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I. AGENCY............................................................................................................................................................3 INTRODUCTION .................................................................................................................................................3 AUTHORITY.....................................................................................................................................................3 AGENT’S DUTY OF LOYALTY.............................................................................................................................4 AN INTRODUCTION TO FINANCIAL STATEMENTS....................................................................................................4 II. PARTNERSHIP .............................................................................................................................................5 PARTNERSHIP FORMATION UPA §6, §7..............................................................................................................5 Formation by Contract............................................................................................................................5 Formation by Estoppel............................................................................................................................5 Implied Pships.........................................................................................................................................6 NATURE OF A PARTNERSHIP...............................................................................................................................6 MANAGEMENT UPA §18, §19, §20.................................................................................................................6 DISTRIBUTIONS ................................................................................................................................................7 AUTHORITY UPA §9 ......................................................................................................................................7 LIABILITY UPA §13, §14, §15 .......................................................................................................................7 PARTNERSHIP PROPERTY AND INTERESTS UPA §§24-30 .....................................................................................7 PARTNER’S DUTY OF LOYALTY UPA §20, §21..................................................................................................7 PSHIP DISSOLUTION UPA §29.........................................................................................................................8 III. THE CORPORATE FORM.........................................................................................................................8 INCORPORATION ..............................................................................................................................................8 ORGANIZATION NYBCL § 201, 401-403, 601 ................................................................................................9 PREINCORPORATION TRANSACTIONS....................................................................................................................9 DEFECTIVE INCORPORATION NYBCL § 403.....................................................................................................10 ULTRA VIRES NYBCL §202, §203...............................................................................................................10 OBJECTIVE OF THE CORPORATION.....................................................................................................................11 IV. CORPORATE STRUCTURE.....................................................................................................................11 LIMITED LIABILITY.........................................................................................................................................11 Piercing the corporate veil: ..................................................................................................................11 EQUITABLE SUBORDINATION: ..........................................................................................................................13 CORPORATE ENTITY AND CONTRACT INTERPRETATION.........................................................................................13 V. DISTRIBUTION TO SHAREHOLDERS..................................................................................................13 INTRO TO FINANCIAL STATEMENTS....................................................................................................................13 LEGAL CAPITAL NYBCL §503, §504, §506.................................................................................................13 AUTHORIZED AND ISSUED NYBCL §501, §622...............................................................................................14 CORPORATE FINANCE NYBCL §502, §518....................................................................................................14 WATERED STOCK...........................................................................................................................................14 DIVIDENDS NYBCL §102(A)(2), §102(A)(8), §102(A)(13), §501, §717, §801(B)(10), §801(B)(11), §804...15 DIRECTOR & SHAREHOLDER LIABILITY, NYBCL §719, §720,..........................................................................15 REPURCHASE BY A CORPORATION OF ITS OWN STOCK NYBCL §513, §515.........................................................15 VI. CORPORATE STRUCTURE.....................................................................................................................15 PUBLICLY-HELD CORPORATIONS.......................................................................................................................15 ALLOCATION OF POWER NYBCL §706...........................................................................................................16 LEGAL STRUCTURE OF MANAGEMENT NYBCL §701, 712................................................................................16 BOARD FORMALITIES NYBCL §707, 708, 709, 710, 711...............................................................................16 OFFICER AUTHORITY NYBCL §715...............................................................................................................16 SHAREHOLDER FORMALITIES NYBCL 602, 604, 605, 606, 607, 608, 614, 615, 616......................................16 VII. SHAREHOLDER INFORMATIONAL RIGHTS AND PROXY VOTING......................................16 INFORMATION RIGHTS NYBCL §624.............................................................................................................16

