Business law 1 part six Flashcards
(24 cards)
What are fundamental changes in a corporation?
Modifying the rules for stakeholders
Necessary for business continuity or investor interests
What is required to implement fundamental changes?
Amending bylaws
Laws permit changes that respect power distribution and avoid harming stakeholders
Who can make fundamental changes in a corporation?
Board of directors or shareholders
What remedies exist for fundamental changes?
Judicial review, double majority approval, exit rights for shareholders
How does law protect stakeholders during fundamental changes?
Regulates changes to protect shareholders, minority shareholders, creditors, and other stakeholders
How does the ownership structure affect stakeholder protection?
Dispersed shareholders require stronger safeguards
What are charter amendments?
Significant changes that apply to all shareholders
Require majority shareholder approval
What is required for share issuance?
Shareholder approval
Board of directors’ authority to issue shares varies by country
What is required for a reduction of capital?
Shareholder approval or majority vote
Specific approval thresholds depend on the jurisdiction
What are pre-emptive rights?
Gives existing shareholders the option to buy new shares before others
What is required to remove pre-emptive rights?
Majority shareholder approval
What are freeze-out mergers?
Majority shareholder eliminates minority shareholders by offering cash to exit the company
How are freeze-out mergers treated in different jurisdictions?
Allowed and facilitated in the United States, subject to legal review in the European Union
What are squeeze-out mergers?
Majority shareholders purchase remaining shares of minority shareholders
What governs squeeze-out mergers in the European Union?
Public bid offer laws
Who are non-shareholder constituencies in mergers?
Creditors, employees, and others
What is conversion and reincorporation?
Transferring corporations to different countries, often through mergers
What are control transactions?
Transfer of ownership or shares in a company
What is the No Frustration Rule?
Prevents directors from obstructing proposed changes in control
What is board neutrality?
Directors should not favor one party over another during a corporate takeover
What are pre-bid defensive measures?
Actions taken to decrease the likelihood of a takeover attempt
What problems may shareholders face during a takeover?
Coordination problems
What measures help address shareholder coordination problems?
Mandatory disclosure, trusteeship strategies, equal treatment, exit rights
What can happen to non-accepting shareholders?
They may be acquired through a ‘squeeze out’ process
