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Exam 40: Corporations: Mergers, Consolidations, Terminations

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Question 1

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"Skateboard Growth." Both Bernie and John were presidents of small corporations involved with manufacturing and selling skateboards. Bernie's store was called "ABC Skateboard" and John's business was called "Skateboard for Health." Because a large sports store was coming into town, they, along with the boards of directors of the two companies and all shareholders, decided that it would be a good idea to combine the businesses. They decided to retain the name "Skateboard for Health." Bernie was concerned, however, with the change because, on behalf of his company, he was contemplating filing a lawsuit against Hank who had purchased 10 custom skateboards and had not paid for them. He was excited, however, about the prospect of not being liable for a lawsuit he expects to be filed by Greg who fell when a wheel came off on a skateboard sold by Bernie's corporation resulting in a serious ankle sprain and medical bills. After investigation, Bernie is aware that the wheel was negligently attached to the skateboard. Bernie told John that one reason he wanted to retain John's name was to prevent Greg from being able to recover against him. -Which of the following is true in most states regarding Bernie's concern that Hank could not be sued for the price of the skateboards?

A) Hank cannot be sued if Hank purchased the skateboards within 30 days of the joining of the businesses.
B) Hank can be sued only if Hank purchased the skateboards within 30 days of the joining of the businesses.
C) Hank cannot be sued unless Hank approves in writing the joining of the businesses.
D) Hank can be sued only if Hank is notified by certified letter of the joining of the businesses.
E) The right to sue Hank would not be lost by the joining of the corporations.

F) None of the above
G) A) and B)

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Question 2

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What is generally the next step for an aggressor after acquiring a substantial number of the target corporation's shares and why?

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After acquiring a substantial number of ...

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Question 3

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Which of the following types of mergers does not require shareholder approval?

Which of the following is false regarding merger control in France?

"Skateboard Growth." Both Bernie and John were presidents of small corporations involved with manufacturing and selling skateboards. Bernie's store was called "ABC Skateboard" and John's business was called "Skateboard for Health." Because a large sports store was coming into town, they, along with the boards of directors of the two companies and all shareholders, decided that it would be a good idea to combine the businesses. They decided to retain the name "Skateboard for Health." Bernie was concerned, however, with the change because, on behalf of his company, he was contemplating filing a lawsuit against Hank who had purchased 10 custom skateboards and had not paid for them. He was excited, however, about the prospect of not being liable for a lawsuit he expects to be filed by Greg who fell when a wheel came off on a skateboard sold by Bernie's corporation resulting in a serious ankle sprain and medical bills. After investigation, Bernie is aware that the wheel was negligently attached to the skateboard. Bernie told John that one reason he wanted to retain John's name was to prevent Greg from being able to recover against him. -Which of the following is the appropriate term for the action contemplated by Bernie and John to combine the businesses under the name "Skateboard for Health"?

"Death." Barbara is president and a large shareholder in Reuse It, a corporation that sells used cellular telephones. Although the company was not insolvent, sales had been significantly down, and Barbara decided that it would be a good idea to discontinue the business. The board of directors agreed with her. The board members presented the proposal to discontinue the corporation to shareholders. Initially, Willy, a disgruntled shareholder, opposed ending the corporation. He claimed that the problem was that Barbara had done a poor job in management. Barbara planned to go forward with the termination of the company because a majority of the shareholders agreed. Willy, however, came around; and upon a second vote to discontinue the corporation, the vote was unanimous. Quill, a vice president of the corporation, was aware of a few outstanding debts owed by Reuse It. He suggested hurrying along quietly with ending the corporation because any claims not made before the corporation was dissolved could be avoided. Barbara told him that she was not sure that was a good idea. Therefore, the company proceeded with all appropriate notifications. When the time came to liquidate the corporation, the members of the board did not want to participate. Barbara was concerned about what action to take at that point because she really wanted to be finished with Reuse It. -Which of the following is true regarding Quill's suggestion that dissolution be implemented quickly in order to avoid claims by creditors?