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REPORTING REQUIREMENTS.............................................................................................................................16 PROXY RULES ’34 ACT §14(A) 14(B) 14(C) RULES 14A-1, 14A-2, 14A-3, 14A-6, 14A-9, (SKIM 14A-4 AND 14A-5) AND SCHEDULE 14A ....................................................................................................................................16 PRIVATE ACTIONS UNDER THE PROXY RULES ...................................................................................................16 SHAREHOLDER PROPOSALS ’34 ACT RULE 14A-8 ..............................................................................................16 PROXY CONTESTS NYBCL §609...................................................................................................................17 VIII. CLOSE CORPORATIONS.....................................................................................................................17 INTRODUCTION TO CLOSE CORPORATIONS..........................................................................................................17 VOTING AGREEMENTS NYBCL §609, §620..................................................................................................17 VOTING TRUSTS NYBCL §621.....................................................................................................................17 CLASSIFIED STOCK NYBCL §402, §703........................................................................................................17 AGREEMENTS DEALING WITH BOARD DISCRETION NYBCL §620.......................................................................17 SUPERMAJORITY VOTING/QUORUM NYBCL §616, §709...................................................................................17 SHAREHOLDERS FIDUCIARY OBLIGATIONS TO CLOSE CORPORATIONS.....................................................................17 RESTRICTIONS ON SHARE TRANSFER.................................................................................................................17 DISSOLUTION NYBCL §1002, §1104, §1111...............................................................................................17 DISSOLUTION FOR OPPRESSION NYBCL §1140-A, §1118................................................................................18 ARBITRATION NYBCL §620(B)....................................................................................................................18 FIDUCIARY DUTIES OF BOARD MEMBERS – .......................................................................................18 IX. DUTY OF CARE AND DUTY TO ACT IN GOOD FAITH..................................................................18 BASIC STANDARD OF CARE NYBCL §717(A), §720.......................................................................................18 BUSINESS JUDGMENT RULE..............................................................................................................................18 DUTY TO ENSURE THAT CORP HAS EFFECTIVE INTERNAL CONTROLS.....................................................................18 LIABILITY SHIELD NYBCL §402(B)..............................................................................................................18 GOOD FAITH; DUTY TO ACT LAWFULLY ..........................................................................................................19 DIRECTORS AND OFFICERS LIABILITY INSURANCE (SKIM NYBCL §721-726)......................................................19 X. DUTY OF LOYALTY...................................................................................................................................19 SELF-INTERESTED TRANSACTIONS NYBCL §713..............................................................................................19 STATUTORY APPROACHES................................................................................................................................20 COMPENSATION, WASTE AND SHAREHOLDER RATIFICATION NYBCL §515(D), §713(E).......................................20 USE OF CORPORATE ASSETS, COMPETITION WITH THE CORPORATION, THE CORPORATE OPPORTUNITY DOCTRINE.......20 DUTIES OF CONTROLLING SHAREHOLDERS.........................................................................................................20 SALE OF CONTROL.........................................................................................................................................21 XI. SHAREHOLDER SUITS............................................................................................................................21 INTRODUCTION NYBCL §626(B)...................................................................................................................21 NATURE OF DERIVATIVE SUIT..........................................................................................................................21 INDIVIDUAL (PRO RATA) RECOVERY..................................................................................................................22 CONTEMPORANEOUS OWNERSHIP NYBCL §626(B)..........................................................................................22 DEMAND ON THE BOARD AND TERMINATION OF DERIVATIVE ACTIONS ON THE RECOMMENDATION OF THE BOARD OR COMMITTEE NYBCL §626©........................................................................................................................22 INDEMNIFICATION...........................................................................................................................................22 XII. INSIDER TRADING..................................................................................................................................22 COMMON LAW BACKGROUND..........................................................................................................................22 RULE 10B-5..................................................................................................................................................22 ELEMENTS OF 10B-5......................................................................................................................................23 LIABILITY FOR SHORT-SWING TRADING...............................................................................................................23 COMMON LAW REVISITED...............................................................................................................................23 XIII. CORPORATE COMBINATIONS..........................................................................................................23 SALE OF SUBSTANTIALLY ALL THE ASSETS NYBCL §909...............................................................................23

