Future Business Leaders of America (FBLA) Business Law Practice Exam

What occurs during a stock acquisition?

1. Dividends are issued to shareholders

2. Control of a corporation is taken over

3. A company merges with another

4. Stock prices are regulated

The correct answer is: Control of a corporation is taken over

During a stock acquisition, control of a corporation is taken over by an acquiring company or party that purchases the majority of its shares. This type of transaction involves the acquiring entity gaining a significant ownership interest, usually enough to influence or determine the corporation's policies, management decisions, and strategic direction. The acquiring company effectively gains the right to vote on corporate matters and can often change the board of directors or introduce new operational strategies. This difference in control is crucial in distinguishing stock acquisitions from other corporate actions, such as mergers, where two companies combine to form a new entity, or the issuance of dividends, which relates to the distribution of profits to shareholders rather than control. Moreover, stock prices being regulated pertains to market regulations, which do not directly relate to the act of acquiring stock and controlling a corporation. Thus, stock acquisition specifically focuses on the transfer of ownership and control rather than the operational aspects of the business or regulatory issues.