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Farris v. Glen Alden Corp. - 393 Pa. 427, 143 A.2d 25 (1958)

Rule:

To determine properly the nature of a corporate transaction, the court must refer not only to all the provisions of the agreement, but also to the consequences of the transaction and to the purposes of the provisions of the corporation law said to be applicable. 

Facts:

Plaintiff, a dissenting shareholder, brought claims brought under § 908A of the Pennsylvania Business Corporation Law against defendant corporation seeking to prevent the execution of a reorganization agreement. The basis of plaintiff's complaint was that the reorganization agreement was actually a merger between defendant corporation and another company and that proper notice was not given to the shareholders of their right to dissent and claim fair value for their shares. Defendant corporation challenged the decree of the Court of Common Pleas of Luzerne County (Pennsylvania) that denied its motion for judgment on the pleadings, contending that the agreement was a purchase of corporate assets of which shareholders had no right of dissent or appraisal.

Issue:

Did the rights of the dissenting shareholder accrue when the "Reorganization Agreements" were executed by the officers of Glen Alden Corporation and List Industries Corporation, and approved by the shareholders of the former company?

Answer:

Yes

Conclusion:

On appeal, the appellate court determined that the nature of the agreement proposed a merger because it fundamentally changed the character of defendant corporation and the interest of the plaintiff as a shareholder therein. Since plaintiff would be forced to give up his stock in one company and accept that of another, the shareholder was entitled to notice.

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