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............23 TRIANGULAR MERGERS AND SHARE EXCHANGES NYBCL 913........................................... Can exist w/o intent........................... Apparent Authority: manifested from principal to 3rd party.....24 I. owned by a single individual................................................ Owner has unlimited personal liability....... principal may ratify after the act............................................................................... the principal is bound........ Person asserting that there is a agency relationship has to prove it ii............................. Scopr: agents acts must be w/in agents auth................................ 910 .............. Or if an agent does what agents customarily do..............................................23 XIV.... CREATING & PROVING IT: i.................. Authority 4.............................23 STATUTORY MERGERS... 3 ..... 6........................................................ Agency by estoppel: when a 3rd party believes that there is a relationship because of the principal’s actions.......................................................... principal is estopped from denying agents authority 7............ Must have 1..... even if the agent wasn’t expressly authorized.......... 8................................... AGENCY Introduction 1................................. A Sole Proprietorship : a business org..........23 Small Scale Mergers ....................... 2. Agreement between parties that the agent will undertake some act on behalf of the principal 2....................................................................23 DEFACTO MERGER NYBCL §913..............23 FREEZEOUTS............. Problems: i... Actual Authorityexpressly conferred by principal or implied by acts 5................... Cant contract OUT of being an agent/principal if the acts say you are............................... BY Ratification: when the principal accepts the benefits of the agent’s act v................. between third party and principal over liability for agent’s tort............................ Authority by Estoppel: when 3rd party detrimentally relies on authority that principal made him believe.............. 3.. Governs relations between the Principal and the Agent............... iii................................23 GOING PRIVATE...... Creation by Agreement iv...........................................................................Downloaded From OutlineDepot.com APPRAISAL REMEDY NYBCL §623...................................... Understanding that the principal is in control...................... between third party and principal based on agent’s conduct iii................................................... TENDER OFFERS NYBCL §912...................23 Classical Mergers NYBCL §§901-906.....23 Short Form Mergers...................................................................... no special legal form...... between agent and principal / ii....

That’s OK. Right + left always add up + match. wants to recover “secret payment” that seller gave finder . 17. Income Statement i. Liabilities on right separated by creditors and equity owners. DUTY OF LOYALTY –anything Agent receives in the course of Agency belongs to the Principal – doesn’t matter is principal suffered no damage— also liable for any reasonably foreseeable injury from his act. guy reported false data. §407(1)) 13. If there is income. then. Tarnowski v. Principal can recover if Agent violates DOL: i. not constant monitoring. §407(2)) ii. Balance Sheet: i. Assets = Liabilities + Owner’s Equity 16.com Morris Oil v. etc. Rainbow Trucking: Principal is liable to 3rd P for agent’s debts incurred in the normal course of business. List Assets on left in ascending order of liquidity (cash first. i. Marks income for the period between Balance Sheets. Resop: Hires guy to investigate value of jukebox business. Also. must avoid conflicts. Value of what he put in plus damages (Rest. An Introduction to Financial Statements 14. 10.sort of he bribe for the false data.) Agent’s Duty of Loyalty 9. it becomes part of the proprietorship’s contribution to the next balance sheet 4 . Accounting is the presentation of finances 15. ii. POLICY: agent loyalty lowest cost of monitoring and still gets the most out of Agents… sort of gives leeway but enforces when agents do something bad. P Goes after the “finder” for the rest. real property later) ii. by length of term. Why throw uncertainty into the equation by saying that the third party might have a cost imposed on them? 12. Principal = liable for agent’s debts incurred in course of business 11. Overall social solution that lowers cost: Principal Taking responsibility for actions is costly – lowest cost solution is to make you responsible for liabilities for agents that work for you. (Even if the K between principal and agent tries to deny the relationship.Downloaded From OutlineDepot. Buyer recovered all but $3. Any anauthorized profit that the agent gets (Rest. iii. Agent = incurs debts for principal in course of business.000 of his downpayment from seller. is a FIDUCIARY.

he 5 . §7 a. can change by agreement) Profit Distribution Pro Rata by membership – and equal sharing in the losses Transfer Right to profit and right to manage… can only be done with consent of all partners Liability Joint & several. you have to disclose and be sure not to compete… Partnership Formation UPA §6. or who expressly or impliedly consents to representations that she is such a partner. has a vote (default. Warren isn’t. a partnership there is (-yoda) • More complex than a sole proprietorship. Formation By K or not Management Every partner manages – receives information. UPA §9: Each partner is an agent of the partnership for the purpose of the business and the act of every partner.com II. PARTNERSHIP • If the contract contemplates an association of 2 or more persons to carry on as COOWNERS a business for profit. for apparently carrying on the usual way the business of the partnership binds the whole partnership (unless he has no auth and the 3rd party doesn’t think he had auth) 1 Can bind partnership 2 Can incur liabilities 3 Duties of loyalty FORMATION FORMATION BY BY CONTRACT ESTOPPEL One who holds herself out to b a partner. an association of 2 or more persons to carry on a business as co owners for profit (UPA §6) b. but he knows that im dropping his name..Downloaded From OutlineDepot. Each partner is liable for all debts of the partnership Duties Facts must trigger the duty (cardozo in Meinhard) If you’re involved in numerous ventures. uses principles of agency law • UPA usually applies to joint ventures. but they are usually formed just for 1 transaction. is liable to any 3rd P who extends credit ot the pship in good faith reliance on the representation Ex) I tell George Soros that Warren Buffet is my partner.

