Law Questions
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1.
A. Action Corporation purchases all of the assets of the Bell Corporation for cash. After the purchase, a creditor of the Bell Corp oration asserts that by buying the assets of the Bell Corporation, Action has automatically assumed all of Bell's obligations. Is he correct? Explain.
B. Dicton Corporation is merged into the Craig Corporation. One of Dicton's creditors was not paid before the merger occurred, The creditor demands payment from the Board of Directors of the Craig Corporation. The board says that because the Dicton Corporation no longer exists, they have no obligation to the creditor. Who is right? Explain.
2.
Nova, Inc., sought to sell a new issue of common stock. It registered the issue with the Securities and Exchange Commission but included false information in both the registration statement arid the prospectus. The issue was underwritten by Barney and Sons and was sold in its entirety by Smith, Jones, and Brown, Inc., a securities broker-dealer. You purchased 500 shares at $6 per share. Three months later the falsity of the information contained in the prospectus was made public and the price of the shares fell to $1 per share- The following week you brought suit against Nova, Inc., Barney and Sons, and Smith, Jones and Brown, Inc. under the Securities Act of 1933.
A. Who, if anyone, is liable under the acts?
B. What defenses, if any, are available to the various defendants?
3.
A. Wurst and Wurst is the accounting firm that has been used by the Intercontinental Bank for over twenty years. Alfred, a Wurst partner, was approached by Benny at a cocktail party. Benny asked about the bank's stability. Although Alfred knew that the bank's stock was overvalued because of some loans to third world countries, he felt a considerable amount of loyalty to the bank for being a good customer of his accounting firm. Alfred told Benny that Wurst had just finished an audit of the bank, and that the bank was as sound as the rock of Gibralter. The next day Benny bought 1,000 shares of Intercontinental. One month later, the bank's losses become the subject of a major financial scandal. Benny is mad and wants to sue. Does Benny have a case? Explain.
B. Alfred also prepared a registration for the first issuance of stock of the Incellmed Corporation. Alfred took the assignment very seriously and spent a great deal of time preparing the statement. Two years after the statement, was filed, the SEC began to investigate the company and claims that the information in Alfred's statement was misleading because some of the information given to him by the corporation was false. Alfred had tried to verify the information but was not able to do so. An investor is now suing Alfred claiming that he violated the 1933 Act. Is Alfred liable? Explain.
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1.
A. Action Corporation purchases all of the assets of the Bell Corporation for cash. After the purchase, a creditor of the Bell Corp oration asserts that by buying the assets of the Bell Corporation, Action has automatically assumed all of Bell's obligations. Is he correct? Explain.
This is not correct. By purchasing all the assets of Bell Corporation, Action Corporation has not purchased Bell Corporation. The transaction for the assets is not a transaction for all the shares of the company. So Action does not assume any liability of Bell Corporation. The claim of the creditor is wrong.
B. Dicton Corporation is merged into the Craig Corporation. One of Dicton's creditors was not paid before the merger occurred, The creditor demands payment from the Board of Directors of the Craig Corporation. The board says that because the Dicton Corporation no longer exists, they have no obligation to the creditor. Who is right? Explain.
The creditor is right.
The law is that the surviving entity will be responsible and liable for all the liabilities and obligation of each limited liability company and other business entity that is a party to the merger. Craig Corporation is responsible for the liabilities of Diction Company..
2.
Nova, Inc., sought to sell a new issue of common stock. It registered the issue with the Securities and Exchange Commission but included false information in both the registration statement arid the prospectus. The issue was underwritten by Barney and Sons and was sold in its entirety by Smith, Jones, and Brown, Inc., a securities broker-dealer. You ...
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