STU15 Flashcards
Acorn Corp. wants to acquire the entire business of Trend Corp. What method of business combination will best satisfy Acorn’s objectives without requiring the approval of the shareholders of either corporation?
A merger, consolidation, or purchase of substantially all of a corporation’s assets requires approval of the board of directors of the corporation whose shares or assets are acquired. An acquiring corporation may bypass shareholder approval by using a short-form merger. No shareholder approval is required if a corporation that owns at least 90% of a subsidiary merger with the subsidiary using a short-form merger.
A corporate shareholder is entitled to which of the following rights?
Shareholders do not have the right to manage the corporation or its business. Shareholder participation in policy and management is through exercising the right to elect directors. Shareholders also have the right to approve charter amendments, disposition of all or substantially all of the corporation’s assets, mergers and consolidations, and dissolutions.
For what purpose will a shareholder of a publicly held corporation be permitted to file a shareholder derivative suit in the name of the corporation?
A derivative suit is a cause of action brought by one or more shareholders on behalf of the corporation to enforce a right belonging to the corporation. Shareholders may bring such an action when the board of directors refuses to act on the corporation’s behalf. Generally, the shareholder must show (1) (s)he owned stock at the time of the wrongdoing, (2) (s)he made a demand to the corporation to bring suit or take other appropriate action, and (3) a bad-faith refusal of the board of directors to pursue the corporation’s interest. The recovery, if any, belongs to the corporation. An action to recover damages from corporate management for an ultra vires act is an example of a derivative suit. An ultra vires act is one beyond the limits of the corporate purposes defined in the articles of incorporation.
