Ontario Barrister and Solicitor Practice Exam

What is a going private transaction?

1. A public company is dissolved.

2. A merger between two private companies.

3. A transaction that terminates a security holder’s interest without consent and without equivalent value.

4. A public company becomes a government entity.

The correct answer is: A transaction that terminates a security holder’s interest without consent and without equivalent value.

A going private transaction is a corporate action where a company that is publicly traded seeks to become a private company. This is typically achieved by buying back shares from the public shareholders, which results in the company being owned by a select group of investors rather than the general public. Option A is incorrect because a public company does not necessarily dissolve in a going private transaction. The company can continue to operate privately. Option B is incorrect because a going private transaction does not involve a merger between two private companies. It specifically refers to a publicly traded company becoming privately owned. Option D is incorrect because a going private transaction does not involve a public company becoming a government entity. It is solely focused on the company transitioning from a publicly traded to a privately owned entity. Therefore, option C is the correct answer as it accurately defines a going private transaction as a corporate action that terminates a security holder's interest without their