Chapter Seven. Rights of Shareholders 74 results (showing 5 best matches)
- The books and records of a corporation fall into several basic categories—shareholder lists; minutes of board meetings, shareholders’ meetings, board committees, and officer committees; financial records, such as books of account and monthly, quarterly, and annual period summaries; and business documents, such as contracts, correspondence, and office memoranda.
- b) Summary Judgment
- A recent decision held that summary judgment should not be granted unless the directors have shown how they chose the SLC and supply some evidence of the requisites of independence and adequate procedures. [
- Legal Ethics Summary]
- Civil Procedure Summary.)
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Summary of Contents 4 results
Chapter Eight. Capitalization of the Corporation 32 results (showing 5 best matches)
- This portion of the summary deals primarily with so-called “primary” stock sales;
- State statutes regulating the issuance of securities are known as “blue sky” laws (their constitutionality resting on the legitimate state interest in preventing “schemes which have no more basis than so many feet of blue sky”). [ 242 U.S. 539 (1917)] Every state has some type of blue sky law; many have special regulatory bodies charged with administration and enforcement of these laws. There are three basic types of blue sky laws (states combining the features of more than one type):
- State statutes regulating the issuance of shares are known as “blue sky” laws. Some impose civil or criminal penalties for fraud in connection with the issuance of shares. All require that persons who sell securities be licensed. The most comprehensive blue sky laws require that the stock be registered with the appropriate state official.
- Some statutes simply allow this problem to be resolved in the articles. [Del. Gen. Corp. Law § 102(b)] Others authorize the board to apportion the new issues so as to preserve “as nearly as practicable” the relative rights of the different classes—and make the board’s apportionment final absent fraud or bad faith. [N.Y. Bus. Corp. Law § 622(d)]
- Both state and federal laws have been enacted regulating the issuance of securities. Because federal laws expressly do
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Capsule Summary 38 results (showing 5 best matches)
- Capsule Summary
- Both common law and Section 16(b) liability run against insiders and in favor of the corporation. However, unlike Section 16(b), the common law theory applies to
- Common law liability and liability under rule 10b-5 is similar except that under the common law recovery runs to the corporation (not the injured purchaser or seller) and there is no purchaser or seller requirement.
- blue sky laws, civil or criminal sanctions are imposed for misrepresentation. Under blue sky laws, sellers of securities must register with the state and submit certain information. Under blue sky laws, stock must be registered with an appropriate state officer prior to issuance. Registration may be by
- A limited liability company (“LLC”) is a non-corporate business entity created under highly variable statutes that combine elements of corporation and partnership law. An LLC’s owners (
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Chapter Ten. Fundamental Changes in Corporate Structure 40 results (showing 5 best matches)
- If the plan of merger must be approved by the shareholders, the corporation must notify each shareholder, whether or not entitled to vote, of the shareholders’ meeting at which the plan is to be submitted for approval. The notice must indicate that a purpose of the meeting is to vote on the plan, and the plan or a summary of the plan must be included. If a shareholder intends to seek appraisal rights, he generally must give the corporation notice of his intent to do so (
- In the case of general laws that apply only to the corporation’s business activities, as opposed to the rights and duties of shareholders, it is clear today that the state’s power to change the law is not limited by For example, the state may enact general laws restricting or prohibiting certain businesses even though such businesses were proper at the time the corporation was originally organized, and even though the law affects a corporation incorporated prior to the adoption of a reserved power clause.
- When a merger becomes effective, the disappearing corporation ceases to exist. The survivor succeeds, by operation of law, to all of the disappearing corporation’s rights, assets, and liabilities. [Del. Gen. Corp. Law § 259; MBCA § 11.06; Cal. Corp. Code § 1107(a)]
- Because the survivor succeeds to the disappearing corporation’s rights, assets, and liabilities by operation of law, the disappearing corporation’s contracts—even contracts that are not ordinarily assignable and, indeed, even contracts that are not assignable by their terms—are generally taken over by the survivor by operation of law.
- In response, the states amended their general corporation laws to include “reserved power clauses,” , provisions reserving to the state the power to alter, amend, or repeal its corporation laws as regards corporations incorporated after the adoption of the provisions. These reserved power clauses are deemed to be part of the “contract” between the state and the corporation and are therefore given effect by the courts.
