Fundamental Corp. Changes & Controlling SHs Flashcards
(27 cards)
fundamental changes req whose approval?
- BOD
- SHs
& notify Dept of State
**What is dissenting SHs right of appraisal upon fundamental change?
right to force corp to buy your stock at FAIR VALUE
what actions trigger SHs’ appraisal rights FOR PRIVATELY TRADED COMPANIES? (If corp is publicly traded, no need for appraisal. You can just sell shares.)
- certain cert amendments
- consolidation
- MERGER
- TRANSFER SUBST. ALL CORP ASSETS
- your shares acquired in share exchange
what does SH do to perfect appraisal rights in private corp?
- written objection and intent to demand payment BEFORE VOTE ON FUNDAMENTAL CHANGE;
- abstain or vote against change; and
- Post-vote make WRITTEN DEMAND to be bought out for fair value
if corp and SH can’t agree on fair value, corp sues and court sets it by….
Court provides fair value. NO MINORITY DISCOUNT.
Is amendment of certificate a fundamental change?
Yes. Req BOD approval + MAJORITY OF SHARES ENTITLED TO VOTE (not just majority of shares that actually do vote)
When are there dissenting SH appraisal rights for change in cert? 4 situations
- alters or abolishes a PREFERENCE
- changes REDEMPTION rights
- alters or abolishes a PREEMPTIVE RIGHT, or
- limits VOTING RIGHTS
def of consolidation
A and B corp join and form C corp
merger or consolidation require approvals of?
BOD and SH approval of all shares entitled to vote
who has appraisal rights in merger?
target’s SHs, including subsidiary SHs in short-form merger
Keep your eyes out for successor liability
b/c existing corp inherit all assets and liabilities of corp(s) merging out of existence
*transfer of substantial all assets (or share exchange) require approval of?
BOD and majorty of all SHs entitled to vote OF SELLING CORPORATION ONLY. Buyer needn’t get SH approval.
sale of subst all assets (or share exchange): who has appraisal right for dissenting SHs?
only seller SHs. it’s not a fundamental change for buyers.
will acquiring corp in buyer of subst all assets be liable for tort claims of target?
NO SUCCESSOR LIABILITY FOR ASSET PURCHASE because the selling corp still exists. Only tort successor liability if (1) deal provides for it, or (2) purchasing company is continuation of seller; or (3) deal was fraud to evade tort.
What approval necessary for voluntary dissolution?
Just majority of SHs entitled to vote. No BOD approval nec.
*** How to get involuntary corp dissolution? (4 ways)
- BOD or majority of SH reso
- 50% or more SHs vote that directors are too divided to manage or SHs too divided
- any SH entitled to vote may petition if SHs unable to directors for 2 annual meetings
* *4. 20% OR MORE OF VOTING SHARES IN CLOSE CORP PETITION FOR DISSOLUTION ON (A) MGMT’S ILLEGAL, OPPRESSIVE, OR FRAUD ACTS TOWARD COMPLAINING SHs; OR (B) MGMT DILUTING, STEALING, OR WASTING ASSETS
When may court deny dissolution upon proper 20% complaining SHs in close corp?
Court will consider non-dissolution options, e.g., order buyout of complainant.
**How many corp or non-complaining SHs try to avoid dissolution where 20% of close corp SHs seek involuntary dissolution?
Within 90 days of petition’s move to get dissolution, corp or non-complaining SHs can buy back BASED ON PRICE APPROVED BY COURT.
Dissolution doesn’t wind up corp. The wind up is 4 steps:
- gather assets
- convert to cash
- pay creditors
- distribute remainder to SHs (pro-rata by share unless there’s dissolution preference)
Do controlling shareholders owe fiduciary duty to minority SHs?
Yes. If you control corp, you do owe fid duty. Most likely to come up in close corp.
sale of controlling SHs interest: if controlling SH sells and gets control premium, does she get to keep premium?
yes
If controlling SH sells to someone with control premium, selling SH is liable to minority if he sells ______
to looter who’s bidding for anonymous buyer and wants just the assets. Then seller’s profit is disgorged and corp recovers for damages.
If controlling SH sells for premium to looter who just wants the assets, what happens to control premium?
shared with all SHs b/c no individual has right to sell corp assets
can controlling SH sell their own resignation from the board?
No. Can’t sell out your fiduciary duties
