Business Organizations Law
Authors:
Cox, James D. / Hazen, Thomas Lee
Edition:
4th
Copyright Date:
2016
36 chapters
have results for Business Organizations Law
Title Page 3 results
Chapter 1. Forms of Business Association—Definitions and Distinctions 195 results (showing 5 best matches)
- A number of jurisdictions have adopted the Revised Model Non-Profit Corporation Act (RMNPCA) drafted by the Corporation, Banking and Business Law section of the American Bar Association. The RMNPCA divides nonprofit corporations into three broad categories: public benefit corporations, which include most types of charitable organizations; mutual benefit corporations, which include entities such as trade associations, social clubs, and other organizations that pursue nonprofit activities that are neither charitable nor religious; and religious corporations. In broad overview, the RMNPCA subjects mutual benefit corporations to the most regulation of the three types of nonprofit corporations. The regulation of mutual benefit corporations approximates that of business corporations. Religious corporations enjoy a good deal of autonomy and noninterference under the RMNPCA.
- The business trust, often referred to as the “Massachusetts trust” because of its reputed origin in Massachusetts and its frequent use there, is a business organization created by a deed or declaration of trust under which assets suitable for a business enterprise are transferred to trustees to be managed for the benefit and profit of persons holding transferable certificates evidencing the beneficial interests in the trust estate. The trustees have legal title to the property in trust and act as principals for the certificate holders (“shareholders”). Vesting title to the enterprise’s assets in trustees and empowering them to act as representatives of the business create a business organization, if not a legal unit. The business trust, therefore, embodies at least three important characteristics of the corporate form of business: limited liability, centralized management, and transferability of ownership. Moreover, continuity of existence is attained by providing for the remaining...
- The principal non-tax advantages customarily given for doing business in the corporate form are: (1) exemption of shareholders from personal liability; (2) continuity of the organization’s existence despite changes in its members; (3) centralized management by a board of directors; (4) free transferability of a participant’s interest; (5) access of the business to additional capital; (6) the organization’s capacity to act as a legal unit in holding property, contracting, and bringing suit; and (7) standardized methods of organization, management, and finance prescribed by corporation statutes for the protection of shareholders and creditors, including a more or less standardized system of shareholder relations, rights, and remedies.
- Note, Investor Beware: Protection of Minority Stakeholder Interests in Closely Held Limited-Liability Business Organizations: Delaware Law and its Adherents, 40 Washburn L.J. 288 (2001).
- At one time, the primary purpose of professional corporate legislation was to permit professionals to adopt a business organization that would be treated as a corporation for income tax purposes and thus eligible for tax-advantageous profit-sharing, pension, and stock option plans. Nevertheless, there still remain some isolated areas where the tax laws continue to favor those doing business as a corporation rather than as a partnership.
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Chapter 5. The Promotion of the Corporation 16 results (showing 5 best matches)
- Promoters discover business opportunities, prepare plans to take advantage of them, and push those plans to completion. They perform an essential economic function in assembling and coordinating the necessary plan, materials, and personnel for new business enterprises. Although there are many professional promoters, people whose life’s work is the conception and organization of business enterprises, most business enterprises are conceived and organized by amateur promoters, people who play the role of promoter only once or twice in a lifetime, usually in connection with a business with which they expect to be permanently identified.
- Timberline Equip. Co. v. Davenport, 514 P.2d 1109 (Or. 1973), where the court found the language of § 146 ambiguous as to who would qualify as a “person who assume[s] to act as a corporation.” The court concluded that anyone having an investment in the organization who actively participates in policy and operational decisions of the organization (not necessarily just those who participate in decisions or acts connected with the obligation on which suit is brought) could be held liable.
- Adoption is a corporation’s assent to a contract that was made in contemplation of the corporation’s assuming it after organization. In other words, adoption occurs when a corporation takes the contract rights and obligations of the promoter and makes them its own.
- Even where promoters become directors and shareholders of the corporation upon its organization, their knowledge is not imputed to it if they have personal interests antagonistic to the corporation and the circumstances are such that they cannot be expected to reveal their knowledge to other directors and corporate officials. However, where promoters become controlling directors and shareholders, it is reasonable to impute their knowledge to the corporation.
- The typical promoter performs many varied services in launching an enterprise, often enlisting the aid of experts, lawyers, bankers, solicitors, and other persons. The various activities of the promoter may be classified as follows: (1) the discovery and investigation of a promising business opportunity; (2) the formulation of business and financial plans; (3) the assembling of the enterprise by negotiating and obtaining some control over the subject matter by options or contracts made on behalf of the proposed corporation or on the promoter’s credit; (4) the making of arrangements for financing the enterprise and issuing securities; and (5) the arranging of the promoter’s own compensation.
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Chapter 9. Functions and Powers of Directors 109 results (showing 5 best matches)
- The directors’ authority generally is restricted to the management of the corporation’s business affairs. Without shareholder approval, they cannot effect fundamental changes in the corporation’s charter or organization or dissolve the corporation, since such actions do not relate to ordinary business.
- concerning “espionage” means that corporate boards may satisfy their obligation to be reasonably informed concerning the corporation, without assuring themselves that information and reporting systems exist in the organization that are reasonably designed to provide senior management and the board itself timely, accurate information sufficient to allow management and the board, each within its scope, to reach informed judgments concerning both the corporation’s compliance with law and its business performance….
- Though the object of his criticism is the law and courts of Delaware, the fount of that criticism is the internal affairs doctrine, the most significant of all legal principles. The internal affairs doctrine is essentially a choice of law rule; it holds that questions regarding the relations among shareholders, directors, and officers are governed by the law of the state of incorporation. The emphasis here on the state reflects not only the federal system of government in the United States, but also the inertial forces of history whereby matters of corporate law have been a matter of state, not federal, law. And, unlike the continental “law of the seat” approach, there is no requirement in the United States that incorporation be in a state where the company has its principal place of business or, for that matter, any business. Not only the state of incorporation is a matter of choice; to the extent that material differences exist in corporate governance procedures, there is also...
- Most LLC statutes permit voting power to be allocated among the members, or even classes of members, as the articles of organization or organization agreement may provide. The members can also provide in the articles of organization or operating agreement for super-majority vote; and, in any case, the careful lawyer needs to be aware that many statutes require unanimous approval of the members unless a lower vote is set forth in the articles of organization or operating agreement.
- states expressly provide that, in the absence of a contrary provision in the articles of organization, when the company is manager-managed any decision by the managers affecting its business affairs must be by a majority of the managers (not simply a majority of the quorum).
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Preface 4 results
- The text is written and edited to provide an understanding of the law relating to business organizations. Although some leading sources are included, the text is not intended as a research tool. Footnotes from the parent Practitioner’s Edition have been edited severely. Readers conducting research should consult the four volume
- Because of the broad impact on the shape of state corporate statutes of the Model Business Corporation Act, close attention is given to the Model Act throughout the text.
- . It has been our aim to examine the law of corporations with care and craftsmanship equal to its predecessor. Though corporate law has undergone a sea change since Ballantine published the last edition of his work, the challenges to the corporate lawyer have not changed over the years. Corporate law is one of the areas most vital to our society, for it regulates the workings of Adam Smith’s invisible hand in the allocation of resources among competing uses. Unfortunately, the importance of corporate law is not matched by clarity in its doctrines, principles, and statutes. The field continues to be filled with “trite dogmas, formulas, metaphors, and legal fictions to the fundamental realities and policies of the law.”