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Chapter Six. Fraud in Securities Transactions 39 results (showing 5 best matches)
- to include securities held by members of a director’s, officer’s or more-than-10% shareholder’s immediate family sharing the same household, but this presumption of beneficial ownership may be rebutted. [Exchange Act Rule 16a-1(a)(2)(ii)(A)] “Immediate family” means “any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and … adoptive relationships.” [Exchange Act Rule 16a-1(e)]
- As seen earlier, in some jurisdictions investors can maintain a common law action for deceit, although such cases are not possible when trades occur through the facilities of an exchange. The common law action for deceit required privity between the investor and the trading insider.
- Common law liability has so far been imposed only against corporate insiders. It is still unclear whether courts would allow recovery under the common law theory against noninsiders (such as tippees), which may be allowed under Rule 10b-5 and Rule 14e-3 under certain conditions (
- , precludes) state-law class actions relating to securities fraud in connection with the purchase or sale of securities listed on a national stock exchange. Class action is defined as a suit on behalf of more than 50 persons. The Act is complex and includes a number of exceptions. Broadly speaking, however, the Act causes, upon the defendant’s motion, removal from state court to federal court of a class action brought under state law if: (i) the action is based on a misrepresentation or omission of a material fact in connection with the purchase or sale of a security that is listed on a national stock exchange; (ii) the defendant is alleged to have used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of such a security; and (iii) damages are sought on behalf of more than 50 persons or common questions of law or fact predominate. Once removed, the federal court will apply federal law in resolving the securities claims. Thus, in...
- Several modern cases have held that as a matter of common law, insider trading 584 F.2d 186 (7th Cir. 1978)—contra] Like liability under section 16(b), common law liability runs against insiders and in favor of the corporation. In other respects, however, common law liability differs from liability under Section 16(b):
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Chapter Eleven. Conflict of Laws Principles 9 results (showing 5 best matches)
- Conflict of laws issues rarely arise on Corporations exams. However, you should remember that all questions concerning the internal affairs of the corporation are decided according to the law of the Also keep in mind that a state may refuse to apply that law if it violates local public policy.
- No matter where the litigation occurs, the general choice of law rule is that all questions concerning the of a corporation are decided according to the law of the state in which it was
- A California court has refused to permit a Delaware corporation to solicit shareholder approval for an amendment to its articles of incorporation that would have eliminated cumulative voting for directors. Even though such an amendment would have been permitted under Delaware law, the California court held that California had a legitimate interest in the matter because the corporation’s principal business was in California and many of its shareholders resided there. Hence, the court insisted upon applying its own local laws prohibiting the amendment. [ 191 Cal. App. 2d 399 (1961)] Recent decisions, however, have split on the reach of such laws. [Compare 871 A.2d 1108 (Del. 2005)—refusing to apply California law, with 206 Cal. App. 4th 351 (2012)—applying California law to Delaware Corporation]
- of the corporation’s business (average of its property, payroll, and sales) is done within the state and more than half of its shareholders have in-state addresses (applicable under only California law), it is treated as a “pseudo-foreign” corporation. Such corporations are subject to the foreign state’s law with respect to such matters as election and removal of directors, directors’ standard of care and liability for unlawful distributions, shareholder rights to cumulative voting and inspection of records, shareholder approval and dissenters’ rights in the case of reorganizations, and required corporate records and reports to shareholders. [Cal. Corp. Code § §2115(a), (b), (e); N.Y.Bus.Corp. Law §§ 1317–1320]
- 1. Law of State of Incorporation Applies
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Chapter Two. Organizing the Corporation 11 results (showing 5 best matches)
- Under early English and American law, corporations were created by a “special charter” granted by the King or the legislature. Today, with rare exceptions, corporations are created by compliance with a “general corporation law” or “business corporation law” of the state in which formation is sought.
- Eastman Kodak Co. owned all the stock of Atex, Inc. An employee of Atex sued for injuries due to a product manufactured by Atex and sought to hold Kodak liable. The court affirmed a summary judgment for Kodak, emphasizing that Atex followed corporate formalities (
- 1. General Corporation Laws
- Typically, a corporation is organized by the execution and filing of a “certificate” or “articles” of incorporation. (The nomenclature varies from state to state.) The articles of incorporation are executed by one or more “incorporators.” What must and what may go into the articles of incorporation depends on state law. The Model Business Corporation Act (“Model Act”) is fairly typical.