cant transfer the management rights separately. Warren would become an agent of our pship and go out and bind me to his deal with Rupert Murdoch. These are bundled. pship itself isn’t taxed. Ex of how its an entity: capacity to be sued.com doesn’t warn George. §20 a. Nature of a Partnership Its both an entity and an aggregate of the partner’s interests. Ex of how its an aggregate: J+S liability. ALL Partners have EQUAL RIGHTS in management (UPA §18e) i. shes not liable to Rupert for Warren’s deal.  UPA § 24 . Peyton (NY 1927) Peyton and other Ds had loaned to KNK. not a pship.  RUPA states that its an entity.you have 3 things as a partner: rights in the partnership property. everyone has the right to vote. But if LL didn’t know. Court said it was a loan. 6 . They said they were not partners but had lots of profit sharing rights for their loan. but no guarantee. it looks more like equity. pship can own property. Owner v. KNK’s creditors came after Ds saying they were liable as partners in KNK. ii. not a pship agreement: Martin v. so they have to be consulted. Management UPA §18. right to participate in management. So now Warren is liable for George’s loan. but can’t have any other rights in my business. Lendor: A lendor might have a guanrnteed return. If a player has control. The key is CONTROL. interest in the partnership. §19. Subject to agreement. and didn’t consent to me using Warren’s name in the first place. IMPLIED PSHIPS A loan. Can pick 1 managing partner. Though you can make a decision with just a maj.Downloaded From OutlineDepot. a securities firm. but less control Owner has huge upside potential + control. If I was in a pship with Lindsay lohan and I was doing this. UPA doesn’t.

can sue entity 2 remedies: i. Dooley (Idaho 1971) c. §14. Partnership may be liable if third parties think you’re acting for the partnership… might not be in your agreement. anything controverting an existing agreement needs consent of all partners.com b. but if people think they’re dealing with the partnership and you act like you are. each parter is liable only to the extent of his involvement in the pship. Duty of Loyalty.D.) Liability UPA §13. . Must disclose related business opportunity 7 . Partner’s interest is share of profits and is personal property (UPA§26) h. (NY A. 55 Perry Co.Downloaded From OutlineDepot.TRIGGERED BY FACTS k. other Ps are necessary parties ii. not necessarily how your firm acts. f. cant sue just 1 partner for a K. UPA §18h d. Ex) Hiring an employee Summers v. Duty to Avoid Conflicts. Torts 1 Partners are JOINTLY AND SEVERALLY liable for torts + breaches of trust to 3rd parties (UPA §15(a)) Partnership Property and Interests UPA §§24-30 g. subject to any agreement (UPA §18a) Authority UPA §9 d. but not w/o consent of every partner (subject to agreement) Rapoport v. can transfer it. i. pship assets cant be attached unless it’s a pship debt ii. Can assign it. Pship Debts and Ks: 1 partners are Jointly liable for the pship debts and Ks (UPA §15b) i. ( can be just acting like other normal businesses do. You get a “charging order” against the Ps interest. doesn’t dissolve the pship.2d 1975) Each family owned 50% of a company. §15 e. Distribution is equal. Ps right in a pship peoperty cant be attached (UPA §25(2)) a. All decisions in ORDINARY MATTER CONNECTED TO PSHIP must be decided by majority UPA§18 i. so now the kids are partners. 1 family wanted to transfer some to their kids. Distributions c. liability between partners. §21 j. Duty not to be self-interested to the exclusion of business interest. Partner’s Duty of Loyalty UPA §20.