- In this work, we provide a comprehensive analysis of all areas of corporate law and the most significant provisions of the federal securities laws. Contrasting judicial and statutory approaches are examined in both a contemporary commercial context and historical evolution of law on each subject examined. We have avoided a state-by-state review on each topic; instead we devote our energies to capturing and critiquing the significance of the differences in approaches. As evident in each of our chapters, we examine the historical fount of doctrines, their contemporary vitality, and qualifications and weaknesses in their impact. This text is not content to recite the empty metaphors and vague incantations that appear with regrettable frequency in the courts’ treatment of important issues of corporate law. We emphasize the financial, political, and social considerations that appear to have guided the courts’ dispositions in individual cases. Simply stated, we seek to provide a helpful...
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Chapter 10. Directors’ and Officers’ Duties of Care and Loyalty 85 results (showing 5 best matches)
- [I]t would be … mistake to conclude that … corporate boards may satisfy their obligation to be reasonably informed concerning the corporation, without assuring themselves that information and reporting systems exist in the organization that are reasonably designed to provide to senior management and to the board itself timely, accurate information sufficient to allow management and the board, each within its scope, to reach informed judgments, concerning both the corporation’s compliance with law and its business performance….
- Report of Committee on Corporate Laws: Changes in the Model Business Corporation Act, 30 Bus. Law. 501, 505 (1975) (hereinafter Report of Committee on Corporate Laws). Corporate Director’s Guidebook (5th ed. 2007), prepared by the Committee on Corporate Laws, Section of Corporation, Banking and Business Law, American Bar Association (hereinafter Corporate Director’s Guidebook).
- Committee on Corporate Laws, Changes in the Model Business Corporation Act—Amendments Pertaining to Electronic Filings/Standards of Conduct and Standards of Liability for Directors, 53 Bus. Law. 157 (1997).
- § 10.02 note 17, at 27–36; A.B.A., Section on Corporation, Banking and Business Law, The Role and Composition of the Board of Directors of the Large Publicly Owned Corporation, 33 Bus. Law. 2083, 2101 (1978).
- Daniel R. Fischel, The Business Judgment Rule and the Trans Union Case, 40 Bus. Law. 1437 (1984).
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Chapter 6. Defective Formation of Corporations and Revival of Existence 27 results (showing 5 best matches)
- If business associates purport to conduct their enterprise as a corporation but have not complied with statutory requirements for the organization of a corporation, or if the organization is otherwise defective in one or more of the respects just enumerated, will their association be treated as a corporation? Or perhaps the more accurate question is, which of the normal corporate attributes and incidents will the association be recognized as having, under what circumstances, and for what purposes?
- (5) Good faith in claiming to be a corporation and in doing business as a corporation. Initial good faith may not be sufficient. Later discovery of defects by the associates may thereafter preclude application of the de facto doctrine to their organization.
- (4) A use of corporate powers—that is, the transaction of business by the organization as if it were a corporation. This element seems to be of only minor importance. Occasionally, in stating the essentials of the doctrine, a court has omitted the requirement of colorable compliance with the statute, but it is not
- Statutes in a number of states forbid collateral attack on incorporation. The Delaware statute, for example, provides that “no corporation of this State and no person sued by any such corporation shall be permitted to assert the want of legal organization as a defense to any claim.” A provision of this kind seems to be merely declaratory of the common law and does not supersede the usual rules as to de facto corporations and corporations by estoppel.
- Under this view, if the attempt to comply with the incorporation law does not go far enough to create a corporation de facto, associates who actively participate in the business are held to full liability on contracts authorized or ratified by them, either as partners or as principals. There is said to be no estoppel of one who deals with business associates masquerading under a name that fails to represent a corporation de facto, because the elements of estoppel, viz., action induced by misrepresentation of the party against whom the estoppel is asserted, do not exist.
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Chapter 2. The Evolution of Corporations in England and America 130 results (showing 5 best matches)
- William A. Klein & John C. Coffee, Jr., Business Organization and Finance: Legal and Economic Principles 174 (8th ed. 2002).
- Stephanie Strom, A Quest for Hybrid Companies that Profit, but Can Tap Charity, N.Y. Times (Oct. 12, 2011), http://www.nytimes.com/2011/10/13/business/a-quest-for-hybrid-companies-part-money-maker-part-nonprofit.html?pagewanted=all. Dana Brakman Reiser, Benefit Corporations—A Sustainable Form of Organization?, 46 Wake Forest L. Rev. 591, 591 (2011) (“Founders of social enterprises believe profits and social good can be produced in tandem and wish to form organizations that will pursue these dual missions.”).
- E. Merrick Dodd, Jr., American Business Association Law a Hundred Years Ago and Today, in 3 Law: A Century of Progress, 1835–1935, 254, 271, 289 (1937).
- The concentration of most businesses into a relatively few huge incorporated units is not due primarily to lax corporation laws or even to a corporation’s privilege to hold shares in other corporations. Whether bigness in business should be curtailed or regulated, and how such controls should be accomplished, are unsettled questions of economic policy, not of corporation law. Various economics issues—for example, whether and the extent to which production, competition, monopoly, labor conditions, profits, and the concentration of wealth should be controlled by government—call for patient, thorough study. This task of regulating corporate bigness and curtailing supposed corporate “evils” should not be confused with the task of establishing modern corporation laws to facilitate incorporation and to define and enforce the rights and duties of shareholders, directors, and officers.
- In 1913, however, reform-minded then-governor Woodrow Wilson caused New Jersey to amend its more permissive provisions. Delaware, which had borrowed most of its corporation law from New Jersey, seized the opportunity to assume leadership in providing and keeping up-to-date a body of permissive corporate laws. At various times, several states—Maine, West Virginia, and later Nevada—have attempted to “out-Delaware Delaware” in an effort to attract incorporation business and, more specifically, tax revenues and fees. These imitators, however, have had little success in displacing Delaware’s preeminence in the race for the rechartering business. Still other states have liberalized their statutes to encourage their local businesses to “stay at home” by incorporating locally rather than organizing in Delaware, New Jersey, or some other permissive jurisdiction.
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Chapter 3. The Incorporation Process 74 results (showing 5 best matches)
- The successive steps usually required or advisable for the incorporation and organization of a business corporation under modern corporation statutes are enumerated below:
- In selecting the state of incorporation, the attorney makes a decision not only as to the relevant statutory law but also as to the case law that will govern all corporate questions, including the duties of the corporation’s officers and directors and the rights of its stockholders. As such, it may be advisable to shop for the jurisdiction that will best suit the organizers’ needs. On the other hand, the decision of where to incorporate “should be approached with a strong predisposition to incorporate in the state where the corporation’s principal business activity will be located.” This local preference is due to several economic considerations. First, incorporating in a state where it would otherwise not have a sufficient presence to subject the corporation to the state’s taxing authority visits upon the corporation an unnecessary tax burden. Moreover, businesses not locally domiciled have to qualify to do business in each state where they operate. ...state’s laws, even though...
- A timing problem arises in the legal mechanics of appointing or electing the first board of directors and adopting bylaws so that the corporation can conduct its business. The link between the inchoate corporation and the completed organization is often the incorporator. Defined functionally, “incorporators” are those who sign the articles of incorporation. They may or may not be subscribers for shares. Most statutes require only a single incorporator.
- The question of availability of a proposed corporate name is usually determined in the first instance by personnel in the secretary of state’s office or other executive department. Under many statutes, the secretary of state must pass on the question of the similarity of a proposed name to those already in use. Under the influence of earlier versions of the Model Business Corporation Act, nearly a majority of the states require that a name not be “the same or deceptively similar.” What is deceptively similar is frequently problematic. Because of this concern and the belief that the real concern of the secretary of state’s office was limited to avoiding confusing two or more organizations in the s records, the Revised Model Business Corporation Act requires only that the “name must be distinguishable upon the records of the secretary of state.”
- Adoption of corporate bylaws is commonly regarded as one of the steps in the organization of the corporation. In broad overview, bylaws must be reasonable, should not conflict with the law of the state of incorporation, and must not limit unduly the rights of shareholders contrary to the policy of the law. Bylaws are subordinate both to the statutes and the charter. Bylaws that conflict with statutes, the articles of incorporation, or public policy are void. Bylaws must be reasonable and must operate equally on all persons of the same class.
