This action might not be possible to undo. Are you sure you want to continue?
PersonallyLiableon pre-incorpKs** untilcorp adopts K(EIN) ExpressBOD resolution OR Implied adoption (w/ knowledge/acceptance of benefit), then Novation occurs substitutes promoter w/corp on original K Corp now liable for pre-incorp acts of promoter NB: Promoter remains liableif no corp formsor no novation Secret Profits(PBD) Promoter profits From Businessdeals w/ corp, & Doesn·t fully Disclose profit to BOD/SH Duties : fiduciary, fair disclosure& good faith Fraudby promoter SUBSCRIBERS (SI) One who makes writtenStock offerrecorp not yet formed Offer Irrevocable for 6 months FORMATIONISSUES (REP DeF2) FORMATION REQUIREMENTS (PPA) Paper: Articles of Inc.(APAIN) K b/n corp, SH& State; must include: Authorized shares Purposestatement Agent (name & address) ² corp·s legal rep Incorporators Name of Corp People: Inc.·ors sign articles Act: file articles w/ State & pay req·d fee Acceptance proof of valid formation of De Jure (´as a matter of lawµ) Corp CORP BY ESTOPPEL (SEAK) Status of Doctrine: ´abolished in many states. However, if allowed, works as follows«µ (include in essay) One tx·ing business as corp may be Estopped from denying corp status Prevents Avoidance of obligations Usually available in K, not tort (narrower) PIERCING CORPORATE VEIL** SH not liable for acts/debts of corp, unless fairness requires it EXCEPTIONS (AEU) AlterEgo - insufficient corp formalities SH tx corp & personal assets as interchangeable Cts will PCV to avoid fraud/unfairness More willing to PCV in tort than K NB: Sloppy admin not enough for PCV Watch for PCV when parent corp forms subsidiary to avoid obligations ² can pierce sub to reach parent Undercapitalization (insufficient funds to cover 4Cable liabilities) Ct might PCV if undercapped when formed DEFACTO CORP DOCTRINE* (SCENK) De Facto Status protection if: Relevant incorp Statute Parties made good faith, Colorable attempt to comply w/ statute Some Exercise of corp privs NoKnowledge of failure to form de jure corp FOREIGN CORP (OEQ) A corp inc·dOutside State Wishes to Engage in business Must Qualify by filing cert of authority w/ State include all info req·d in articles of incorp STOCK ISSUANCE ISSUANCE Occurs when corp sells/trades own stock to raise capital CONSIDERATIONHow much is corp stock worth? (FP2T) FORM OF CONSIDERATION ² SPLIT:
will issue 3.000 shares of C Corp. there are 5. services performed Prohibited: unpaid stock. C Corp. tangible/intangible property.000/5.Trad: cash/check.Dselected by SHs (ERS) Elect entire BOD or stagger (½ to 1/3) SH can RemoveDsb4 term expires w/ or w/out cause (requires majority) BOD or SHSelectfor vacancy on BOD VALID MEETINGS (MMQ) Meet via agreed upon Method Notice can be set in bylaws Proxies void/Ø public policy ² need Ds independent judgment Must pass w/ Majority of those present M/h Quorum to take action EX:9 Ds ² 5 Ds must be present & 3 Ds must vote to pass resolution NB: W/ounanimity/quorum/voting. promissory notes Strong Trend: payment w/ any tangible/intangible property/benefit to corp PAR VALUE: [Minimum Issuance Price] (VMW) BODValues stock ² m/b in good faith Corp Must receive par value unless stock isno par (modern) IfWatered(less than par value) stock issued (IMPP) Issuer personally liable SHbuyer MustPay full price Buyer Presumed to have notice 3Pbuyer not liable if in good faith PREEMPTIVERIGHTS: [Right of Existing SH to Keep% of Ownership] Right to buynew issuance stock EX:B owns 1.SPLIT: Trad: exist unless articles sayo/w Strong Trend : don·t exist unless in articles TREASURY STOCK: [Stock Previously Issued & Reacquired by Corp] (CRNP) BOD value Conclusive if in good faith Can be Resold Tx·d as NoPar DIRECTORS & OFFICERS DIRECTORS (RRVDL) ROLE OF D(MAD) Manages corp business has Access to corp records can Delegate to committees REQUIREMENTS: (NE) Number ² one or more adult Election . good faith. future services.000) If articles silent re preemptive rights .000 more shares W/ preemptive rights. act void unless later ratified by a valid corp act DUTIES &LIABILITIES (MCLØUI) Duty to Manage : (PSRD) Set Policy Supervise officers Recommend fundamental corp changes to SH Delegate managementfunctions to committees NB: Business Judgment Rule [BJR] presumption actions are on informed basis. in honest.000 shares o/s. and in corp·s best interests DutyofCare: owed by D to corp (GPNM) Must act in Good faith Must use Prudent person w/ own business standard of care (burden on ) Business Judgment Rule (BJR) Ds who manage in good faith & in best interest of corp No Breach Standard(GIR) Made in Good faith Was Informed& Had a Rational basis Nonfeasance(BOD does nothing) ONLY liable if D·s breach caused a loss to corp must show Breach of duty of care . B maybuy 600shares (or 20% of 3000) since she is 20% owner (1.
