Ontario Barrister and Solicitor Practice Exam

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What is the difference between a squeeze out and a share consolidation?

A squeeze out involves a merger; a share consolidation does not.
A share consolidation is carried out by arrangement and not amalgamation.
A squeeze out targets preferred shares; a share consolidation targets common shares.
There is no legal difference between the two.

The correct answer is: A share consolidation is carried out by arrangement and not amalgamation.

A share consolidation and a squeeze out are both methods used by companies to reduce the number of outstanding shares. The main difference between the two is the way in which they are carried out. A share consolidation involves combining multiple shares into one, while a squeeze out involves merging one company's shares into another's. This means that A and C are incorrect as they suggest a difference between the types of shares targeted, when in fact both methods can be used for any type of shares. Additionally, D is incorrect as there is a clear legal difference between a share consolidation, which is carried out by arrangement, and a squeeze out, which is a type of merger. Therefore, B is the correct answer as it correctly explains the difference in the methods used for share reduction.