Ontario Barrister and Solicitor Practice Exam

What constitutes a share consolidation?

1. Merging two companies' shares into one.

2. Splitting shares into smaller units.

3. A going private transaction inflating share values such that minority shareholders receive cash.

4. Increasing the share capital without issuing new shares.

The correct answer is: A going private transaction inflating share values such that minority shareholders receive cash.

A share consolidation refers to a company reducing the number of shares outstanding and increasing the value of each share. Option A is incorrect because merging shares into one would not result in a reduction of outstanding shares. Option B is incorrect because splitting shares into smaller units would result in an increase in the number of shares, not a decrease. Option D is also incorrect because increasing share capital would result in the issuance of new shares, not a reduction in outstanding shares. A going private transaction does not necessarily involve merging two companies and it does not involve splitting shares or issuing new shares. Therefore, option C is the most accurate answer.