Chapter 36. Fundamental Changes
1. Shareholder approval of a fundamental change in a corporation would normally need to be unanimous.
a. True
b. False
2. The 1999 amendments to the RMBCA eliminate the appraisal remedy for almost all charter amendments.
a. True
b. False
3. If Ajax Corporation buys substantially all the assets of Beta Corporation, a new corporation will result.
a. True
b. False
4. Kuhn Corporation transfers one third of its assets to True Color Co., a wholly owned subsidiary. Under the Revised
Act, this transfer is considered to be a sale in the regular course of business.
a. True
b. False
5. If Able Corporation buys all the assets of Beta Corporation in a merger, Able Corporation also assumes Beta
Corporation‘s liabilities.
a. True
b. False
6. A sale of substantially all of the assets of a corporation in the ordinary course of business of the corporation will not
require shareholder approval.
a. True
b. False
7. If Able Corporation purchases all of the stock of Beta Corporation rather than all of its assets, there is now a change
in Beta Corporation‘s legal status.
a. True
b. False
8. Brown Corporation purchased all of the stock of Grey Corporation. The appraisal remedy is not available to a
dissenting shareholder of Brown Corporation.
a. True
b. False
9. Under the Investor Protection and Securities Reform Act of 2010, new corporate governance rules are imposed on
publicly and privately held companies.
a. True
b. False
10. Shareholders have a vested property right resulting from the provisions in the articles of incorporation and therefore
must give approval for any amendments to the articles.
a. True
b. False
11. A “short-form merger” requires shareholder approval of both corporations.
a. True
b. False
12. If Corporation J and Corporation K combine all of their assets and create a consolidated corporation; Corporation J
and Corporation K will cease to exist.
a. True
b. False
13. The Revised Act takes the position that consolidations are, for all practical purposes, obsolete.
a. True
b. False
14. A tender offer is a general invitation to all the shareholders of a target company to tender their shares for sale at a
specified price.
a. True
b. False
15. A corporation must notify the shareholders of the existence of dissenters’ rights before taking the vote on the
corporate action.
a. True
b. False
16. When purchasers are willing to pay a premium for a block of shares that conveys control, almost all courts today
require the controlling shareholders to turn over this control premium to the corporation’s treasury.
a. True
b. False
17. Dissolution of a corporation does not terminate its existence and does not require that it liquidate its assets.
a. True
b. False
18. The state may bring an action for involuntary dissolution of a company if the corporation has not paid its annual
franchise tax.
a. True
b. False
19. The state, a shareholder, or a creditor may bring a proceeding seeking judicial dissolution.
a. True
b. False
20. A dissenting shareholder can stop a merger or consolidation.
a. True
b. False
21. The attorney general of the state of incorporation may bring a court action to dissolve a corporation if the corporation
obtained its charter by fraud or if the corporation continues to exceed or abuse the authority that was conferred on it.
a. True
b. False
22. The Action Corporation and the Braker Corporation combine into the Action Corporation. This is a consolidation.
a. True
b. False
23. The Action Corporation and the Braker Corporation combine to form the Cable Corporation. This is a merger.
a. True
b. False
24. After an amendment to the corporate charter has been approved, it must be filed with the Secretary of State.
a. True
b. False
25. The Revised Act, as amended in 2002, provides for domestication procedures which permit a foreign business
corporation to become a domestic partnership or LLC.
a. True
b. False
26. Once a corporation becomes publicly held, it cannot return to being private.
a. True
b. False
27. Management buyouts commonly make extensive use of borrowed funds.
a. True
b. False
28. Under the CFPA of 2010, publicly held companies must, on their proxy solicitations, disclose and provide
shareholders with a binding vote to approve any type of compensation based on or relating to mergers,
consolidations, or the proposed sale of all of the assets of the company.
a. True
b. False
29. Statutory provisions do not protect creditors upon the dissolution of a corporation.
a. True
b. False
30. The Revised Act permits the board of directors to make minor corporate name changes without shareholder action.
a. True
b. False
31. A shareholder of N Corporation dissents to the corporation’s merger with J Corporation. If the appraisal remedy is
granted, the shareholders will be paid the:
a. par value of their shares.
b. stated value of their shares.
c. fair market value of their shares.
d. accounting book value of their shares.
32. The management of Corporation A forms Corporation B in which management owns some stock and institutional
investors own the rest. Corporation B issues bonds to institutional investors to raise cash, with which it purchases the
assets or stock of Corporation A. The assets of Corporation A are used as security for the bonds. This action by
management is best described as a:
a. leveraged buyout.
b. cash–out combination.
c. short-form merger.
d. compulsory share exchange.
33. The remedy of appraisal is allowed to a dissenting shareholder if:
a. the stock price goes down.
b. the shareholder does not vote by proxy.
c. the stock is split.
d. None of these.
34. If Yeron Corporation buys all of the assets of Aeron Corporation:
a. Yeron becomes a parent corporation.
b. Aeron is merged into Yeron.
c. Aeron’s board is dissolved and replaced by Yeron’s.
d. None of these.
35. AB Corporation consolidates with ZX Corporation to form A-Z Corporation. The debts of AB Corporation are:
a. assumed by the stockholders of AB Corporation.
b. discharged by the process of consolidation.
c. assumed by the new corporation.
d. discharged by the issuance of new stock in A-Z Corporation.
36. The consolidation of AB Corporation and ZX Corporation requires the affirmative majority vote of:
a. the boards of directors and shareholders of both corporations.
b. the boards of directors of both corporations, but not the shareholders.
c. the shareholders of both corporations, but not the boards of directors.
d. the directors and shareholders of one of the corporations, but not both corporations.
37. The 2002 amendments to the Revised Act provide for procedures permitting:
a. a corporation to change its state of incorporation.
b. a domestic business corporation to become a domestic or foreign partnership or LLC.
c. Both of these.
d. Neither of these.
38. The RMBCA (without the 1999 amendments) grants dissenters’ rights to all but which of the following?
a. Dissenting shareholders to any plan of compulsory share exchange in which their corporation is the one to be
acquired
b. Dissenting shareholders to any amendment to the articles of incorporation that materially and adversely
affects the dissenters’ rights regarding their shares
c. Dissenting shareholders of each corporate party to a merger, other than a short-form merger, where only the
dissenting shareholders of the subsidiary have dissenters’ rights
d. Dissenters’ rights exist under the RMBCA in all of these situations.
39. In many states, dissolution that is nonjudicial may be brought about when:
a. all the shareholders agree to dissolve, even without action by the board.
b. the board of directors agrees to dissolve.
c. the creditors petition the court.
d. the business of the corporation becomes obsolete.
40. A corporation may acquire all of the assets, including goodwill, of another corporation and combine them with its
own through:
a. a purchase of a controlling stock interest in such a corporation.
b. a merger or consolidation with such a corporation.
c. a purchase or lease of such assets.
d. All of these.
41. The combination of two or more corporations’ total assets, title to which is vested in one of them, which is known as
the surviving corporation, is a:
a. dissolution.
b. liquidation.
c. consolidation.
d. merger.