- set forth the names and addresses of the individuals who are to serve as the initial directors, and provisions, not inconsistent with law, regarding:
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Chapter Five. Management and Control 42 results (showing 5 best matches)
- Under the New York statute, if a corporation’s stock is not publicly traded, a certificate provision that would otherwise be prohibited by law as improperly restrictive of the board’s discretion is valid if authorized by all shareholders. [N.Y. Bus. Corp. Law § 620]
- [Del. Gen. Corp. Law §§ 342, 343] There must also be “noted conspicuously,” on the share certificate, of any qualifications that must be met by persons in order to be entitled to be holders of the corporation’s shares and any provision in the articles of incorporation that confers management powers on the shareholders, rather than the directors ( below). [Del. Gen. Corp. Law § 351]
- In contrast to the common law, many statutes permit the shareholders to remove a director unless otherwise provided in the articles of incorporation. [Del. Gen. Corp. Law § 141(k); MBCA § 8.08]
- The director’s right to inspect corporate records is usually governed by common law principles. However, a few states have , Cal. Corp. Code § 1602; Del. Gen. Corp. Law § 220(d)], courts may be less inclined to read in any exceptions.
- Most courts abandoned the strict common law rule in favor of the more liberal position that contracts and dealings in which a director has a personal financial interest are voidable by the corporation only where the contract is found to be to the corporation considering all the relevant circumstances. Today in most states the issue is governed by statutes based in large part on the more modern common law approach.
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Chapter Four. Powers of the Corporation 13 results (showing 5 best matches)
- [Del. Gen. Corp. Law § 122] The Delaware statute also provides that a certificate of incorporation may simply state that the purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under Delaware law. [Del. Gen. Corp. Law § 102(a)(3)] As more and more corporations use this kind of sweeping purpose clause, the problem of corporate powers becomes less and less significant, because a corporation has implied powers to accomplish the purposes set forth in its certificate of incorporation.
- 1. At common law, if a contract is
- The law concerning donations and other uses of the corporation’s resources for public welfare, charitable, educational, or like purposes, in the absence of an explicit statutory power, has never been completely well-defined, partly because it is in a process of continual growth.
- Even where an ultra vires defense would otherwise be allowed, under American common law a corporation was not permitted to assert the defense if
- 4. Contract Actions—Common Law
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Chapter One. Characteristics of the Corporation and Other Business Organizations 8 results (showing 5 best matches)
- There is a split of authority on the extent to which joint ventures are governed by partnership law. Some cases suggest that joint ventures are governed by all the rules applicable to partnerships, while other cases suggest that joint ventures are not entirely subject to partnership rules. Even under the concept that joint ventures are not subject to the rules of partnership law, however, it is clear that they are subject to most of those rules.
- Most LLC statutes provide that in the absence of an agreement to the contrary, distributions to members are to be made pro rata, according to the members’ contributions, on analogy to corporate law, rather than per capita—the default rule in partnership law. Some of the statutes, however, provide that in the absence of agreement, distributions are to be on a per capita basis.
- Limited liability companies (“LLCs”) are noncorporate entities that are created under special statutes that combine elements of corporation and partnership law. As under corporation law, the owners (called ) of LLCs have limited liability. As under partnership law, an LLC has great freedom to structure its internal governance by agreement. Like a corporation, an LLC is an entity, so that it can, ...sue and be sued in its own name. LLCs come in two flavors: member-managed LLCs, which are managed by their members, and manager-managed LLCs, which are managed by managers who may or may not be members. The LLC is a relatively new form. As a result, the LLC statutes are still evolving and the case law is still sparse. Moreover, the LLC statutes are highly variable. The central characteristics of LLCs will be described below in terms of prevailing statutory patterns. However, bear in mind that as to any given characteristic there will usually be some LLC statutes that fall outside the...
- Broadly speaking, the law may attach consequences to dissolution (i) among the partners themselves, and (ii) between the partners as a group and third persons, such as individuals or firms with whom the partnership has contracted.
