The Readers Digest Association (RDA) formulated a recapitalization plan that called for it to: (a) Purchase all

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The Readers’ Digest Association (RDA) formulated a recapitalization plan that called for it to: 

(a) Purchase all the shares of its Class B voting stock at a premium ratio of 1.24 to 1, with the newly issued common stock at one vote per share;

(b) Recapitalize each share of the Class A nonvoting stock into one share of the new voting common stock. 

A group of Class A nonvoting shareholders opposed implementation of the recapitalization plan. RDA responded that it had established a Special Committee to evaluate the fairness of the transaction. Although the committee never tendered an opinion on whether the recapitalization plan was fair to the Class A shareholders in particular, it did conclude that the plan would benefit the corporation in general. Should the court issue a preliminary injunction against implementation of the recapitalization plan? Explain.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Law for Business

ISBN: 978-1259722325

13th edition

Authors: A. James Barnes, Terry M. Dworkin, Eric L. Richards

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