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Chapter 4. The Scope of the Authorized Business and Duties to other Constituencies 43 results (showing 5 best matches)
- ALI 1 Principles of Corporate Governance: Analysis and Recommendations (1994 & Supp. 1998). The ALI’s corporate governance project commenced in the late 1970s and culminated in the organization’s approval in 1992 of a set of principles forming seven chapters. Though much of the project is consistent with the ALI’s efforts in other areas to offer in “restatements of the law” descriptions of prevailing and better trends in the case law and statutes, there are many areas of the corporate governance project that prescribe reform for prevailing practices. Hence, the ALI’s work on this project is not called a restatement but a set of “principles.” Much of what is in does not have a focus similar to that of the Revised Model Business Corporation Act because the latter is devoted exclusively to guidance in drafting state corporate statutes.
- First, section 2.01 mandates that the corporation must abide by the law, as must a natural person. Under the common law’s strict obeisance to the economic objective of the corporation, corporations may disobey the law and remain true to their objectives if the benefits of disobeying the law exceed the cost of compliance and/or apprehension. Section 2.01 rejects such cost-benefit determinations; the ALI commentary permits disobeyance only out of necessity or desuetude. ...to the common law arises with those actions covered by section 2.01(b)(2) and (3)—deviations from the profit objective supported by ethical or societal considerations. In place of the economic considerations for judging the propriety of such departures, the ALI substitutes a broad standard of “reasonableness,” in which the propriety of a corporation’s actions motivated by ethical or societal considerations is tested by such varying considerations as the custom among corporations and the relative nexus between the...
- The debate that surrounds section 2.01 focuses on the necessity of adding subsection (b) to the overall economic objectives that are embodied in subsection (a). The critiques of subsection (b) argue that staying within the bounds of the law as well as the appropriateness of corporate activity being undertaken for ethical or social good could easily be handled by continuing the common law approach of examining the activity to determine whether it is reasonably related to the corporation’s economic objective. The common law approach does this through the business judgment rule, which accords a high presumption of propriety to board decisions, so that decisions guided by ethical or social considerations are examined for their plausible relationship to the corporation’s economic objectives. As seen earlier in this chapter, this approach is reflected in numerous cases where an activity has been challenged as ...section 2.01 makes two significant modifications in the common law in...
- case is especially significant because it upheld the gift as a matter of common law. The holding has won legislative confirmation as evidence by the Model Business Corporation Act’s express recognition of the corporate power “[t]o make donations for the public welfare or for charitable, scientific or educational purpose.”
- Today, both by law and by public sentiment, a greatly enlarged social duty and responsibility of businesses exists for the comfort, health, and well-being of their employees. It is not always sufficient merely to pay the actual wage agreed upon.
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Chapter 17. Liability for Watered, Bonus, and Underpaid Shares 11 results (showing 5 best matches)
- “The great abuses which have been perpetrated, and the deceits which have been practiced upon the public, in the organization of corporations by the issue of stock and bonds, the par value of which has been grossly in excess of the real capital embarked in the business, are too well known to require comment.” Altenberg v. Grant, 85 F. 345, 346 (6th Cir. 1898) (construing a strict Kentucky constitutional provision against stock watering).
- Three developments have significantly reduced the frequency of suits under state corporate statutes for watered stock liability. First, the advent of low-par and no-par stock has to a large extent eliminated watered stock problems in the strict definitional sense. By eliminating par value, the present Model Business Corporations Act also does away with watered stock in its strictest meaning. Finally, the prophylactic effects of state blue sky laws and remedial benefits available under the antifraud provisions, section 10(b) and Rule 10b–5, of the Securities Exchange Act of 1934, have largely supplanted the regulatory impact of state corporate statutes for watered stock, at least with respect to protecting the corporation and later-purchasing shareholders. The discussion that follows closely examines the remedies the corporation and its creditors have for watered stock.
- Under the trust fund theory in its original form, however, the implication of the promise seems to have been based on the policy that the obligation to pay the par value of shares arises from the privilege of exemption from individual liability and that the release from full payment is an evasion of the law as against all creditors. Thus unless the fraud theory is accepted, the creditors’ right of action against the holder of watered stock is considered to be an equitable right to reach an asset of the corporation, as in the case of shares issued on credit. The shareholders’ liability is thus a legal obligation to the corporation to make a capital contribution required as one of the conditions of doing business with limited liability for the protection of all creditors.
- the proprietors of a business sold it to the corporation for shares of no-par stock. The agreement stated, “It is understood that the said shares of stock shall be issued at the price of $20 per share and representing a total value of $6000.” It was alleged by the receiver that the assets and good will of the business turned over were worth only $1,500. The receiver of the corporation sought an assessment against the subscribers on the ground that the no-par shares were not fully paid and that the prices of the shares had been fixed at $20 per share. The New Jersey court held that the only consideration actually agreed to be given was the transfer of business and that the statement of a price of $20 per share was not intended to fix the consideration to be paid. The duty of the subscribers to pay for the shares was accordingly fully satisfied, and they were not liable for the underpayment. The
- stock subscribed and unpaid, and no more” or words to that effect. For example, the pre-1980 Model Business Corporation Act requires that par value stock not be issued for less than par
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Chapter 20. Dividend Distributions: Rights, Restrictions, and Liabilities 68 results (showing 5 best matches)
- The Business Corporation Law ch. 434, § 35, 1903 Mass. Acts 418, 435 (1903) (current version of Mass. Gen. Laws Ann. ch. 156D, § 6.40 (West Supp. 2009)); An Act on Corporations, ch. 77, § 21, 1892 Miss. Laws §§ 269, 276 (1892); Act of Dec. 2, 1871, ch. 80, art. III § 28, 1871 Tex. Gen. Laws (2d Sess.) §§ 66, 71 (1871); Act of Feb. 17, 1939, ch. 62, § 28–131, 1939 Wyo. Sess. Laws §§ 66, 71 (1871).
- Former MBCA §§ 2(i), 45(b) (1980); MBCA §§ 1.40(b), 6.40 (2008). The text to the 1980 amendments to the Model Business Corporation Act is reported in 34 Bus. Law. 1867–1889 (1979).
- The commentators in varying respects argue that the Model Business Corporation Act permits some departure from generally accepted accounting principles. Ray Garrett, Capital and Surplus Under the New Corporation Statutes, 23 Law & Contemp. Probs. 239, 259 (1958) (unrealized gains can be recognized).
- The major source of funds for business expansion is the accumulated but undistributed profits of the business. The board of directors’ decision to expand the business opens a host of questions as to how the expansion should be financed—by issuance of equity, by debt, or from undistributed earnings. Even though a school of financial theory counsels that the firm’s value is not impacted by whichever of these choices occurs, intangible considerations that are best commended to the board of directors unless an abuse of discretion is otherwise demonstrated. Thus the courts hesitate to substitute their judgment on complicated questions of business policy for that of the elected managers of the business and have limited the scope of judicial review that they are willing to undertake.
- There are two dangers of abuse of the directors’ discretion in declaring or withholding dividends. One is a policy of wastefulness or prodigality—improvident distributions that are injurious to present or future creditors and investors reduce working capital and weaken the corporation as a going concern. The converse abuse is undue accumulation beyond the reasonable needs of the business—the arbitrary refusal to pay shareholders a fair return on their investment when it clearly would be possible and wise to divide accumulated profits. Investors purchasing shares in a business often expect to obtain a return in the form of more or less regular dividends according to the corporation’s ability to pay. The management’s desire for expansion and more compensation instead of dividends in some cases may defeat the shareholders’ just expectations. The law has been concerned primarily with restraining dividend distributions that are dangerous to the rights of corporate creditors.
