42. The Revised Act grants dissenters’ rights to:
a. a shareholder when any amendment to the articles of incorporation materially and adversely affects that
dissenter’s rights regarding his shares.
b. dissenting shareholders of a corporation leasing substantially all of its assets in the usual course of business.
c. dissenting shareholders of each corporate party to a short-form merger.
d. All of these.
43. Which of the following statements about corporate dissolution is incorrect?
a. A creditor cannot force a corporation into dissolution.
b. A corporation will be dissolved if all shareholders vote to do so.
c. A Secretary of State may start an administrative proceeding to dissolve a corporation for failure to pay taxes.
d. A shareholder may petition a court to dissolve a “deadlocked” corporation.
44. If Sean, a shareholder, dissents to a corporate merger, his appraisal remedies will be:
a. fair value of his shares as of the day the corporation agrees to purchase the shares.
b. fair value of the shares as of the time immediately before the action to which he objects is taken.
c. average purchase price for the shares during the preceding 30 days.
d. None of these.
45. Fundamental changes to a corporation:
a. fall within the authority of the board of directors.
b. include the sale of substantially all of the corporation‘s assets in the regular course of business.
c. need to be approved by shareholders, by a majority of the shares present at a meeting at which a quorum is
present, under the 1999 amendments to the Revised Act.
d. require unanimous shareholder approval.
46. Appraisal rights:
a. belong to dissident shareholders.
b. can be exercised by a target company any time before acquisition.
c. allow a target company to get a fair valuation of its assets before sale.
d. always give all shareholders the fair market value of their shares.
47. A consolidation:
a. has precisely the same result as a merger.
b. is the most typical form of business combination used today.
c. is always illegal (in contrast to mergers, which are legal under state law).
d. requires the assent of the board of directors and shareholders of each corporation.
48. Which of the following is NOT a basis for involuntary dissolution?
a. By the Secretary of State, if it is established that the corporation failed to pay its franchise tax
b. By a shareholder, if the directors are deadlocked and the shareholders cannot break the deadlock
c. By the shareholders, if they dissent to a merger and are asserting their appraisal rights
d. None of these
49. If a company owns 90 percent or more of the outstanding shares of each class of a subsidiary company’s stock, a
merger may be effected with approval of the parent’s board of directors alone, without resort to shareholders. This is
called a:
a. parent-sub merger.
b. board merger.
c. short-cut merger.
d. short-form merger.
50. Larson & Son manufactured welders that frequently malfunctioned, setting clothing on fire and causing serious
burns. Larson & Son sold all of its assets to Swenson Co., which continued to manufacture the Larson welder
product line. Eighteen months after Swenson’s purchase, one of Larson’s customers sued Swenson for injuries
caused by a welder purchased from Larson, one year prior to the purchase by Swenson. Under the circumstances,
Swenson Co.:
a. cannot be held liable, because it is a corporation.
b. cannot be held liable, because it did not manufacture the welder in question.
c. might be held liable for this debt in some states under strict tort liability.
d. could not be liable if Larson & Son still existed as a corporate entity.
51. A short-form merger:
a. is not a merger at all but a form of consolidation.
b. may be undertaken only with the subsidiary’s directors’ approval.
c. allows no appraisal rights for the parent’s minority shareholders.
d. requires shareholder approval.
52. Which of the following is a prerequisite for requesting appraisal rights?
a. Make a verbal demand
b. Meet the statutory time limit
c. Get an independent appraisal of the stock’s value
d. None of these.
53. The RMBCA provides what period of time within which an otherwise barred claim may be enforced for a claimant
who did not receive notice of dissolution and liquidation?
a. Six months
b. One year
c. Three years
d. Five years
54. Which of the following is true of liquidation of a corporation?
a. Liquidated assets are used first to pay contract rights of shareholders.
b. Common stock has a priority over stock with a liquidation preference.
c. Voluntary liquidation is carried out by the corporate officers.
d. A court-appointed receiver may conduct involuntary liquidation.
55. The Revised Act permits the board of directors to adopt certain amendments without shareholder action. These
amendments would include:
a. extending the duration of the corporation if it was incorporated when limited duration was required by law.
b. changing each issued and unissued authorized share of an outstanding class into a greater number of whole
shares if the corporation has only one class of shares.
c. making minor name changes.
d. All of these.
56. A corporation may accomplish acquiring all or substantially all assets of another corporation by:
a. purchase or lease of the other corporations’ assets.
b. purchase of a controlling stock interest in other corporations.
c. merger or consolidation with other corporations.
d. All of these.
57. A corporation that buys the assets of another corporation does not assume the other’s liability unless the:
a. purchaser, expressly or impliedly, agrees to assume the seller’s liabilities.
b. transaction amounts to a consolidation or merger of the two corporations.
c. sale is for the fraudulent purpose of avoiding the liabilities of the seller.
d. All of these.
