Quiz 41: Mergers and Takeovers
Corporate Acquisitions: Under option (1), Faraday acquires all of the stock and assets of Firebrand. This is called a merger where Faraday is the surviving corporation and possesses all of the rights, privileges, and powers of itself and Firebrand. In addition: 1. Faraday would acquire all of Firebrand's property and assets without the necessity of a formal transfer. 2. Faraday would also inherit Firebrand's preexisting legal rights, debts and obligations. 3. Additionally, Faraday's articles of incorporation would be amended to include any changes that are stated in the articles of merger. Under option (2), both corporations combine to form a new corporation, Farabrand. This is called consolidation where a new corporation emerges from the combination of corporations that cease to exist upon combination. In addition: 1. Farabrand would inherit all of the rights, privileges, and powers previously held by Faraday and Firebrand. 2. Title to any property and assets owned by either corporation passes to Farabrand without a formal transfer. 3. Farabrand assumes liability for all debts and obligations owed by Faraday and Firebrand. 4. The articles of consolidation take the place of Faraday's and Firebrand's original corporate articles and are thereafter regarded as Firebrand's corporate articles. With either option, the surviving corporation or newly formed corporation will issue shares or pay some fair consideration to the shareholders of the corporation or corporations that cease to exist.
B has appraisal rights as a minority shareholder dissenting to the merger. The shareholders of each corporation subject to a merger are required to authorize, by vote in the undergoing shareholders' meeting. As per the relevant and applicable statues, two-thirds approval of the outstanding shares of voting stock is required. If a shareholder disapproves of a merger but is outvoted by the other shareholders, the dissenting shareholder should not be forced to become the corporation's unwilling owner than the one in which he or she originally invested. It is the shareholder's appraisal right to get entitled to the fair value of the number of shares held on the date of the merger.
Corporate Merger: Alir should have received notice from Ajax of the merger approval meeting. She would also have received notice of her right to dissent. If the merger is approved, Alir would be paid a fair value for her shares Under the law, Zeta must pay the fair value of her shares according to her appraisal rights. Fortunately, Alir will be paid the value of the share before the vote for the merger took place, as would be fair value in this situation. Alir will receive $200,000 for her 10,000 Ajax shares.