using Material.Causation& Damages to corp Misfeasance(BOD hurts corp) ONLY liable if Ø BJR& shows breach of duty of care Fiduciaryduty to corp (Burden on ) DutyofLoyalty(CCOTØSD) Compensation set by D.SH hire & fire D INDEMNIFICATION OF Ds. In breach of Fiduciary duty. intentional misconduct or wrongful personal benefit In some states. it·s derivative) Make Demand on BOD to bring suit BOD rejects or 90 days pass Corp can move to Dismiss derivative suit if not in corp·s best interests . must: TellBOD&Wait for BODto reject opportunity NB: Corp·s inability to pay for opportunity NOT a defense Remedy: D must sell item to corp at cost ORgive up profit (constructive trust) DutyØ Insider Trading(TFITT) Trading a security.Dcan·t compete directly w/ corp Owed to corp by D Burden onD NB: BJR doesn·t apply toconflicts of interest Transactions will be set aside unless D shows: (FDA) Deal was Fair to corp when entered. can bind corpby their authorized activities Compensation set by D NB: D hire & fire O. govt employees Policy: undermines investor confidence. family. such provisions are available for D. SEC priority NB: Corp insiders may buy & sell company stock. damages for business harm Duty Ø Usurp Corp Opportunity (T&W) Dcan·t usurp corpopp. SHs&Os(BANAMO) -. services companies. OR D·s interest/relevant facts Disclosed&Approved by majority of disinterested D/SH ØSelf-Dealing no benefit to detriment of corp SH² need material disclosure & independent ratification Remedy: constructive trust on profits. but must report trades to SEC OTHER BASES OF D LIABILITY (UIIS) Ultra Vires Act (beyond scope of authority/power): responsible D/Os liable for such losses Improper Loans:BOD loans ok if RP expected to benefit corp (some states: need SH vote) Improper Distributions Securities Liabilities OFFICERS SAME DUTIES AS Ds STATUS: agents of corp. not O Never indemnify if D/Oliable Always indemnify if D/O wins May indemnify if liability to 3P or settlement w/ corp if D/O showed BJR Ct canOrder indemnification if justified RIGHTS OF SHAREHOLDERs DERIVATIVESUITS RULES: (LASSOED DJ). waste of corp assets & a breach Competing Ventures .sued in work capacity. m/b RP IF excessive. SH must: Show Lackof good faith/inquiry Adequately represent interest of corp Post Security bond for costs Have Ct approval to Settle Own> one stock when claim arose & throughout litigation Sue to Enforce corp·s COA (if corp could bring. nonpublic Info May also includeTipping or using Tippedinfo EX: friends. seekreimb from corp Corp can Buy insurance for D/Oliability Articles can: Allow limitation/elimination of liability for damage Can·t cover breach of loyalty.
