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AICPA CPA-Business Exam - Topic 2 Question 128 Discussion

Generally, a merger of two corporations requires:
A) That a special meeting be held and that notice and copy of the merger plan be given to all stockholders of both corporations.
B) Unanimous approval of the merger plan by the stockholders of both corporations.
C) Unanimous approval of the merger plan by the boards of both corporations.
D) That all liabilities owed by the absorbed corporation be paid before the merger.

AICPA CPA-Business Exam - Topic 2 Question 128 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 128
Topic #: 2
[All CPA-Business Questions]

Generally, a merger of two corporations requires:

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Suggested Answer: A

Choice 'a' is correct. The merger of two corporations requires that a special meeting be held and that notice and copy of the merger plan be given to all stockholders of both companies. A merger generally requires the approval of both the directors and stockholders.

Choice 'b' is incorrect. While the stockholders' approval is required, in most states a majority vote is required; no state requires a unanimous vote.

Choice 'c' is incorrect. While the board's approval is required, a majority vote and not a unanimous vote is required.

Choice 'd' is incorrect. There is no requirement that all liabilities owed by the absorbed corporation be paid before the merger because the merged corporation becomes obligated to pay such liabilities upon the merger.


Contribute your Thoughts:

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I remember discussing liabilities in class, so option D seems relevant, but I’m unsure if they have to be paid off before the merger or if they can be handled afterward.
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Horace
5 days ago
I practiced a similar question, and I believe option C is important since both boards need to agree, but I can't recall if it's unanimous.
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Selma
10 days ago
I'm not entirely sure, but I feel like option B might be too strict. I thought some mergers could be approved with a simple majority.
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Herman
15 days ago
I think option A sounds right because I remember something about notifying stockholders before a merger.
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