Helix BBQ: Corp & LLC-Corporations - Changing Organizational Structure with Explanations

Once a corporate merger plan has been drafted, it first must be adopted by which of the following?

C.The boards of directors of both the acquiring corporation and the target corporation.

Solution: The correct answer is C.

Answer option C is correct. After it is drafted, the plan of merger first must be adopted by the boards of directors of both the acquiring corporation and the target corporation.

To effect a merger of a subsidiary corporation into its parent corporation without the approval of the subsidiary’s shareholders or board of directors, what percentage of voting power must a parent corporation own in the subsidiary?

D. At least 90%.

Solution: The correct answer is D.

Answer option D is correct. When a parent corporation owns at least 90% of the voting power in a subsidiary, the parent may merge the subsidiary into the parent without obtaining the approval of the subsidiary’s shareholders or board of directors. This is known as a “short-form merger.”

Under which situation below would a merger require approval from shareholders of the target company but not those of the acquiring company?

A.The merger would have little effect on the acquiring company.

Solution: The correct answer is A.

Answer option A is correct. It is not necessary that the acquiring company’s shareholders approve a plan of merger if the merger’s effect on that company is small. For this exception to apply, the following conditions must be met: (1) the acquiring company will survive the merger; (2) the acquiring company’s articles of incorporation will not be changed as a result of the merger; (3) each of the acquiring company’s shareholders will hold the same number of shares with identical rights immediately after the effective date of the merger; and (4) the merger’s issuance of shares or stock options convertible into shares does not require a shareholder vote, because the total number of shares outstanding after the merger will not exceed the maximum number of shares authorized in the articles of incorporation.

What are “dissenter’s rights” in the context of a merger?

C.The right of shareholders who vote against the merger to sell their shares to the corporation if the merger is approved.

Solution: The correct answer is C.

Answer option C is correct. Shareholders who do not consent to a merger or acquisition may be entitled to sell their shares to the corporation for a fair value by exercising dissenters’ rights (also known as “appraisal rights”).

When must a corporation obtain shareholder approval for a sale of corporate assets?

B.When the sale of assets would leave the corporation without a significant continuing business activity.

Solution: The correct answer is B.

Answer option B is correct. A corporation must obtain the approval of its shareholders whenever it wishes to sell so many of its assets that the sale would leave the corporation “without a significant continuing business activity.” A corporation will be deemed to retain a significant continuing business activity if, after the proposed sale, the corporation would still have (1) at least 25% of its total assets, and (2) at least either 25% of income from continuing operations before taxes or 25% of revenues from continuing operations.