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Chapter 12. Obligations Arising out of Transactions in Shares 71 results (showing 5 best matches)
- Quite separate from controlling person liability is vicarious liability premised upon the doctrine of respondeat superior. It is quite easy to understand that control person liability is not the exclusive form of vicarious responsibility. Recall that respondeat superior liability is the means for holding the master responsible for torts committed by the servant within the scope of the servant’s employment. Under respondeat superior liability it is the employing organization that is liable. Whereas, under control person liability, responsibility can be imposed upon the supervisor of the primary participant, even though the supervisor is not the employing organization. Courts have therefore held that respondeat superior and control person liability coexist, i.e., that control person liability is not the exclusive means to reach the employer. There is some cause for pause, however, that the narrow construction given to the securities laws by the Supreme Court, especially in ...laws...
- The truly challenging issue under Rule 10b–5 and the securities laws generally arises in providing definitive guidance of when there is a duty to speak. That is, omissions, not misstatements, pose the greatest intellectual challenge under Rule 10b–5. Duty is an element in a Rule 10b–5 action only in the case of the omission of a material fact since a matter in issue is the defendant’s obligation to disclose the omitted fact. Note here that the securities laws are quite selective in the instances when there is an express duty to speak. Corporations subject to the registration requirements of section 12 of the ...are relatively focused in terms of the precise types of information that is required to be disclosed. Furthermore, the listing requirements of the major stock exchanges expressly require corporations to make timely disclosure of all information that would be material to the reasonable investor, but nevertheless accord the issuer business discretion to withhold information...
- Racketeer Influence and Corrupt Organizations Act Section 1964(c) (2015), 18 U.S.C. § 1964(c).
- United States v. Kim, 184 F.Supp.2d 1006 (N.D.Cal.2002) (membership in young executives organization did not create a duty even though there was an expectation of confidentiality since there was not binding obligation to keep information confidential).
- Whether a fact is material is a joint question of law and fact and in theory is poorly suited for resolution on the pleadings. However, the courts with some regularity dismiss actions after concluding the alleged omission or misstatement was not material. Aside from their willingness to weigh the likely importance to the objectively qualified investor of an omitted or misstated item, there are several other heuristics that have developed that empower the court to determine the plaintiff has failed to allege a material misrepresentation. The first is the doctrine of “puffing.” A puffing statement is a generalized statement of optimism that, in the court’s eye, is not material to the investor because the investor would never attribute any importance to statements as “the business is proceeding well.”
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Chapter 15. The Derivative Suit 110 results (showing 5 best matches)
- Report of the Committee on Corporate Laws, Proposed Revisions of the Model Business Corporation Act Affecting Actions by Shareholders, 37 Bus. Law. 261, 265–266 (1981).
- 449 U.S. 869 (1980) (under California law, board of directors may delegate to disinterested independent committee business judgment authority to dismiss derivative action against some of directors).
- Changes in the Model Business Corporation Act Affecting Indemnification of Corporate Personnel, 34 Bus. Law. 1595 (1979).
- Can the law always trust an honest management to decide whether a suit on a clear cause of action is expedient or inexpedient? The distinction cannot be drawn between the directors’ neglecting their duty when deciding whether the corporation should bring suit and their committing errors of judgment as to law or policy. Good faith in refusing to sue should not be the only limitation on the discretion of the directors. The proper limit is whether the directors acted not only honestly but within the permissible bounds of intelligent business judgment or discretion. The question whether refusal to sue is wrongful depends on all the circumstances of the case.
- In examining the settlement, the Chancellor need not try the case. Indeed, he is not required to decide any of the issues on the merits…. Instead, he … exercises a form of business judgment to determine the overall reasonableness of the settlement…. [O]ur review is more limited than that of the Court of Chancery. It is not our function to determine the intrinsic fairness of the settlement or to exercise our own business judgment respecting its merits. We limit ourselves to the question of an abuse of discretion by the trial court in exercising its business judgment.
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Chapter 22. Corporate Combinations 106 results (showing 5 best matches)
- Committee on Corporate Laws, Changes in the Model Business Corporation Act Pertaining to Appraisal Rights and to Fundamental Changes—final Adoption, 55 Bus. Law. 405 (1999).
- Proposed Changes in the Model Business Corporation Act—Appraisal Rights, 54 Bus. Law. 209 (1998).
- The power to sell all of a corporation’s assets can be a preliminary step to formal dissolution. Simply put, the authority to sell all its assets outside the regular course of business can be the means for the orderly cessation of business, whether going out of business was caused by financial distress or otherwise.
- (1) A consolidation or merger always involves a transfer of the assets and business of one or more corporations to another corporation in exchange for its securities, cash, or other consideration. A merger results in a transfer of the assets to one of the constituent corporations that absorbs the other. With a consolidation a new consolidated corporation is created into which each constituent corporation transfers its assets and liabilities. In each case, the transfer is made by operation of law—that is, by force of the statute operating on the agreement of the constituents to merge or consolidate.
- As was seen earlier, a distinguishing feature of a business combination carried out as a merger or consolidation is that by operation of law the surviving corporation is subject to all the liabilities of the acquired companies. In contrast, when the combination is structured as an asset or stock purchase-sale, absent special circumstances, the acquiring company is subject only to those liabilities it has agreed to assume. Traditionally, there were just four circumstances in which the selling corporation’s creditors could successful proceed against a purchaser who had not so assumed the debt owed to that creditor:
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Chapter 16. Issuance of Shares 57 results (showing 5 best matches)
- Committee on Corporate Laws, Changes in the Model Business Corporation Act—Amendments to Financial Provisions, 34 Bus. Law. 1567 (1979).
- N.Y. Stock Corp. Law § 12 (1912). Alfred F. Conard, Cook and the Corporate Shareholder: A Belated Review of William W. Cook’s Publication on Corporations, 93 Mich. L. Rev. 1724, n.48 (1995) (commenting that an analysis of the early no-par statutes is provided in Cornelius W. Wickersham, A Treatise on Stock Without Par Value of Ordinary Business Corporations (1927)).
- David R. Herwitz, Allocation of Stock Between Services and Capital in the Organization of a Close Corporation, 75 Harv. L. Rev. 1098 (1962).
- It is important for business lawyers to understand the nature of the underwriting arrangements commonly used by issuers and investment bankers in bringing out and distributing issues of corporate securities. However, lawyers should also be aware that securities may be “distributed” to the investing public directly by the management of a going corporation or by the promoters of a new enterprise without the aid of investment bankers or the use of an underwriting agreement. Small concerns often cannot afford underwriting by investment bankers and must rely on corporate officers and agents to sell securities. Large concerns are sometimes able to place large issues of high-grade securities directly with life insurance companies, pension funds, or other institutional investors. In direct private financing, underwriting commissions are saved, as are other expenses such as registration under the securities laws.
- The merger of law and accounting is nowhere more evident than in the statutory regulation of the corporation’s power to make distributions to its shareholders. The focus of such regulation is threefold: (1) first and foremost, the protection of creditors against unreasonable diminution in the debtor corporation’s assets through asset distributions to its shareholders; (2) if there are more than two classes of shares outstanding, the protection of classes having the senior economic rights from erosion of those rights as a result of corporate distributions to the junior shareholders; and (3) the protection of all shareholders from improvident distributions that impair the corporation’s power to carry on its business.