ofRecorddate (BOD sets)can vote SH can vote by Proxy(WAVSIR) Writing Authorizing another tovote their shares Valid for 11 months Sent to corp secretary Unless labeled Irrevocable& coupled w/ an interest.. damage toearnings) NB: Watch for facts that would put RP on notice re shady buyer INSPECTIONRIGHTS RULE: SHs have right to examine corp books/records w/ notice & proper purpose DIVIDENDS RULE:Dividends declared at BOD discretion unlesscorp insolvent orw/bmade insolvent by dividend PRIORITYOFDISTRIBUTION: (PPCC) Preferredshares first Participatingsharepaid twice (as preferred & common) Cumulative shares (paid for previous years & for no dividend) Common shares paid last & equally CA DIFFERENCE -. proxies are Revocable Properly Noticed meeting M/hSHQuorum VOTINGMETHODS: (TAC) Voting Trusts (10TRC) Formal& enforceable up to 10 years Written trust agreement filed w/ corp to Transfer shares to votingtrustee SHRetains all other rights except voting SH will get a Cert SH Voting Agreements(VBNT) Written agreement on way to Vote shares Binding& enforceable NoTime limit or filing requirement Cumulative Voting for D (EM) Right has to be Explicit in articles SHMultiplies# ofshares by # of D to be elected NO LOOTING OF CORP ASSETS(LD) Controlling SHLiablefor sale w/out RP investigation Liable for Damageto corp ² amt looted & any other harm (e.SHs have no right to receive dividends at all PROCORPS REQUIREMENTS: Licensed pros may Inc. in writing. by SHs M/bRPSH restriction. as PC if (MOLD): SH liable for malpractice Corp practices one profession SH are licensed pros Name designated as PC NOTES: PC may employ nonpros SH AGREEMENTS TO ELIMINATE CORP FORMALITIES(URPE) RULE: M/bUnanimously agreed. low chance of success orcost of litigation would exceed recovery ** Corp must be Joinedinitially as CONSEQUENCES OF A SUCCESSFUL DERIVATIVE SUIT (RRD) Recoverygoes to corp SHReceives cost/fees from corp Exception: Ct may allow SHto recover Directly if money would go to bad guys CONSEQUENCES OF AN UNSUCCESSFUL DERIVATIVE SUIT (CRL) SHCannot recover costs & fees SH may be liable for costs & fees (ifnotRP) NB: Later suit on same T/O w/b res VOTING PROCEDURE: (RdPNQ) Only SH. such as no public trading Eliminates formalities w/out PCV CLOSE CORPS(MFSHNP FLO) SHsor BODcan Manage closely heldcorp FewSHs& stock NotPublicly traded SHs owe each other Fiduciary duties SHs must be Licensedpros& .g.e.g.
To engage in any act.SHcan force corp to buy her shares for fair value Requirements: File written notice of objection & intentto demand payment b4SH vote Do not vote in favor of proposed change.Approval by SHquorum RIGHTOFAPPRAISAL:. use to buy or sell securities in Connectionw/actual buy or sale of securities RULE ² illegal to use any fraudulent scheme in connection w/ buying or selling any security ELEMENTS: NOTE: Recovery by private buyer. buyer or seller of securities who misrepresents material info Possible BADACTS by (MFT2) . file articles of disso & give notice to creditors Involuntary (by Ct order) SH can petition b/c of: Director abuse. unanimous written SH agreement ok After either of these. waste of assets. OR SH deadlock & failure for at least two annual meetings to fill avacant board position After dissolution proceedings. national exchange POSSIBLE SEC Private buyer or seller of securities POSSIBLE S² any person (human or entity) EX: Company issues misleading press release. misconduct OR Director deadlock that harms company.Generally PC may practice only One profession FUNDAMENTAL CORPORATE CHANGES FIVE TYPES(MCDFS) MERGER: A becomes B D&SH of both corps must approve Exception: short form merger doesn·t require SH approval