Centralized Management by a board. p. its because they left out goodwill + intangibles.Downloaded From OutlineDepot. Meinhard v. n. so P gets nothing (when the co was valued so low. THE CORPORATE FORM Basics: 1. Salmon NY 1928) Cardozo on duty of loyalty: it was triggered because the D had an existing lease as part of a joint venture with the P. co. opened an account excluding him. new 3rd aprty Ks. III. q.is valued at less than what they owe to the investors. it can be dissolved.o the dissolving partner. did not notice or get his consent for purchase w. court is allowed to ignore goodwill when valuing the co as a punishment for wrongful dissolution) iii.D. 2. wrongful acts causing dissolution: 1 Drashner v. 2 Punishment for the wrongful dissolver: i. Effect on 3rd parties: 1 Dissolution and continuation means new business. o. Continuity of Existence.com l. it was related to the old deal and should have been disclosed PShip Dissolution UPA §29 m. made crazy demands. damages ii. Free Transferrability of Ownership Interests. 5. It’s a choice. Limited Liability of shareholders and managers. wrongful expulsion 1 when other Ps deny someones rights as a P 2 crutcher v. ignored work) SO. (gots drunk. Sorenson (S. But oh ! pship hasn’t repaid the initial capital yet. Incorporation State law governs corp law. r. 1954) P had made it impossible to carry on the business. smith (pa 1997) partners excluded P from management decisions. 4. Legal Person / Entity Status. so P only gets a 3rd after that. and P gets a third…. 8 . when he took a new lease for himself separate from the JV. Uh oh. told bank not to let him withdraw. Under the UPA a partnership ends when 1 partner leaves. (follows the concept of pship as aggregate of interestes instead of entity) So there are continuation agreements to keep the business nad the other partners going. s. pship funds. the rest of the business can go on w. 3. at death or withdrawl of a partner (subject to agreement) expiration of fixed term – ( but it can still be terminated at will) at will.

debentures. bonds. You must elect to become a corp. and notes). The special character of preferred stock is its relation to common stock . classes of shares. Carries right to vote in election of directors. The equity interest. but a corp. or 2) Initial directors can be named in the corporation’s certificate (DEL). 3. etc. dissolution. Dividends are often paid. 401-403. is a legal person created by the state. then the corporation is created and issue shares in exchange for $. major corporate events (merger. Promoter’s liability: promoter is personally liable on a 9 . for principal and interest.). No fixed claim on the corp.the preferred SH shall have “first claim” in the event that directors are able and willing to pay a dividend 7. 601 a. b) Debt: A fixed claim against the corp. location + service of process agent 5.: 1) File a charter (Certificate of Incorporation or Articles of Incorporation) w/ the state (usually Secretary of State). original directors must execute it and certificate must be filed c. b. has no SH until stock is issued and issuing stock is vested in the Board. maybe put $ down.com Organization NYBCL § 201. With: 1. Board is elected by SH. c) Preferred stock: A hybrid that combines the ownership element of common stock and the senior nature of debt. 2 methods for solving this problem: 1) Incorporators have the power of SH until stock is issued and power of directors until directors are elected (NY). adopt bylaws 2.have the claim to what is left after all senior claimants have been satisfied. specific business (for ultra vires) 4.NYBCL §201) 3. # of shares. par values of shares. 3) The corp. original names 6. purpose (any purpose OK. Preincorporation Transactions d. A promoter brings and idea to a business by getting everyone together. 2) State approves the charter. Subscription agreement: people agree to invest. (Major types of corporate debt are trade debt. or residual interest . or power to issue stock Three major modes of corporate finance: a) Common stock: (ownership/equity interests). First incorporation meeting: 1. bank debt. name 2. # of directors.Downloaded From OutlineDepot. capital structure.

to procure a judgment in its favor against an incumbent or former officer or director for loss or damage due to his unauthorized act. actually use of the corporate form. to enjoin the doing of any act or the transfer of any property by or to the corp. Substribers are solicited. An owner has no fixed claim Defective incorporation NYBCL § 403 h. 3. carryong int as a corp. was w/o capacity or power to do such act. Corporation must act only within their charter (charter usually says “conduct all lawful business”) l. Ultra Vires NYBCL §202. i.com K he makes on a corps behalf before incorporation. by AG in an action to dissolve or annul the corp. b. articles get mailed to secretary of state.. No act of a corp. but get lost) 2. It was made obsolete by NYBCL 203 1. §203 k. nad pre-incorporation subsctiption agreements are irrevocable unless all subscribers agree to a revocation. c. or transfer of property shall be invalid by reason of the fact that the corp. f. godd faith attempt to organize the corporation (ex. He is still liable for that K after formation. EXCEPTION: Person K-ing w/ the promoter knew that the corp. 1. for performance of the K. need a colorable. or enjoin it from doing unauthorized business. De Facto Corporation: 1. j. may be held liable (after its formation) along w/ the promoter (joint and several liability). in an action by SH against corp. e.Downloaded From OutlineDepot. This comes up when a creditor wants to hold a individual personally liable y saying that the corp wasn’t formed properly. (express or implied agreement) Courts vary on whether an implied K will be found and whether the corp. Debt holder has a fixed claim on the corp g. by or in the right of the corp. was not in existence and still agreed to enter into the K and looked solely to the corp. As a defense: estopped from using it as a defense for nonperformance m. but such lack of capacity or power may be asserted: a. Generally incorporation is automatic. only the state can challenge the existence of a de facto corp. 10 .