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Chapter 11. Fiduciary Duties for Executive Compensation, Corporate Opportunities, and Controlling Stockholders 75 results (showing 5 best matches)
- The American Law Institute provides a much broader proscription of business opportunities for senior executive officers than for outside directors, essentially applying a line-of-business test to opportunities before the senior executive officer. The American Law Institute also casts aside the multifactor approach, opting for the more certain inquiries of the circumstances surrounding the fiduciary learning of the opportunity or its acquisition as well as, in the case of senior executive officers, its relationship to a present or contemplated business of the corporation. Although there is not much precedent to support its position, the American Law Institute separately proscribes the Finally, the American Law Institute eliminates the possible defenses of incapacity or inability, financial or otherwise, of the corporation to embrace the opportunity. ...the director’s or senior executive officer’s acquisition of the business opportunity only in advance of its acquisition; their...
- What is within a corporation’s line of business is not always easy to identify Though the test is broader than the interest or expectancy test, courts can still have a very narrow view of what is within a firm’s line of business. distinctions abound even under the broader line of business test. Thus an opportunity to earn a large profit quickly by purchasing a parcel of land should be considered within the line of business of a company that generally develops land but rarely itself speculates in land. The question would be much closer, however, if the company only developed land and never speculated in land. Of course, the corporation may have in its articles, bylaws, or a resolution of its board of directors a provision that unequivocally identifies the types of business or activity in which the company does not have an interest and that are fair game for its directors or even officers. ...approach is expressly authorized by the American Law Institute’s Corporate Governance...
- Certainly in close corporations and LLCs there is much to commend private ordering among the firm’s owners and managers to clarify the freedom to individually pursue business opportunities. The parties should consider when forming the business to what extent business opportunities that are with the firm’s line of business or that could be within its line of business can nonetheless be acquired by an owner or manager. State statutes increasingly authorize such private ordering with respect to delineating the extent to which parties can so pursue business opportunities that might otherwise be deemed to belong to the entity.
- Subcommittee on Executive Compensation of the ABA Section on Corporation, Banking and Business Law, Executive Compensation: A 1987 Road Map for the Corporate Advisor, 43 Bus. Law. 185 (1987).
- Line of Business.
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Chapter 7. The Separate Corporate Entity: Privilege and its Limitations 36 results (showing 5 best matches)
- The disregard of the corporate entity occurs in a variety of settings, the most common being to impose personal liability on the corporation’s stockholders. If the corporation is insolvent, its unsatisfied creditors, including any tort claimants, can be expected to pursue all reasonable avenues to reach the personal assets of its shareholders by arguing that the corporation is not truly a separate entity. Sometimes it is important to determine whether the real party in interest is the corporation or an individual. For example, state usury laws frequently apply if the borrower is an individual but not if the borrower is a corporation. Cases have therefore posed the question whether the corporate entity should be disregarded for the purpose of applying the state usury law. Another illustration where holding a statute had been violated turned on whether to disregard the separate identity of a corporation arose in where, to circumvent a state law mandating that businesses close on...
- Testing capital adequacy at the corporation’s inception and evaluating its amount strictly in terms of the magnitude of future business risks introduce a good deal of ambiguity and unreasonableness into the equation. Are the risks to be perceived only those that are normal for a business, or do they include a highly unusual tort claim that ...some lesser amount that is simply necessary to launch the firm such that its future cash flows will meet its normal operating expenses? The former is clearly an unreasonable demand because no company can be expected to endow its future operating expenses and liabilities as a precondition to opening its doors. As for gauging capital adequacy in terms of massing assets sufficient to generate a positive cash flow, it must be borne in mind that the mere fact a business fails in terms that it produced a negative, rather than a positive, cash flow is customarily explained by a good many factors other than the relative amount invested in the...
- Subsidiary and affiliated corporations have become important instruments of large-scale business. The same shareholder or group of shareholders may form or acquire various affiliated corporations for use as related branches of an enterprise under the unified management of common directors and officers. Much the same result is accomplished by subincorporation, when a parent or holding company reincorporates itself and splits its personality into several branches of the business.
- ...and then converted the subsidiary into a supplier of newsprint because the parent believed there would soon be a shortage of newsprint. The feared newsprint shortage never developed; in fact, there was an abundant supply of newsprint. The subsidiary entered bankruptcy. Among the claims before the bankruptcy court were the loans the parent had made to convert the subsidiary’s operations. The Second Circuit subordinated the parent’s loans, reasoning they were tainted by the parent having controlled the subsidiary for its own interests to the detriment of its creditors. One would expect a different holding if the parent had not itself been a publisher but rather a conglomerate that legitimately believed greater returns would lie in meeting the expected demand for newsprint. Under these facts, the parent’s motives, while self-serving in the sense they sought to maximize its return, are of the type the law should nurture; the expected benefits of directing its subsidiary into fields...
- Phillip I. Blumberg, The Law of Corporate Groups: Tort, Contract, and Other Common Law Problems in the Substantive Law of Parent and Subsidiary Corporation 111 (1987).
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Chapter 13. Rights and Powers of Shareholders: Inspection Rights, Voting, and Proxies 92 results (showing 5 best matches)
- Committee on Corporate Laws, ABA Section of Business Law, Changes in the Model Business Corporation Act-Proposed Shareholder Proxy Access Amendments to Chapters 2 and 10, 64 Bus. Law. 1157 (2009) The official comment provides that section (d) of the provision “allows directors to ensure that such bylaws adequately provide for a reasonable, practicable, and orderly process, but is not intended to allow the board of directors to frustrate the purpose of a shareholder-adopted proxy access or expense reimbursement provision”.
- ABA Section of Bus. Law, Committee on Corporate Laws, Changes in the Model Business Corporation Act—Proposed Amendments to Incorporate Electronic Technology Amendments, 64 Bus. Law. 1129 (2009) (defining in section 1.40(6A), (7A) and (28) that a “writing” includes an electronic record which in turn means “information stored in an electronic or other medium and is retrievable in paper form through an automated process used in conventional commercial practice”).
- The shareholder’s right to ascertain how the affairs of the business are being conducted by the officers and directors has traditionally been founded on the ownership interest and the necessity of protecting that interest. The common law right of inspection rests on the underlying rights of ownership of the corporate property.
- While the SEC’s rule provides numerous grounds for a proposal’s omission, the overriding concern is “[i]f the proposal is not a proper subject for action by shareholders under the laws of the jurisdiction of the company’s organization.” Because there is very little judicial authority on this topic, the staff of the SEC has over the years been the primary generator of guidance on what is or is not a proper subject for stockholder action. The Delaware legislature in 2008 addressed this awkward situation by authoring the Delaware Supreme Court to receive questions certified to it on the question of the scope of Delaware general corporation law. Thus, in the first use of its expanded jurisdiction,
- is an important decision interpreting the “ordinary business” grounds for a proposal’s omission. The proposal called on the board to develop policy and standards to determine whether a retailer should sell a product that “especially endangers public safety,” has “the substantial potential to impair the reputation” of the firm, and/or “would reasonably be considered by many offensive to the family and community values integral to the” firm’s brand. The narrative portion of the proposal clearly identified a concern that many Wal-Mart stores sold high-capacity guns. The SEC issued a no-action letter supporting the company’s decision to omit the proposal on the ground the proposal involved ordinary business matters; ultimately the federal district court ruled the proposal could not be excluded (reasoning the proposal called on the board to oversee and effect company policy as contrasted with ...whether the proposal addressed ordinary business operations by first discerning the proposal...
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Chapter 14. Closely Held Entities 75 results (showing 5 best matches)
- The most frequently invoked basis for ground for judicial dissolution is that “not reasonably practicable to carry on the company’s activities in conformity with the certificate of organization and the operating agreement.” However, the courts look for clear evidence that the certificate or agreement have been violated. On the other hand, on-going disagreements about the conduct of the business and complaints that the party to whom operating agreement delegated management authority acted unilaterally in furtherance of the business was not sufficient basis to order dissolution as the operating agreement empowered such unilateral action.
