CORPORATIONS - POWER OF MAJORITY STOCKHOLDERS TO REORGANIZE BY TRANSFER OF ASSETS TO NEW CORPORATION IN EXCHANGE FOR STOCK

A private corporation is solvent and prosperous but is nearing the time when its charter will expire. The directors call a stockholders' meeting at which the majority of the stockholders vote: first, to form a new corporation and, second, to transfer all the assets of the old corporation to the new corporation in consideration for the entire capital stock of the new corporation and the assumption by the new corporation of all liabilities of the old corporation. The plan further provides that the old corporation is then to be dissolved, and the stock of the new corporation is to be distributed pro rata to the stockholders of the old. The plan is carried out as contemplated.

Plaintiff, a minority stockholder who has refused to consent to a renewal of the charter dissents to the plan, refuses to receive his share of the stock in the new corporation and brings a bill in equity to set aside the transfer and to have the old corporation liquidated by a receiver.