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CHARACTERISTICS OF FUNDAMENTAL CORP. CHANGE
1) Who must approve?
2) What is the right of appraisal?
1) DIRECTORS & S/H must approve, and notify NY Dep't of State
2) RIGHT TO FORCE CORP. to buy dissenting shareholder's shares at FMV
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CHARACTERISTICS OF FUNDAMENTAL CORP. CHANGE
What triggers a S/H's right of appraisal?
- certain AMENDMENTS to certificate of incorporation
- CONSOLIDATIONS
- MERGERS into another corp.
- transfers of SUBSTANTIALLY ALL ASSETS
- corp. shares acquired in an EXCHANGE of SHARES
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CHARACTERISTICS OF FUNDAMENTAL CORP. CHANGE
What is needed to perfect the right to appraisal? (3 steps)
1) Before S/H vote, file a written OBJECTION and INTENT TO DEMAND PAYMENT
2) ABSTAIN from vote, or VOTE AGAINST the fundamental change
3) after the vote, make a written DEMAND to be BOUGHT OUT
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AMENDMENT TO CERTIFICATE OF INCORP.
1) What amendments to the certificate require S/H approval?
2) How much S/H approval is required?
3) Rights of appraisal available?
1) AMENDMENTS REQUIRING APPROVAL
- changes that affect S/H rights as to voting, preemptive share purchases, redemptions, preferences
- basically, all changes OTHER THAN office location, registered agent for service of process
2) MAJORITY of shares ENTITLED TO VOTE (as well as Director approval)
3) APPRAISAL RIGHTS AVAILABLE if amendments affect one of the following
- preferences (distributions)
- redemption rights
- preemptive rights
- voting rights
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MERGERS & CONSOLIDATIONS
1) Director and S/H approval needed?
2) Short-form mergers?
3) Rights of appraisal available?
4) What does surviving corporation succeed to?
1) YES—as to EACH corporation
- Directors must adopt plan of merger/consolidation
- S/Hs must approve plan if not a short-form merger (majority of shares entitled to vote)
2) S/H APPROVAL NOT NEEDED where parent corp. owns ≥ 90% of corp.
3) YES—but ONLY for former shareholders of disappearing corporation
4) ALL RIGHTS & LIABILITIES of the disappearing corepresent.
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TRANSFERS OF (SUB) ALL ASSETS
1) Fundamental change for which corporation?
2) Must each BOD authorize?
3) Must the S/Hs of each corp. approve?
4) Rights of appraisal?
5) Does acquiring corp. succeed to seller's liabilities?
1) Selling corp. only
2) Yes, BODs for each corp. must authorize
3) Only the Selling Corp's S/Hs need to approve (by majority of shares entitled to vote
4) Only Selling Corp. S/Hs get appraisal rights
5) Generally, no (because the selling corporation is still around) UNLESS
- deal provides otherwise
- acquiring corp. is a MERE CONTINUATION of the seller
- deal entered FRAUDULENTLY to escape seller's obligations
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DISSOLUTION***
Who can approve a VOLUNTARY dissolution?
MAJORITY of shares entitled to vote (no BOD approval is necessary)
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DISSOLUTION***
What is needed for an INVOLUNTARY dissolution?
1) Management is behaving badly (20% or more of voting shares in a CLOSE CORP. may petition). Bad activities include illegal, fraudulent or OPPRESSIVE activities, or the waste, diversion, or looting or assets
2) Deadlock: directors TOO DIVIDED to manage corp., or S/H too divided to elect directors AND dissolution would be beneficial (at least 1/2 of shares entitled to vote may petition)
3) S/H unable to elect directors for 2 annual meetings (any S/H may petition)
4) ASSETS are INSUFFICIENT to satisfy liabilities, AND dissolution would be beneficial to S/Hs (BOD or majority of shares entitled to vote may petition)
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DISSOLUTION***
How to avoid dissolution
The corporation or non-complaining S/Hs may
- REPURCHASE petitioner's stock
- at FMVw/i 90-DAYS of petition
- on terms approved by the COURT
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