- majority of the jurisdictions that have not adopted the ULLCA. Two of its key grounds for dissolution require winding up upon 1) “an event or circumstance that the operating agreement states causes dissolution,” 2) “it is not reasonably practicable to carry on the company’s activities in conformity with the certificate of organization and the operating agreement,” or 3) upon “consent of all the members.” Some states authorize dissolution upon “deadlock,” but define this to mean the business “cannot be conducted to the advantage of the members;” this appears to be a condition somewhat more liberal than the ULLCA’s “not reasonably practicable to carry on the company’s activities in conformity with the certificate of organization and the operating agreement.” Deadlock, however, is not established by the majority of the members ousting as a manager the founding member.
- N.Y. Bus. Corp. Law § 1111(b)(3) (McKinney 2003). For a discussion of amendments to the New York act that have put it “more in harmony” with the Model Business Corporation Act.
- Most objections to arbitration of intracorporate disputes are based on the supposed unfitness of the arbitral process for formulating corporate policy and making managerial decisions. Before deciding to use arbitration in a close corporation, the lawyer should carefully search the statutes and judicial decisions of the state of incorporation for corporate norms that would either invalidate arbitration agreements in the particular business situation involved or would otherwise nullify their effectiveness. Further, the lawyer should examine the state arbitration statute and applicable common law principles of the forums in which litigation may arise to determine the proper limits of arbitration.
- 805 ILCS § 5/12.56(b)(11) (Smith-Hurd Supp. 2009); Mich. Comp. Laws Ann. §§ 450.1489, 450.1801 (West Supp. 2009); Minn. Stat. Ann. § 302A.751 (West. 2004); N.J. Stat. Ann. § 14A:12–7 (West 2003). For a state-by-state compilation of the standard for invoking protection and whether there is buyout remedy, John H. Matheson & R. Kevin Maler, A Simple Statutory Solution to Minority Oppression in the Closely Held Business, 91 Minn. L. Rev. 657, 700–709 (2007).
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Chapter 18. Capital Structure, Preferences, and Classes of Securities 23 results (showing 5 best matches)
- A sound and well-balanced capital structure must be carefully planned. The choice between stocks and bonds of different varieties depends on many considerations, including whether the business has an established earnings record, the ratio of property to its obligations, the rate of return that must be paid, probable marketability and attractiveness to investors, advantages under federal and state tax laws, and the effect on the future credit and ability of the corporation to survive business cycles.
- Since a corporation’s power to redeem shares at a set price is part of the preferred share contract, complaints that a redemption price is unfair vis-à-vis the shares’ market value should be unsuccessful. The exercise is subject to the standard requirements of the business judgment rule.
- Income bonds, which are not normally issued except during a corporate reorganization, are obligations that call for interest payments only to the extent that income is earned annually or within specified interest periods. Such interest payments ordinarily are not made cumulative. Income bonds remove the menace of fixed charges and depend for their return on the success of the business.
- Liberty Media Corp. v. Bank of New York Mellon Trust Co. N.A.,2011 WL 1632333 (Del. Ch. 2011) (there be no evidence of a master plan to dispose of all the assets the court held that each of four disposition transactions would be treated separately as each was supported by its own business justification).
- BankAtlantic Bancorp., Inc. Litig., 39 A.3d 824 (Del. Ch. 2012)(successor obligation clause is boilerplate, entitled to uniform interpretation, and purpose of clause is to ensure that borrowers have the flexibility to sell entire business and liquidate, or to liquidate their operating assets and enter a new field free of public debt, so long as the debt is transferred with substantially all of the assets or is otherwise paid).
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Chapter 27. Investor Protection: State and Federal Securities Regulation 48 results (showing 5 best matches)
- It is the policy and purpose of this type of legislation to prevent unscrupulous dealers foisting on inexperienced persons unfair, spurious, and worthless securities, and further to provide some method of supervision and regulation of the marketplace. Blue sky laws often give administrative officials great power over the activities of issuers, promoters, and dealers offering shares, bonds, and all types of securities and investment contracts of both incorporated and unincorporated companies for public sale. The laws thus regulate business trusts, partnerships, and individuals as well as corporations.
- Another common form of investment is a partnership interest. Partnership interests can implicate the definition of “security.” Since general partners ordinarily take an active part in the business, interests in a general partnership ordinarily will not be securities. In the case of the new form of doing business known as a limited liability company, if the enterprise is set up in such a way that the owners will be active participants, the securities laws are not likely to be implicated.
- State corporate laws are geared to the chartering function and for the most part do not concern themselves with investor protection. The great problems caused by stock watering and other fraudulent promotional schemes at the turn of the century did not result in adequate common law safeguards. The courts’ inability to prevent or redress these frauds led to the passage in 1911 of the first state securities regulatory scheme, or blue sky law. The importance of the state statutes has been dwarfed to a large extent by the impact of federal regulation. Yet, the state laws provide significant protection for investment schemes that are either small or essentially local in nature as well as supplementing federal law for more widely offered issues. The topic of securities regulation consumes several treatise volumes and thousands of pages in law reviews. What follows is but a general introduction and overview.
- SEC Rule 168(a), 17 C.F.R. § 230.168 (2015). This exemption applies to the types of information that the company has been disseminating in the regular course of business.
- 15 U.S.C. § 77c(b), as amended by Jumpstart Our Business Startups Act (JOBS Act) § 401, H.R. Rep. No. 112–3606, Cong. 2d sess. (2012).
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Chapter 21. Repurchases, Redemptions and the Reduction of Capital 27 results (showing 5 best matches)
- This interpretation essentially brings the law of Delaware into line with the discretion the board of directors enjoys under the current Model Business Corporation Act to resort to unrealized gains as a source for distributions to shareholders. One should approach these developments with a healthy appreciation of the risks of allowing such discretion. Corporate law has historically restricted the ability of directors to make distributions to shareholders out of fear that if unrestricted the directors may prefer the interests of shareholders over the pressing rights of creditors. The historical limitations, albeit artificial, nevertheless were guided by metrics that were objective and certainly not within the control of the board of directors. ...economic profits. True gains are those that are amounts that are not necessary to continue to operate the business at its present state. Thus, the fact that the company’s asset in Manhattan has appreciated greatly in value does not mean that...
- The more restrictive earned-surplus test had become a trademark of the Model Business Corporation Act. These amendments present a radical departure to a total-assets-exceed-total-liabilities plus-liquidation-preferences balance-sheet test. The Model Business Corporation Act does retain a basic insolvency test.
- Under the pre-1980 Model Business Corporation Act, share repurchases were generally limited to the extent of unrestricted earned surplus or unrestricted capital surplus if specifically authorized by the articles or a majority shareholder vote. The earlier version of the Model Business Corporation Act exempts certain repurchase transactions, such as elimination of fractional shares and retirement of redeemable shares. The 1980 amendments to the Model Business Corporation Act’s financial provisions, carried forward to the present Model Business Corporation Act, treat share purchases as a form of distribution to shareholders and apply the same limitations to share purchases as to dividends. Because the California statute and since 1980 the Model Business Corporation Act provide that repurchased shares are restored to the status of authorized but unissued shares, they have each thereby prevented such shares from being reported as treasury shares.
- or a lack of relation to the corporate objects and business. Purchases of its shares, like purchases of its bonds, may be regarded as an incident of adjusting its financial structure to the needs of the business.
- Due to the fictional nature of treasury shares, the current Model Business Corporation Act, following the 1980 amendments to the Model Business Corporation Act and the California statute, has abolished the need to recognize treasury stock. Under these provisions
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Chapter 26. Voluntary Dissolution, Administrative Dissolution, and Winding up 18 results (showing 5 best matches)
- Filing of a certificate of dissolution and, in some states, the publication of notice are required steps. After the statement of intent to dissolve has been duly adopted and filed, notice thereof is generally required to be sent to all known creditors. When a corporation conducts business in several states, it must dissolve according to the law of the state that granted its charter.