Atex. IV. can the firm do non-economic things? r. disregard of corporate requirements (money commingled with individuals and the corp. Kodak Case: Fletcher v. q. they also have power to make charitable contributions that are incidental to business and somehow help the business. ECONOMICALLY IRRATIONAL 1. shareholders don’t have liability. Cannot be for personal reasons. Ford wanted to reinvest profits. which didn’t make sense economically. 1995. Dodge v. 11 . Smith v. PIERCING THE CORPORATE VEIL: t.com Objective of the Corporation n. Ford wanted to reduce the price of cars. not pay out dividends. 2nd cir. RULE: given that firms have for-profit purpose. For-profit is the equity that shareholders have after assets – liabilities. when a parent and a subsidiary operate as a single economic entity they are not separate corporate persons.Downloaded From OutlineDepot. exception: NYBCL §630 10 largest shareholders liable for unpaid wages. Unless its economically irrational and doesn’t make sense with forprofit purpose of the firm. saying it was Ultra Vires. Barlow Smith donated $ to Princeton and the shareholders sued. Shareholders rights are the focus. What other motivation can a firm have? 1. rcords not maintined. Separate from the corporate person 1. So. Alter ego theory – where the corp is the alter ego of individual shareholders. 1. There may be times when assets are declining or disappearing p. Ford Motor Co. but Courts are reluctant to second-guess business decisions. The corporate person is primarily for profit. but the public benefit has some connection to the market. Maximize shareholder wealth o. Incidental Charity Giving 1. CORPORATE STRUCTURE Limited Liability s. fraud or injustice u. required meetings not held.

Finances co-mingles 3.Downloaded From OutlineDepot. debts + risk 1. Circumstances must be such that adherence to the fiction of separate corporate existence would sanction a fraud or promote injustice. 1 corp treating the assets of the other as their own. Contract liability for piercing the veil: 1. 12 . Undercapitalization: piercing can happen where the Co. is operated for PERSONAL rather then corporate purposes. Walkovsky v. P sued 10 corporations that Carlton was a shareholder of. 4. w. has too little capital for its liabilities. seeking approval from the parent. Individual firm is undercapitalized. Carlton (NY 1966): taxi hit plaintiff. Two-Prong Test to pierce the veil: (sealand v. Must articulate 4 factors in a complaint: 1.com 2. there were 10 or 20 cabs in a business. In reality. Being part of a larger corporate enterprise is OK b. pepper source 7th Cir. NOT alter ego: Using the same cash management system. The individual mini-corporations had barely enough capital + insurance to cover. v. but they were divided into 10 different businesses. 1991) a. i.when something indicates that they are the same as the firm (personhood is not respected) Theory 3: Sue the other firms because they were artificially separated to avoid liability. b. calling itself “a Kodak company” is just NOT enough. i. Must plead that someone would be unjustly enriched NOT enough to say that a creditor will go unpaid. taxi industry split ownership of the cars into several corporations. having overlapping Board members. Fanto: the Legal persons don’t really reflect the business. Liability Insurance as evidence of undercapitalization: a. Can’t sue shareholders unless you allege that the co. Must be unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist. Failure to maintain corporate records 2. conducted together. Theory 1: Sue the firm because of actions of agent of the firm Theory 2: Sue the shareholders .