CONSOLIDATION: A & B become C DISSOLUTION:A dissolves(MLVIL) Majority of D/SH must approve (no quorum needed) If Liquidation. or. mail. scheme. & Make prompt written demand to be bought out FILEARTICLESOFNOTICE: State wants to know when corp makes fundamental changes FEDERAL SECURITY LAW CONSIDERATIONS SECTION 10B5 ² EMPLOYMENT OF MANIPULATIVE/DECEPTIVE DEVICES §10(B)(5) It shall be unlawful for any person: directly or indirectly. & Distribute any remainder to SHs (pro-rata share) NB: Ct may order buy-out of complaining SH(usu. To employ any device. & . or course of business which operate(s) as a fraud/deceit re person. phone. re purchase/sale of any security REQUIREMENTSFORVIOLATION (IAC) Intent to deceive Actual deception (material misrep or misapprop of nonpublic info) NB: Misappropriation theory: convert material nonpublic info. or artifice to defraud.g. seller or SEC(JX. by instrumentality of IC or of mails or any national securities exchange. To make any untrue statement of a material fact or to omit to state a material fact necessary so not to mislead. practice. Liquidate: (GCPD) Gatherall assets Convert them into cash Pay off creditors. for close corp)** FUNDAMENTAL AMENDMENTS TO ARTICLES(IH) Insert any provision that w/h/b lawful in originalarticles Housekeeping changes: can be made w/out SHapproval SALES OF SUBSTANTIALLY ALL CORP ASSETS(RS) RequiresSH approval considered Substantial change to corp FIVE PROCEDURAL STEPS (ANVAF) ADOPT resolution (BOD) NOTICE OF SPECIAL MEETING² given to SH VOTE . pay outside creditors first Voluntary BOD resolution/approval by a majority voting shares OR In some states.BAMS RD) INSTRUMENTALITY OF INTERSTATE COMMERCE(PROVIDES JX): e.
one RP investor would consider important to know b4 investing SCIENTER: must knowingly deceive. trading secrets negates that Imposed on insiders & temporary insiders Tipper passing material inside infofor wrongful purpose&benefit Doesn·t have to use info himself Gift or enhancing rep constitutesbenefit Tippee: traded on tip rc·d& knew or s/h/kinfo improperly passed NB: Bad act m/b in connection w/ buy or sale of any security (includes debt/equity securities) MATERIALITYMisrep/omission re material fact Material fact . or defraud Negligence not enough for scienter. b4 or after any sale. or at least 500 SH& $10 million in assets Insider (D/O or SH>10%) Re buying& selling of stock w/in6 month period (ShortSwing trading) Remedy: profits go to corp²Disgorgement NB: Fraud. inside info not required When 16(b) applies: All profits recoverable by corp If w/in 6 months. manipulate. listed on nat·l exchange. buy at lowerthan sale price profit (note difference as profit) NB:FOCUS ON SALE SARBANES-OXLEY ACT 2002 *** INTENT: protect investors by improving accuracy/reliability of corp disclosures REQUIREMENTS: Applies to all public companies CEO & CFO must certify that reports filed w/ SEC: Contain no material misrep or omissions.Misrepresentation of material info(fraud on market) Covers those whorelied on info& bought or sold securities Failuretodisclose when trading on material inside info when duty to disclose exists Duty comesfrom need for trust & confidence w/SHs Everyone m/b on same footing. recklessness may be enough RELIANCEpresumed in nondisclosure & public misrep DAMAGES: difference b/w price paid & price RP time after news wentpublic SECTION 16B ² SHORT SWING TRADING PROFITS REQUIREMENTS (RI/6MONTHs/SS/D) ReportingCorp: reg·d per SEC §12. & Give fair account of corp·s present financial position Willful certification of false report $5M fine & 20 year jail sentence Corp (directly or derivatively) may recover for false statements .
