FUNDAMENTAL CORPORATE CHANGES

Question 1

General procedure for corp changes

Answer 1

(1) The board adopts a resolution;
(2) written notice is given to the SHs;
(3) the SHs approve the changes;
(4) the changes in the form of articles are filed with the state. Dissenting SHs have right of appraisal (have corp purchase their shares, but not in publicly held corps).

If SHs will have right, must give notice, before vote is take SH must deliver written notice of her intent to demand payment, corp must give 10 days’ notice once approved including time and place to submit their shares and terms of repurchase and upon demand, corp must pay FMV + Interest.

Question 2

Disposition of Property

Answer 2

Sale, lease, exchange or other disposition of all or substantially all (more than 75% of corp. assets/revenue) and must follow fundamental change procedure. Must be approved by a majority of SHs.

Question 3

Amendments

Answer 3

The corp can amend it articles with any provision that would be lawful in original articles. Housekeeping items can be amended without SH approval, but most require SH approval.

Question 4

Merger, Share Exchange, and Conversion

Answer 4

A merger involves the blending of one or more corporations into another corp., and the latter corp survives while the merging corp ceases to exist.

A share exchange involves one corporation purchasing all of the outstanding shares of one or more classes or series of another corporation.

A conversion involves one business entity changing its form to another business entity (corp to LLC).

Question 5

SH approval - Merger

Answer 5

Depends on the significance of the merger. No need for SH approval in Short form Merger of a subsidiary.

Share exchange – only SHs of the corp who shares will be acquired need to approve (not a fundamental corp. change).

Conversion – generally the same procedure for approving the merger.

Question 6

Voluntary Dissolution

Answer 6

Requires a
(1) resolution from the BOD AND
(2) approval from an absolute majority of shares entitled to vote.
Some states require unanimous written shareholder agreement. Deliver Articles of dissolution to state. Can be voluntarily dissolved by (1) incorporators or initial directors if shares have not been issued or business not yet commenced; (2) corporate act (fundamental change procedure). May revoke dissolution using same procedure that was used to dissolve.

Question 7

Involuntary/Administrative Dissolution

Answer 7

The state may bring an action to administratively dissolve for reasons such as failure to pay fees, file annual report, maintain registered agent. State must serve written notice. If corp does not correct or show that the grounds do not exist within 60 days after service, the state dissolves by signing a certificate of dissolution. Within two years, the corporation may apply for reinstatement and application must state the grounds did not exist or have been eliminated. Reinstatement relates back to date of dissolution.

Question 8

Judicial Dissolution

Answer 8

The state AG can seek JD on grounds of fraudulently obtaining corp aritcles or exceeding or abusing authority. Shareholders can also seek judicial solution: shareholder petitions the court for dissolution based on:
(1) director abuse, waste of assets, or general misconduct,
(2) director deadlock and threat of irreparably injury the corp;
(3) shareholder deadlock and failure for at least two annual meetings to fill a vacant board position or
(4) Directors have or will act in a manner that is illegal, oppressive, or fraudulent.
As an alternative to involuntary dissolution, the court may order a buyout of the complaining shareholder’s shares.