BUSINESS LAW TodaySTANDARD EDITION TEXT & SUMMARIZED CASES, 12e

Roger LeRoy Miller

Miller, Business Law Today, Comprehensive Edition: Text & Cases, 12th Edition. © 2020 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Corporate Mergers, Takeovers, and Termination

Chapter 35

Chapter Outline

35-1 Merger, Consolidation, and Share Exchange

35-2 Purchase of Assets

35-3 Takeovers

35-4 Corporate Termination

35-5 Major Business Forms Compared

Learning Objectives

What are the basic differences between a merger, a consolidation, and a share exchange?

Under what circumstances is a corporation that purchases the assets of another corporation responsible for the liabilities of the selling corporation?

What actions might a target corporation take to resist a takeover attempt?

What are the two ways in which a corporation can be voluntarily dissolved?

35-1 Merger, Consolidation, and Share Exchange (slide 1 of 4)

35-1a Merger

Merger: The legal combination of two or more corporations in such a way that only one corporation (the surviving corporation) continues to exist.

One of the Firms Survives

It Inherits All Legal Rights and Obligations of the Other Firm

35-1 Merger, Consolidation, and Share Exchange (slide 2 of 4)

35-1b Consolidation

Consolidation: The legal combination of two or more corporations in such a way that the original corporations cease to exist, and a new corporation emerges with all their assets and liabilities.

A New Corporation Is Formed

It Inherits All Rights and Liabilities of Both Predecessors

35-1 Merger, Consolidation, and Share Exchange (slide 3 of 4)

35-1c Share Exchange

Share exchange: A transaction in which some or all of the shares of one corporation are exchanged for some or all of the shares of another corporation, but both corporations continue to exist.

35-1d Merger, Consolidation, and Share Exchange Procedures

Board of directors of each corporation must approve merger or consolidation plan.

Plan must specify any terms and conditions of merger. It also must state how value of shares of each merging corporation will be determined and how they will be converted into shares or other securities, cash, property, or other interests in another corporation.

Majority of shareholders of each corporation must vote to approve plan at shareholders’ meeting. If any class of stock is entitled to vote as separate group, majority of each separate group must approve plan.

Once plan is approved by directors and shareholders of both corporations, surviving corporation files plan with appropriate official, usually secretary of state.

When state formalities are satisfied, state issues a certificate of merger to surviving corporation or certificate of consolidation to newly consolidated corporation.

35-1 Merger, Consolidation, and Share Exchange (slide 4 of 4)

35-1e Short-Form Mergers

Short-form merger: A merger that can be accomplished without the approval of the shareholders of either corporation because one company (parent corporation) owns at least 90 percent of the outstanding shares of each class of stock of the other corporation (subsidiary corporation).

35-1f Shareholder Approval

35-1g Appraisal Rights

When Appraisal Rights Apply

Procedures

35-2 Purchase of Assets

35-2a When Shareholder Approval May Be Required

35-2b Successor Liability in Purchase of Assets

When the purchasing corporation impliedly or expressly assumes the seller’s liabilities.

When the sale transaction is actually a merger or consolidation of the two companies.

When the purchaser continues the seller’s business and retains the same personnel.

When the sale is fraudulently executed to escape liability.

Case Example 35.3 American Standard, Inc. v. OakFabco, Inc. (2010)

35-3 Takeovers (slide 1 of 2)

The acquisition of control over a corporation through the purchase of a substantial number of the voting shares of the corporation is a takeover.

35-3a Tender Offers

Tender offer: An offer made by one company directly to the shareholders of another (target) company to purchase their shares of stock.

35-3 Takeovers (slide 2 of 2)

35-3b Responses to Takeover Attempts

Business Judgment Rule

An Example—The Poison Pill Defense

With this defensive measure, a board gives shareholders the right to buy additional shares at low prices.

35-4 Corporate Termination (slide 1 of 2)

Dissolution is the formal disbanding of a corporation. It can be brought about by the following:

An act of the state.

An agreement of the shareholders and the board of directors.

The expiration of a time period stated in the certificate of incorporation.

A court order.

35-4 Corporate Termination (slide 2 of 2)

35-4a Voluntary Dissolution

By shareholders’ unanimous vote to initiate dissolution proceedings

By proposal of board of directors submitted to shareholders at shareholders’ meeting

35-4b Involuntary Dissolution

The state can also dissolve a corporation in certain circumstances.

35-4c Winding Up

35-5 Major Business Forms Compared

Sole Proprietorship

Partnership

Corporation

Limited Partnership

Limited Liability Company

Limited Liability Partnership

Miller_BLTC12E_PPT_ch35.pptx

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