- 2. Governing Law
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Chapter Nine. Distributions to Shareholders 18 results (showing 5 best matches)
- after making inquiries reasonable under the circumstances) on financial statements showing that the funds were properly available for the payment. [Del. Gen. Corp. Law §§ 172, 174; N.Y. Bus. Corp. Law §§ 717(a), 719]
- In states following the traditional par value approach, cash or property dividends are payable only when the corporation has a surplus—an excess of net assets (total assets minus total liabilities) over stated capital. In these states, dividends cannot be paid out of the corporation’s stated capital. [Del. Gen Corp. Law § 170]
- an asset such as an oil well or patent that is to be consumed over a period of time and not replaced. [Del. Gen. Corp. Law § 170(b); N.Y. Bus. Corp. Law § 510(b)] Subject to some limitations, these statutes permit corporations to pay dividends out of net profits computed without a deduction for the depletion (
- [N.Y. Bus. Corp. Law § 510(b)] Other states are more restrictive. In some, dividends may not be paid out of paid-in surplus unless the fair value of the remaining assets is at least 25% of the total liabilities. [R.I. Bus. Corp. Act § 7–1.1–41(4)]
- by canceling stock that has been reacquired. [N.Y. Bus. Corp. Law § § 515, 516]
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Index 19 results (showing 5 best matches)
Exam Questions and Answers Part 2 7 results (showing 5 best matches)
- At the April meeting last year, only two directors were present, Bilker and Cane. Cane was clearly an interested director vis-a-vis the Crafts transaction, due to his holdings in Kanine. As a director, he was necessary for a quorum. This alone might make the transaction voidable at common law, as would the fact that he voted for the deal. However, in most states today, the quorum issue is not determinative, nor is Cane’s vote, despite the fact that it was a determinative vote. The transaction would not be voidable under modern statutes unless it is unfair.
- If the action to rescind is held to be a derivative suit because it alleges injury to the corporation, most jurisdictions would require Doltless to be a contemporaneous owner. As an owner of preferred stock (who would have a general interest in the integrity of the corporation’s assets), he would meet this requirement. Even as an owner of common stock, it would seem that he could qualify under the exception for shares devolving by operation of law (here, inheritance). Historically the contemporaneous ownership requirement existed to prevent the buying of lawsuits by strikers (the reason for the rule has no application here).
- Thus, as to them, it would appear that Bilker violated his duty of disclosure, thereby affording a common law cause of action to the corporation for his gain (also under rule 10b-5), which was at least $10,000: the difference between what he got, and what he gave up. But the suit is derivative, Doltless is not a contemporaneous owner, and what about the statute of limitations? Even if there is no contemporaneous ownership requirement, Doltless may be barred because he is Abie’s successor, who may have been estopped because of knowledge.
- CO is governed by the proxy rules, because its stock is listed on the New York Stock Exchange. Proxy rule 14a-8 provides that management must include a timely filed shareholder proposal in the corporate proxy materials, unless the proposal falls within an exclusion in rule 14a-8. The only exclusion that might be applicable to Proposal 1 is rule 14a-8(c)(1), which allows management to omit a shareholder proposal if “under the laws of the issuer’s domicile [it is] not a proper subject for action by security holders.”
- Proposal 2 raises several problems under rule 14a-8. First, it can be argued that Proposal 2 is not a proper subject under state law because it infringes on the powers of the board to manage the corporation’s business. But Proposal 2 only requires a report. The decision whether or not to build a plant would still be in management’s hands. (However, it could be argued that the
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- Under agency law, the promoter cannot be said to be acting as an agent of the corporation, because the corporation was not yet in existence and therefore could not have authorized the acts. Nor can a subsequent ratification by the corporation make it a party to the contract, because ratification relates back to the time the contract was made and the corporation was not then in existence. [
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- Publication Date: December 24th, 2015
- ISBN: 9781634598828
- Subject: Business Organizations
- Series: Gilbert Law Summaries
- Type: Outlines
This outline clearly examines the full range of issues that arise in classes focused on business organizations. The central distinctions among business forms such as general and limited partnerships, limited liability corporations as well as close and public corporations. Both federal and state statutes that regulate the affairs of corporations are examined. The legal requirements for their formation, operation and management. Also includes shareholders' right to inspect records, shareholders' suits, capitalization, dividends, redemption of shares, fundamental changes in corporate structure, and applicable conflict of laws principles.
Contemporary practices and legal provisions addressing corporate governance are described. Special attention is given to the fiduciary obligations of owners and managers as well as the governance rights of shareholders. The materials provide detailed coverage of the federal provisions addressing proxy solicitations, insider trading, disclosure requirements and the scope of the anti-fraud provision Rule 10b-5. The outline provides comprehensive treatment of a wide range of mergers and acquisition issues including the procedural requirements to effect acquisitions, the fiduciary obligations to defend and transfer control, and the intricate case law surrounding self-dealing acquisitions.