only–not the buyer.
Are there dissenting shareholders’ rights of appraisal for transfer of assets?
Yes, for SHs of the selling corporation (but not for the SHs of the buying corporation)
Do we expect successor liability in the sale of substantially all assets?
No, because the selling company still exists
Voluntary dissolution
Board of directors action and approval by a majority of the shares entitled to vote. File notice of intent to dissolve with Secretary of State. Corporation stays in existence to wind up. Notify creditors os they can make the claims.
Involuntary dissolution
A SH can petition because of:
1) director abuse, waste of assets, misconduct (can be removed for this as well, duty of loyalty);
2) director deadlock that harms the corporation; OR
3) SH have failed at consecutive annual meeting to fill a board vacancy.
A creditor can petition because corporation is insolvent and (1) he has an unsatisfied judgment or (2) the corporation admits the debt in writing
When does 16b apply?
1) “reporting” corporation:
1) listed on a national exchange, OR
2) at least 500 shareholders and $10,000,000 in assets
2) types of defendants:
– Director (either when she bought or sold) or
– Officer (either when she bought or sold) or
– Shareholder who owns more than 10 percent (both when she bought and sold)
3) type of transaction:
Buying and selling stock within a single six-month period (short-swing trading). No fraud or inside info needed
What happens when 16(b) applies?
All profits from such short-swing trading are recoverable by the corporation. If, within 6 months before or after any sale, there was a purchase at a lower price, there is a profit. The order of the buy and the sell–we match low buys with high sells within a 6 month period.
- liability of shareholders and directors/officers to third parties
shareholders not liable to third parties for actions by corporation (except close corporations)
officers liable if he/she breaches a duty of care, breach of duty or loyalty, if the corporate veil is pierced, or if the officer
directly engages in conduct that he supervises, contributes to that is detrimental to the corporation.
