Reference no: EM132214143
Jeannie's Garden Equipment, Inc. is a corporation that sells gardening tools. The board of directors makes a proposal for voluntary dissolution of the company and submits it to the shareholders at a shareholders' meeting for approval. The proposal is approved.
Which of the following statements is true?
a. A court would likely hold that the shareholders did not need to be consulted for voluntary dissolution of the corporation to take place.
b. A court would likely hold that a corporation could only be dissolved by the shareholders' unanimous decision to start the proceedings.
c. A court would likely hold that this was a proper and legal method of voluntary dissolution of the corporation.
d. A court would likely hold that this was not a proper and legal method of voluntary dissolution of the corporation
2. Bits & Bridles Company was owned by the Miller family, which included Hank and Edith Miller and their son, Samuel. When the corporation was established, the Millers estimated that they would require a minimum of $20,000 per year in operating costs. They had only $10,000 when they started the corporation and did nothing to raise further funds. The business operated at a loss for more than five years. Eventually, Bits & Bridles was sued by an unhappy creditor who had not been paid. The creditor sought to have the Millers held individually responsible for the debt.
In this situation, how would a court rule in terms of holding the Millers personally responsible for the company's unpaid debt?
a. The court would be unlikely to pierce the corporate veil because the corporation had not violated any rules.
b. The court would be is likely to pierce the corporate veil because the corporation was never set up to make a profit.
c. The court would be is likely to pierce the corporate veil because the corporation failed to have regular meetings.
d. The court would be unlikely to pierce the corporate veil because the corporation was a close corporation.
3. Marcy owned 500 common stock shares in Ready Runners, Inc. According to the state laws, shareholder approval must be obtained for any mergers of corporations. When Ready Runners, Inc. decided to merge with Joyful Joggers, Inc., there was no consultation of the shareholders. Marcy sued the corporation, claiming Ready Runners shareholders should have been consulted. How would a court rule on Marcy's claim for shareholder approval of the merger?
a. Marcy had a right to vote on a merger because she owned preferred stock.
b. Marcy had no right to vote on a merger because she did not own preferred stock.
c. Marcy no right to vote on a merger because she owned common stock.
d. Marcy had a right to vote on a merger because she owned common stock.
4. In the course of her employment as a machine operator, Lori Ann Nilsson was injured by a pipe and tube cutoff machine. This machine had been manufactured and sold by Continental Machine Co. before 1978.
In 1986, Fredor Corp. purchased all of the production assets of Continental, including the pipe and tube machine product line. Fredor then formed Continental Machine Manufacturing Co. (CMM). The assets purchased from Continental were transferred to CMM, and CMM's product lines were the same as Continental's had been. The shareholders of Continental did not become shareholders, officers, or employees of Fredor or CMM. Most of the employees of Continental became employees of CMM, however. There was no evidence that the transaction was undertaken for a fraudulent purpose, nor did Fredor or CMM agree to assume Continental's liabilities.
After the sale of assets, Continental continued to exist, but it had no productive assets. Continental continued to own the building in which the assets were located and leased that same building to CMM. Nilsson brought a product liability lawsuit against CMM. CMM claimed that it had merely purchased Continental's assets and had not assumed its liabilities.
Was CMM liable for Nilsson's injuries? Why or why not?
a. Yes. The court most likely held that CMM was liable for Nilsson's injuries, because Continental's employees became CMM employees.
b. Yes. The court most likely held that CMM was liable for Nilsson's injuries, because CMM's purchase of Continental's assets constituted a de facto merger.
c. No. The court most likely held that CMM was not liable for Nilsson's injuries, because there was a de jure corporation.
d. No. The court most likely held that CMM was not liable for Nilsson's injuries, because there was no continuity of ownership between Continental and CMM.