- Most states authorize dissolution based solely on the approval of the incorporators or the initial board of directors. Each jurisdiction that authorizes this method of dissolution when either one or both of the following two factors are present: 1) the corporation has not issued shares; or 2) the corporation has not commenced business activities. In jurisdictions based on the pre-1984 Model Business Corporation Act both factors must be present, while jurisdictions based on the current Model Business Corporation Act require the presence of either one of the two factors. or require only that business activities have not commenced.
- Voluntary dissolution of a corporation involves two legal steps: (1) the dissolution itself, which involves the termination of the corporate existence, at least as far as the right to continue doing ordinary business is concerned, and (2) the winding up of affairs, payment of debts, and distribution of assets among the shareholders. Winding up may precede or follow the dissolution, depending on the jurisdiction’s statutory procedures. For convenience in winding up, the corporate existence is usually continued either indefinitely or for some period limited by law in order to dispose of the corporation’s assets and pay creditors.
- The pre-1984 Model Business Corporation Act provides a two-step process to dissolve. First, a statement of intent to dissolve that has been approved by the shareholders is filed with the Secretary of State. Additionally, notice of the intent to dissolve must be given to known creditors during this step. Second, when the winding up process is completed, the articles of dissolution must be filed. The Secretary of State then issues a certificate of dissolution and the corporation is dissolved. The current Model Business Corporation Act and a clear majority of the states have simplified the process by requiring only that the articles of dissolution to be filed, with the dissolution becoming effective as of the date of the filing.
- require that a corporation cease all business activities upon dissolution, except those germane to winding up the affairs of the corporation. The current M.B.C.A. and statutes patterned after it go as far as to provide a list of various steps to be taken during the winding up period. These steps include: (1) collecting the corporation’s assets; (2) disposing of properties that will not be distributed in kind to the shareholders; (3) discharging or making provision for the liabilities of the corporation; (4) distributing the remaining property among shareholders; and (5) doing every other act necessary to wind up and liquidate the corporation’s business and affairs.
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Chapter 25. Amendments to the Corporate Charter 23 results (showing 5 best matches)
- In most instances the amendment of the articles of incorporation requires the approval of both the board of directors and the shareholders entitled to vote. Many states follow the lead of the former Model Business Corporation Act and the current Model Business Corporation Act to permit certain types of amendments solely on the authority of the board of directors. In most instances such authorization is confined to certain “housekeeping” changes, such as deleting the names or addresses of the initial directors, substituting the full expression “corporation” or “incorporated” for the abbreviated version, or vice versa, or to deleting the name or address of the initial registered agent. Some substantive changes are also authorized to be made solely on the authority of the board of directors, such as the power to extend the duration of the corporation if the corporation was formed at a time when a limited duration was required by law,
- ...understand the formal procedures that accompany the process of amending the articles of incorporation invites a reconsideration of the earlier discussion that a corporation is but a “nexus of contracts.” This metaphor describes the unique contractual relationship that exists among the shareholders, the corporation, and the state of incorporation. At the heart of this contract are the corporation’s articles of incorporation as well as the statute under which it is incorporated. By conceptualizing the shareholders’ relationship with their corporation as contractual, with the terms of that contract set forth in both its articles of incorporation and the local corporate statute, a certain rigidity in that relationship appears. Thus, absent some authority in either the articles of incorporation or the laws of the governing state, an amendment of the articles of incorporation would appear to require the consent of all shareholders. This statement merely reflects the basic principle of...
- Corporation statutes vest the management of corporate business in the board of directors. The board’s authority extends to the making of contracts of any kind, incurring indebtedness, and authorizing any other act, unless otherwise limited by the articles of incorporation or by a provision in the state corporation statute. Any statutory limitation on the board of directors’ authority to carry out corporate business arises when the transaction is of a type for which the statute requires shareholder approval to be obtained. Shareholder approval is so required in those instances where the transaction poses a fundamental change in the corporation or the stockholders’ economic or voting rights. Fundamental corporate transactions are those characterized by their extraordinary nature as well as by the unusual changes they bring either to the corporate business or to the rights of its shareholders. It is because of their effects on the business and the shareholders that the authority to...
- The Constitution declares that “[n]o State shall … pass any … Law impairing the Obligation of Contracts….” When the legislature of a state grants a charter to a private corporation, whether it be of a business or a charitable nature, the charter embodies a contract between the state and the corporation and later its shareholders.
- The Model Business Corporation Act grants appraisal rights when an amendment to the articles of incorporation, with respect to a class or series of shares, reduces the number of shares of a class or series owned by a shareholder to a fraction of a share if the corporation has the obligation or right to repurchase the fractional share.
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Chapter 19. Accounting Statements and Dividend Law 29 results (showing 5 best matches)
- Shares of stock outstanding are usually represented at their aggregate par value if they have such, or otherwise at their stated value. Reflecting par value in the capital stock account is more or less mechanical and traditional, for it has little or no reliability as a record of the amount of actual investment of the shareholders in the business. The directors may allocate a larger part of the paid-in capital to stated capital rather than account for it as capital surplus. The customary capital stock entry corresponds more closely to the important concept of stated or legal capital. All corporation laws, except California’s and those of states adopting the current Model Business Corporation Act,
- Statements are prepared based on the assumption the business will have a continuous existence. This is frequently referred to as the “going-concern assumption.” Thus expenditures for such items as future insurance coverage, a new piece of machinery, and inventory are not charged against revenues as an expense if these assets are believed to contribute to the operations in future years. That is, by assuming an indefinite life for the business, the accountant can assign present expenditures to future years on the basis estimates regarding when a purchased item is likely to contribute to operations. If a going concern were not assumed, then all expenditures would be “expensed” in the year the item was purchased.
- As will be seen, the balance sheet is the basic financial report for dividend purposes; most important, it indicates whether, pursuant to an older regulatory pattern, a corporation has sufficient “surplus,” or, pursuant to statutes patterned after the current Model Business Corporation Act, its assets are sufficient in light of the firm’s liabilities, so that there is a basis for dividends or other distributions to shareholders.
- Fixed assets comprise those that are held indefinitely for the purpose of conducting the business, as contrasted with those that are intended for sale. Assets within this category contribute to future operations through their use or consumption during a longer time period than one year or operating cycle. They may be tangible or intangible property interests owned by the business and include land, buildings, machinery, and equipment as well as goodwill, patents, trade secrets, and other intangible assets. Overvaluation of tangible or intangible assets has frequently been the cause for skepticism as to whether such assets’ fair market value can ever be reliably determined.
- This special class of debits, seemingly of relatively minor importance, might best not be designated as assets. By definition, a “deferred charge” is an expenditure for a service that will contribute to the generation of revenues in the future. Prepaid expenses, as the name implies, more closely resemble operating expenses but are temporarily designated as assets, until they are consumed by the business. Examples of prepaid expenses are prepaid premiums for insurance covering the protection one or more years in advance, and rent paid in advance. These two examples represent expenses that are not charged against income for the period in ..., deferred charges may be described as long-term prepaid expenses. One example is the unamortized debt on bond discount plus the expense of the bond issue. Likewise, legitimate organizational costs may be regarded as creating intangible assets for a going concern, from which the earning capacity of the business will benefit over long periods...
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Chapter 23. Equitable Limits on Acquisitions and Defensive Maneuvers 76 results (showing 5 best matches)
- One of the most basic tenets of Delaware corporate law is that the board of directors has the ultimate responsibility for managing the business and affairs of a corporation. Section 141(a) [of the Delaware statute] requires that any limitation on the board’s authority be set out in the certificate of incorporation. The Quickturn certificate of incorporation contains no provision purporting to limit the authority of the board in any way. The Delayed Redemption Provision, however, would prevent a newly elected board of directors from completely discharging its fundamental management duties to the corporation and its stockholders for six months. While the Delayed Redemption Provision limits the board of directors’ authority in only one respect, the suspension of the Rights Plan, it nonetheless restricts the board’s power in an area of fundamental importance to the shareholders—negotiating a possible sale of the corporation. Therefore, we hold that the Delayed Redemption Provision is...