58. A court may dissolve a corporation in a proceeding by a shareholder if it has established that:
a. the directors are deadlocked in the management of the corporate affairs.
b. the acts of the directors or those in control of the corporation are illegal, oppressive, or fraudulent.
c. the shareholders are deadlocked and have failed to elect directors for at least two consecutive annual
meetings.
d. All of these.
59. A compulsory share exchange:
a. is a transaction by which the corporation becomes the owner of all the outstanding shares of one or more
classes of another corporation by an exchange that is compulsory on all owners of the acquired shares.
b. may be carried out by a corporation acquiring shares in another corporation with its or any other corporation’s
shares or other securities, but not for cash or other property.
c. affects the separate existence of the corporate parties to the transaction.
d. All of these.
60. One method of taking a publicly held corporation private, by forcing minority shareholders to accept cash or property
for their shares, is a(n):
a. appraisal remedy.
b. cash–out combination.
c. management buyout.
d. tender offer.
61. The Revised Model Business Corporation Act would permit the directors to avoid a shareholder vote for which of
the following amendments to the articles of incorporation?
a. Changing the name from Oskcamp Brown Corporation to McDuddy Corporation
b. A change from duration of 99 years to perpetual life
c. Authorizing a new class of stock
d. Adding to the number of directors
62. If Barker Co. buys 51% of the shares of Carter Co.:
a. Carter Co.’s board would have to approve the sale.
b. Barker Co.’s board would have to approve the sale.
c. Both boards would have to approve the sale.
d. Both sets of shareholders would have to approve the sale.
63. If Beta Corporation buys all the existing common shares of Ajax Corporation, which has no preferred shares, in
exchange for a new class of Ajax Corporation preferred shares, the transaction is a(n):
a. merger.
b. acquisition.
c. compulsory share exchange.
d. consolidation.
64. A merger of Parker Corporation with Jones Corporation that results in only Parker Corporation surviving normally
would require approval of:
a. Parker’s and Jones’s boards.
b. Parker’s shareholders.
c. Jones’s shareholders.
d. All of these.
65. Avins Corporation wishes to acquire all of the shares of Solomon Corporation. Approval would be required of:
a. Avins’ board of directors.
b. Solomon’s board of directors.
c. Avins’ shareholders.
d. Solomon’s shareholders.
66. The courts may grant a petition of involuntary dissolution if shareholders:
a. do not approve of fundamental changes of the board.
b. show that the corporation has not kept adequate records or filed annual reports.
c. did not receive their dividends.
d. show that corporate assets are being squandered.
67. A creditor may petition the court to judicially dissolve a corporation if he has an unsatisfied judgment against the
corporation and:
a. the corporation is insolvent.
b. the creditor will become insolvent if not paid.
c. the debt is over $5,000.
d. All of these.
68. If a shareholder dissents to a proposed business combination, he is entitled to receive the fair value of his shares. In
order to do so, the shareholder must do which of the following?
a. Attack the validity of the corporate action that gives rise to his right to obtain payment or to have the action
rescinded
b. Obtain an appraisal of the value of the shares
c. Oppose the proposed corporate action verbally at a special meeting of the stockholders
d. Make a written demand upon the corporation within the set time period
69. Nonjudicial dissolution may be brought about by:
a. expiration of the time period for which the corporation was formed.
b. an administrative proceeding because the corporation did not notify the Secretary of State within 60 days that
its registered agent resigned.
c. voluntary action taken by all the shareholders of all the outstanding shares of stock.
d. All of these.
70.
a. When may the attorney general of a state seek to dissolve a corporation?
b. When may the shareholders of a corporation seek to dissolve it?
c. When may the creditors of a corporation seek to dissolve it?
71.
a. In general, what is considered a fundamental change in a corporation? Give three examples of
what would be considered a fundamental change.
b. Bill is a minority shareholder in B & B, Inc. He opposes a fundamental change that is approved
and implemented. What rights does he have?
72. Discuss the similarity between a management buyout and a cash-out combination.
73.
a.
b.
Action Corporation purchases all of the assets of the Bell Corporation for cash. After the
purchase, a creditor of the Bell Corporation asserts that by buying the assets of the Bell
Corporation, Action has automatically assumed all of Bell‘s obligations. Is he correct? Explain.
Dicton Corporation is merged into the Crag Corporation. One of Dicton’s creditors was not paid
before the merger occurred. The creditor demands payment from the board of directors of the
Crag Corporation. The board says that because the Dicton Corporation no longer exists, they
have no obligation to the creditor. Who is right? Explain your answer.
74. Discuss what happens to a corporation after dissolution and what protection is afforded creditors of the corporation.