when a loan is deemed equity and moved down the distribution chain (becoming LESS senior – just recharacterizes how money is put in the firm. and you cant touch it. reputation. z. Surplus is equity and you can touch it. If the par value is also 100$.000 so you offer 1000 common shares at 100$ per share. §506 a. b. Stated Capital (or legal capital) can’t be touched. Awarded when there has been bad faith by the SH/creditor toward other corporate creditors or mismanagement.com Equitable Subordination: x. future labor or services. DISTRIBUTION TO SHAREHOLDERS Intro to Financial Statements a.000 is stated capital. d. §506 . Contribution doesn’t have to be $. its not really ordering the SHs to pay the debts back.) y. Don’t include non-tangible assets (human capital. etc) Net Income = Revenue – Expenses Legal Capital NYBCL §503. the courts will hold the parent liable V. §504. §501(a). So. Board can determine how much the services are worth + how many shares that translates to.Downloaded From OutlineDepot.) Corporate Entity and Contract Interpretation a. labor. §504 .corporation has power to create + issue shares. when a loan is deemed equity and moved down the distribution chain (becoming LESS senior – just recharacterizes how money is put in the firm. aa. If it starts to be infringed. under Liabilities. When the corporations SHs are also lenders (and the corp is insolvent) the SHs loans are pushed to the bottom. Or undercapitalization. the firm is in trouble.initial capitalization ex) goal is the capitalize with $100.consideration for shares can be money.000$ is called stated capital (or legal capital) then. when the corporate definition is used to contradict pubic policy or legislation. 13 . then only 10.000$ is surplus. The expended $100. a. the other 90. If the par value is $10 and the share price is still $100. An equitable alternative to piercing the veil. c. Par Value = what price you sold the shares for. its just allowing the nonSH creditors to be paid first bb. property.

it means the firm is in trouble. Division of equity into legal capital and surplus: sort of false because you can choose any par value. you cant infringe on it. the surplus grows. you have $100.com Stated capital is under Liabilities on a balance sheet. The Par value can be anything. the rest is surplous. Authorized and Issued NYBCL §501.p1261 14 .000 cash in assets. get $ in return. e. Legal capital. or services.000 in liabilities. then the equity claim is for just $10. Equity claim is part legal and part surplus. i. or commitment of future services) h.000 is surplus that can be used. If you issue 1000 shares at $100 issue price. Creditor protection: can restrict what $ is taken out of the firm – Watered Stock i. §622 – Preemptive right. If its touched. so they are liable to the company or the creditors --. its assets are shrinking so that the claims (the value) shrink as well. then par value x # of shares is the legal capital. because someone has a claim on it. Legal Capital – how to capitalize the firm: issue shares. iii. ii. Corporate Finance NYBCL §502. they also have the assets from the cash they gained by selling shares. youre in bankruptcy. stock in exchange for overvalued property (like.Downloaded From OutlineDepot. Lenders want to see that owners are invested in corp. or even no par.current shareholders have the first right to buy more shares when more are issued. cant be touched. If you hve no par stock the board can move everything to surplus. §622 f. Firm issues shares. but they also are liable for it.000 (called legal capital) and the other $90. takes in money (or property. Often. Then. what happens is : the capital is affected. all the $ is legal capital but the firm can decide to use it. As the firm makes $. once defined. How do you state that? If the par value of a share is $10. holder of the stock paid less than par. shareholders have a claim to it. §518 g. watering your cattle before going to the weigh-in at the auction) j. and also 100. A share is designated with a par value.

Repurchase by a Corporation of its own stock NYBCL §513. Blesias cases – a board cant interfere with a shareholder’s rights (these are more often involved in a takeoerattempt where the management tries to play around with election rules to avoid takeover--.adding board seats. Its their only real power. repurchase can be selective (unless it’s a tender offer) they both have to come out of surplius (we had a case where a Co. §102(a)(13). Court scrutinized that area for actions that are infringement).Downloaded From OutlineDepot. §801(b)(11).the equity account gets bigger. 15 . Variations – the structure of power runs the other way in reality. §804 k. Dividends have to be across the board. §515 l.) VI. NYBCL §719. Proxy process allows other names to come forward. b. Bylaws may allow nominations in another way. you cant infringe on shareholders voting right. Governance. Director & Shareholder Liability. delaying election. CORPORATE STRUCTURE Publicly-held Corporations a. how you capitalize and how you take $ out.Payment of the dividend comes from surplus. Dividend. §720. SH power is their vote. reevaluated its assets and said – we have these assets which are worth more than the book says now (book was using original $$ cost. §501.com Dividends NYBCL §102(a)(2). §102(a)(8). but a proxy fight is the way to take control of a board.BUT FOR a compelling justification. -. the officers have more power and the directors are really just there once a month. Can buy back shares only out of surplus as well. Put up your own slate and try to get the most votes.Shareholders  (elected@ meeting) Board  (appointed @ meeting) Officers Shareholder votes on board by plurality (not maj. §717. Its mechanical.) typically management puts up a slate of directors. §801(b)(10).