publish summary2 newspapers for 6 wks Liabilities: members not liable for business debts Control by members. liquidity. tax) Formation: file Articles of Org. may transfer to 3P parties Share in management: owned by Pship. P may not transfer to 3P Pship or personal $used to pay for property? Management: absent agreement.equally or by agreement .incoming Ps$ ok to pay debts OutgoingPs retain liability. Pship may bring an action for accounting Recover losses from breach & Disgorge profits Pship assets: P may not transfer land. P dies) Rights & Liabilities B/nP Pfiduciaries of Ps&Pship Duty of Loyalty: no self-dealing. profits & losses shared equally Pship Dissolution (DTWCL) Dissolution: any material change in Pship caused by GP death/w/drawal Termination. & until notice to known/potential creditors Priority of distributions Paid 1st: outside creditors Paid 2d: P who loaned Pship$ Paid 3d: P who contributed capital Paid 4th: profits & losses b/n Ps .end of Pship Winding Up period ..disso may occur (e. who may delegate Interests of members not freely transferable (via agreement) Ltd life . unless notice given to known/potential creditors Estoppel: one who repsthat Pship exists w/b liable as if Pship exists Ltd Pships/corps LtdPships (LLPs): at least 1 GP& 1 ltdP Formation: file cert of ltdPshipw/ Sec of State w/ names of GPs Liability & Control: GP: liable personally for all debts & obligations GP: may exercise managerial control LtdP: not liable for debts/obligations of business Ltd P: may not exercise managerial control Reg·dLtd Liability Pships (RLLPs) .Pship&GP retain liability for existing creditors.PARTNERSHIP Formation No formalities to beGP Def: ass·n of 2 or more who act as co-owners of business for profit Sharing profits prima facie Ev of GP Liabilities of P to 3P Parties Agency principles apply: P agents ofPship Pship bound by torts committed by P in scope of Pship Pship bound by K entered by Pw/ authority GPs Personally Liable for Debts of Pship IncomingPs not liable for debts. P gets no salary (except during disso) Profits/Losses: absent agreement. & no secret profits If breach. life. each Pgets equal control (vote) Salary: absent agreement.GP provides pro services Formation: Must file cert of regw/ Sec of State Liabilities: No P liable for business debts/obligations P liable for own debts &for debts of those they control Ltd Liability Corp (LLC): ltd liability. no usurpation. & tax Purpose: owners same ltd liability asSHs. & equipment owned by Pship to 3P P rights Share of profits & surplus: individual Powns shares. tax benefits ofPship (better than corp. leases.liquidation for creditors Compensation&Liability for winding up Pget comp during disso Liability for winding up .g.
reasonable person MPC Modern Penal Code defendant Corp corporation Circs circumstances V victim m/b must be K contract Juvi juvenile peremps peremptory challenge admiss admissible SOL statute of limitations PC probable cause DP due process unRP unreasonable person 3PB third party beneficiary B4 before en4able enforceable P·orpromissor Op operation Uni K unilateral contract TP third party defendant CA California Rules SH shareholder w/ with G·ee grantee RPP reasonably prudent person SP separate property Q question Cong congress/congressional CEC CA Evidence Code COI conflict of interest NG not guilty Tx treat Ex: example usu.Abbreviation Key RP reasonable. usually C/L common law m/h must have m/h/h must have had M modernly/married prelim preliminary FM felony murder Q question! S&S search & seizure Wrnt warrant ID identification GJ Grand Jury B/Benies beneficiaries/benefits rq·d required P/Evparol evidence Bi bilateral r·cd received 3P third party S&C summons & complaint O Officer/Owner BOD Board of Directors Pship partnership RAP Rule against Perpetuity Mort mortgage QCP quasi community property SS strict scrutiny Exec executive branch DRR dependent relative revocation IWC informed written consent ALI American Legal Institute 4cable foreseeable NB nota bene (note well) Stat statutory Ø against w/not/h would not have s/h/b should have been Jx jurisdiction MisD misdemeanor GBI grievous bodily injury VKI voluntary. knowing & intelligent cred credibility Ev evidence DJ double jeopardy CBX California Bar Exam B buyer h/b/d had been done! QK quasi-contract S seller Det detrimental P·ee promisee SJx supplemental jurisdiction D Directors S/L strict liability GP general partner b/c become(s)/became OOS out of state Prej prejudice IS intermediate scrutiny T testator T·arytestamentory o/s outstanding Prom/E promissory estoppel PJx ² personal jurisdiction SMJx ² subject matter jurisdiction JNOV J not w/standing verdict JMOL J as a matter of law RJMOL renewed JMOL MSJ motion for summary J Depo deposition RFPs requests for production RFA requests for admission Rogs interrogatories C/O court order priv·d privileged Pub publication Ct court CQ common question X cross COA cause of action T/O transaction/occurrence J Justice FEDFederal Rules nat·l national PCV piercing the corp veil W/o without G·or grantor Cov·t covenant CP community property W witness/Will Punis ² punitive damages CPC CA Probate Code Dispo disposition LOW loss of wages .
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.