- The utility of the business purpose test appears to be its invitation to the court to review somewhat more widely the overall terms, objectives, and motivations surrounding the acquisition. There is little evidence that the business purpose test otherwise provides strong and predictable protection to the minority or ensures the majority against the unnecessary scrutiny of a fair transaction. It is important in this regard to stress that the emphasis of the business purpose test is on the purpose for the acquisition; the business purpose test applied by the courts does not inquire as to why the acquisition’s terms provide cash, rather than a continuing equity participation, to the acquired corporation.
- Notwithstanding its subsequent rejection in Delaware, the business purpose test continues to be an issue in many other jurisdictions. Further, the business purpose test is not limited to mergers; it has also been applied, for example, where the directors issued additional shares to themselves to perpetuate their control.
- The defense against a takeover attempt is generally covered by the business judgment rule, which allows management the use of reasonable corporate funds to defend its policies. The business judgment rule does not apply, however, to decisions by directors who have a self-interest in the transaction. Often a charge is made that a takeover defense is motivated by the directors’ desire to entrench themselves in office. Accordingly, the courts have to decide in which instances the directors will be insulated by the business judgment rule and in which instances their self-interest will limit their discretion to act.
- A unique defensive tactic used in recent years is the acquisition of another business by the target company, creating a potential antitrust threat to impending tender offers. A somewhat related strategy of imposing a regulatory obstacle in the suitor’s path is to purchase assets of a type such that any change in their ownership requires prior governmental clearance. For example, the purchase of a radio station or some other heavily regulated business can tie up the takeover attempt in any administrative proceedings that may be needed to approve a change of ownership in the regulated business. Another type of asset acquisition that becomes a defensive maneuver is the “Pac-Man” defense, where the target company makes a tender offer for control of the original tender offeror.
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Chapter 8. Powers of Officers and Agents; Tort and Criminal Liability of Corporations 17 results (showing 5 best matches)
- The president of a corporation, as its executive head, is often expressly or impliedly given supervision and control of its business. In view of this general practice, some courts have adopted a doctrine of “inherent authority”—namely, that the president of a business corporation, solely by virtue of the office, may bind the corporation by contract and by other acts in the usual course of its business. Other courts recognize a “presumptive authority,” taking the position that contracts entered into or acts performed by the president of a corporation in the ordinary course of the corporation’s business are presumed to be within his or her authority until the contrary is proven. The presumption is limited, however, to acts in the ordinary course of business and does not extend to all matters that can be authorized by the board of directors.
- Because mens rea has been a staple of English common law, responsible under the criminal law for the violations of their subordinates, unless the officer or director had knowledge of the subordinate’s criminal act. If the business is unlawful, an entity’s executive may be held vicariously liable for a subordinate’s criminal acts regardless of whether the executive was present or had knowledge of the act.
- The CEO or president may be expressly given general authority to supervise and manage the business of the corporation, or a particular part of it. In such a case the president’s authority extends impliedly to any contract or other act that is incident to the ordinary business of the corporation, or to that part with which he or she is entrusted; thus there is no need for special authority for the particular acts within the ordinary business of the corporation or that part of its operations to be expressly granted. Furthermore, in the absence of express authority a corporation may be estopped to deny the authority of its president where it has created apparent authority in the president to make contracts or do other acts, as when a corporation allows its managing officers generally or habitually to make contracts or perform acts of that type. ...to carrying on the corporation’s ordinary business and does not extend to extraordinary transactions. In any particular case, the...
- The title of chairman of the board and chief executive officer, when held by a single person, identifies the center of actual power within the organization. Recently there has been much discussion whether the governance of the public corporation would be improved by separating the two positions and assigning to an outside director the role of chairmanship of the board of directors so as to provide something of a counterweight to the inertial flow of power to the chief executive officer.
- , 60 A.D.3d 1468, 876 N.Y.S.2d 298 (4th Dep’t 2009) (president has authority to sign lease under grant of authority to manage the business).
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Table of Contents 29 results (showing 5 best matches)
- § 1.15 The Business Trust (Massachusetts Business Trust)
- § 3.3 The Usual Steps in the Formation and Organization of a Corporation
- CHAPTER 1. FORMS OF BUSINESS ASSOCIATION—DEFINITIONS AND DISTINCTIONS
- § 1.10 Tax Considerations in Selecting a Business Form
- [1] Tax considerations in selecting a business form
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Chapter 24. Federal and State Takeover Laws 33 results (showing 5 best matches)
- Item One must contain a description of the security purchased and its issuer. Item Two elicits information regarding the beneficial owner, including the principal business of the person making the filing and whether the filer has been convicted within the past five years of criminal violations or has been the subject of a civil order arising out of a violation of the securities laws. Item Three requires detailed disclosures of the source and amount of funds or other considerations being used to acquire the securities. Item Four requires a description of the purpose(s) of the transaction, including any plans the purchaser may have that likely will result in a reorganization or a business combination such as mergers, consolidations, sales or acquisition of substantial assets, tender offers, changes in dividend policies and the like.
- Briefly, if the bidder or other person presents the request according to the rule’s requirements, the target company’s management must comply, but the reasonable cost of compliance can be charged to the bidder. Faced with such a request, the target company has two options. First, within three business days it may deliver the stockholder lists to the bidder making the request. Or secondly, it can mail the bidder’s materials, within three business days of receipt, to the target company’s holders.
- provides that withdrawal rights may be exercised throughout the period that the tender offer remains open, which must be for at least twenty business days. Any increase or decrease in the consideration offered under the tender offer requires that the tender offer’s duration be extended for an additional ten business days from the date of change in consideration.
- The Illinois statute required the bidder to notify the secretary of state 20 business days before commencing its tender offer, and the secretary of state was empowered to convene a hearing in which case the tender offer could not proceed until the hearing’s completion.
- The Indiana statute applied to target corporations that (1) were incorporated in Indiana and (2) had their principal place of business or substantial assets within Indiana and a certain number of shareholders in Indiana. The latter two-point bases were not emphasized by the court, and logic would suggest that being incorporated within the state justifies applying its anti-takeover provisions.
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Index 20 results (showing 5 best matches)
Summary of Contents 4 results
Advisory Board 9 results (showing 5 best matches)
- Distinguished University Professor, Frank R. Strong Chair in LawMichael E. Moritz College of Law, The Ohio State University
- Professor of Law Emeritus, University of San Diego Professor of Law Emeritus, University of Michigan
- Professor of Law, Chancellor and Dean Emeritus, Hastings College of the Law
- Professor of Law, Yale Law School
- Professor of Law, Pepperdine University Professor of Law Emeritus, University of California, Los Angeles
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Table of Statutes 128 results (showing 5 best matches)
- Publication Date: February 24th, 2016
- ISBN: 9781634592277
- Subject: Business Organizations
- Series: Hornbooks
- Type: Hornbook Treatises
- Description: Clear, succinct, descriptions of the reasoning and policy issues underlying corporate law that is accessible to law students with no business or economic background. The 2016 edition is thoroughly updated to include recent U.S. Supreme Court, Delaware and other leading decisions and regulatory developments that impact the fiduciary obligations and duties in corporate transactions, governance, and management of corporations and LLCs, as well as benefit corporations, including rules implementing important provisions of the Dodd-Frank Act of 2010 and the Jobs Act of 2012 that have changed, the landscape of securities fraud suits in the federal courts, new discussions of unincorporated forms of business, insightful explanations of such news-making issues as corporate governance and director liabilities, and coverage of LLCs and LLPs.
