Book Opener

CHAPTERASSESSMENTSection 30.1 Government Regulation of aCorporation● The federal government derives its power toregulate business from the commerce clause ofthe U.S. Constitution. The federal governmentcan regulate any business activity that affectsinterstate commerce, even one that occurs completelywithin the boundaries of a single state.● Congress passed the Securities Act of 1933 andthe Securities Exchange Act of 1934 to protectcorporate investors by ensuring that informationregarding securities is available before purchase.These acts protect purchasers by enabling themto learn the true nature of securities they buy andby providing a way to discover fraud and unfairpractices.● In 1890, Congress passed the Sherman AntitrustAct that declared monopolies to be illegal. Inaddition, Congress passed the Clayton Act in1914, which made specific practices that fosterthe formation of monopolies illegal. To combatunfair competition, the Federal Trade CommissionAct was passed to protect a business from thewrongful acts of unfairly competing companies.The Robinson-Patman Act made it illegal forcompanies to sell goods at lower prices to highvolumepurchasers without offering the samediscount to smaller purchasers.● Among the federal acts that regulate energy andthe environment are the Energy ReorganizationAct and the National Environmental Policy Act.The Energy Reorganization Act created theNuclear Regulatory Commission (NRC). Thecommission regulates the licensing, constructing,and opening of nuclear reactors. The NRC alsohandles the possession, use, transportation, anddisposal of nuclear material. Under the termsof the National Environmental Policy Act, adetailed statement explaining the environmentalconsequences must precede any major federalgovernment action that affects the quality of theenvironment.Section 30.2 Corporate Expansion andDissolution● In a merger, one corporation continues itsexistence and absorbs another corporation,which gives up its corporate identity. In contrast,a consolidation of two or more companies is theformation of a new corporation. In an assetacquisition one corporation agrees to purchasethe assets or property of a second corporation. Astock acquisition occurs when an individual or acorporation purchases enough shares in acorporation to control it.● Before a stock acquisition, the buyer makes anoffer to shareholders of a corporation to buy anumber of shares at a specified price. A tenderoffer is also referred to as a takeover bid, and it isusually communicated to the prospective sellingshareholders through a newspaperadvertisement.● A suitor is the party making the tender offer tobuy shares to achieve a stock acquisition. Thetarget is the corporation that is considered fortakeover by the suitor.● A corporation may dissolve itself voluntarily bya unanimous vote of all of its shareholders. Thedirectors may also vote its end with the supportof two-thirds of the shareholders. In contrast, thestate can bring an action against a corporationfor repeated wrongdoing and force its dissolution.In addition, a shareholder can bring an actionto dissolve a corporation to protect the shareholders’rights from the consequences ofdestructive board decisions.● The members of a limited liability company caninitiate its dissolution by unanimous agreement,by the expulsion of a member, or by a member’sbankruptcy and withdrawal from the company.662 Unit 6: Starting a Business