In which of the following are two or more corporations combined with neither of the original corporations continuing to exist legally?

Which of the following is generally false regarding the surviving entity in a merger situation?

Federal regulations prohibit the management of target companies from using corporate funds to educate shareholders on the disadvantages of a takeover.

The surviving corporation's right to sue for debt and damages on behalf of the absorbed corporation is called which of the following?

Which of the following was the result on appeal in Royal Crown Companies Inc., v. McMahon, the case in the text in which the former president of a subsidiary of Royal Crown sued claiming that an agreement regarding severance pay was breached?

"Green Trees." Wally, the president of Green Corporation, a company that provides landscaping services, wanted his corporation to purchase Tree Corporation, another corporation providing landscaping services. The board of Tree Corporation, however, did not wish to sell. The board of Green Corporation decided to buy any or all of Tree Corporation's stock in order to gain control of Tree Corporation. The management of Tree Corporation and its board strongly objected to the attempt by Green Corporation to take over the company. Green Corporation offered to purchase stock held by shareholders of Tree Corporation at a price substantially above the current market value of the stock. When that strategy was not wholly successful, Green Corporation offered to give shareholders of Tree Corporation stock in Green Corporation in return for their stock in Tree Corporation. -Which of the following terms describes Tree Corporation in the attempt of Green Corporation to gain control?

"Skateboard Growth." Both Bernie and John were presidents of small corporations involved with manufacturing and selling skateboards. Bernie's store was called "ABC Skateboard" and John's business was called "Skateboard for Health." Because a large sports store was coming into town, they, along with the boards of directors of the two companies and all shareholders, decided that it would be a good idea to combine the businesses. They decided to retain the name "Skateboard for Health." Bernie was concerned, however, with the change because, on behalf of his company, he was contemplating filing a lawsuit against Hank who had purchased 10 custom skateboards and had not paid for them. He was excited, however, about the prospect of not being liable for a lawsuit he expects to be filed by Greg who fell when a wheel came off on a skateboard sold by Bernie's corporation resulting in a serious ankle sprain and medical bills. After investigation, Bernie is aware that the wheel was negligently attached to the skateboard. Bernie told John that one reason he wanted to retain John's name was to prevent Greg from being able to recover against him. -Which of the following results in a chose in action?

In a hostile takeover situation, what does the term "going private" reference?

Which of the following was the result in Hartleib v. Sirius Satellite Radio et al., the case in the text in which shareholders of Sirius sued Sirius XM after a merger claiming that Sirius executives decreased stock prices by entering into agreements with XM to the effect that both companies would refrain from looking at other merger deals?

Which of the following is generally false when a consolidation occurs?

In which of the following does an aggressor pay cash to target shareholders?

When an asset purchase occurs, the acquiring corporation assumes ownership and control over tangible, but not intangible, assets of the selling corporation.

"Skateboard Growth." Both Bernie and John were presidents of small corporations involved with manufacturing and selling skateboards. Bernie's store was called "ABC Skateboard" and John's business was called "Skateboard for Health." Because a large sports store was coming into town, they, along with the boards of directors of the two companies and all shareholders, decided that it would be a good idea to combine the businesses. They decided to retain the name "Skateboard for Health." Bernie was concerned, however, with the change because, on behalf of his company, he was contemplating filing a lawsuit against Hank who had purchased 10 custom skateboards and had not paid for them. He was excited, however, about the prospect of not being liable for a lawsuit he expects to be filed by Greg who fell when a wheel came off on a skateboard sold by Bernie's corporation resulting in a serious ankle sprain and medical bills. After investigation, Bernie is aware that the wheel was negligently attached to the skateboard. Bernie told John that one reason he wanted to retain John's name was to prevent Greg from being able to recover against him. -Which of the following is true regarding Bernie's belief that Greg will be unable to collect anything for the accident after the joining of the businesses?

In some states, when merger or consolidation is at issue, the right to vote and receive dividends is denied to dissenting shareholders who exercise their appraisal rights.