look at what he highlighted (14a8) those are the grounds to exclude proposals. (skim 14a-4 and 14a-5) and Schedule 14A a. 711 Officer Authority NYBCL §715 Shareholder Formalities NYBCL 602. 614. can get access to contest management maybe a shareholder list. In a contest. Reporting Requirements Proxy Rules ’34 Act §14(a) 14(b) 14(c) Rules 14a-1. 710.Downloaded From OutlineDepot. Inspection right – demand to see balance sheet. 14a-6. Shareholder Proposals ’34 act Rule 14a-8 b. 605. Private Actions Under the Proxy Rules a. Private Suit. and ill cast it for you.com Allocation of Power NYBCL §706 Legal Structure of Management NYBCL §701. but its within the directors discretion to spend the money to defend themselves. youll get 2 proxy statements. 14a-9. 608. 14a-2. 712 Board Formalities NYBCL §707. 604. you can sue Mills case _ VA bank case define materiality and also when you can or cant sue. 607. 606. they have to give you a proxy statement… company says give me your vote. Shareholder proposals . 14a-3. Proxy statement – the information given to public shareholders when a vote is required fo them When they ask for your vote.if you get a materially misleading proxy statement . Proxy contests are very expensive. but the main access for a public firm is the federal regulators. 615. The current issue is – can shareholders put names of people on the proxy statement – the proposals are mostly used to push companies 16 . Proxy was an essential link in the transaction. 708. 709. The money isn’t just sending out the statement but planning and persuading shareholders. 616 VII. SHAREHOLDER INFORMATIONAL RIGHTS AND PROXY VOTING Information Rights NYBCL §624 a.

Downloaded From OutlineDepot. Shareholders have parternship like dutues toward the minority shareholder §620 of NYBCL says board doesn’t dominate.com around on policy. Whatever it is. Director. etc. so you can have afalling out and dissolve. §620 Voting Trusts NYBCL §621 Classified Stock NYBCL §402. Managers are shareholders. §1104. Proxy by contract can be irrevocable Restrictions on Share Transfer b. theyre like partnerships. §703 Agreements Dealing with Board Discretion NYBCL §620 Supermajority Voting/quorum NYBCL §616. Look at accommodations of small firm setting and some of the basics of the corporate form Voting Agreements NYBCL §609. ? problems occur when there is a falling out with one party who is no longer a manager. Officer. or maybe its institutional shareholders that recommend that they get rid of the poison pill.in that way. Dissolution – corporate form is a creation of the state. What happens when the sameperson is a SH. is only a shareholder. §1111 c. but a close corp or partnership it’s a choice. Transfer Restrictions – might want to restrict it. so state wont let it die. SH can be in control. its pressure on the board. law allows restrictions on transfers Dissolution NYBCL §1002. etc. NYBCL 17 . Proxy Contests NYBCL §609 VIII. naj. $ doesn’t come from dividends. CLOSE CORPORATIONS Introduction to Close Corporations c. How does law accommodate this setting? Shareholders have duty to aone another in this setting. comes from salary. privately held. §709 Shareholders Fiduciary Obligations to Close Corporations a. keep it in the family.

a court wont just dismiss because relief cant be granted. van gorken. states also relieved directors from liability. but fanto says theyre primarily creatures of equity. §720 a.Do whats necessary to make a proper decision – gather information. (2 part) duty to set up monitoring systems know that supervisory system is in place caremart case. nad the controlling shareholder can say. Business Judgment Rule Duty to Ensure that Corp has Effective Internal Controls Liability Shield NYBCL §402(b) a. then make a business decision… THEN if those are met. where the duties developed from decisions by equitable courts. DE102b7 after smith v. IX. don’t dissolve. they act not with negligence but gross negligence often you cant recover damages from that breach. Duty of Care. monitor. Absolved from Liabiltiy. This is a little 18 b. ill buy all their shares.when can directors invoke the proivision in the certificate that relieves them from liaibltiy? Want to make sure that complaint is fully explored . One alternative is to petition for dissolution because of oppression.com 1104 allows for dissolution in the case of deadlock. deliberate. seems to be procedural also. ask for information from experts. Dissolution for Oppression NYBCL §1140-a. §1118 Arbitration NYBCL §620(b) FIDUCIARY DUTIES OF BOARD MEMBERS – these are in the law.Downloaded From OutlineDepot.the court wont scrutinize your decision. DUTY OF CARE AND DUTY TO ACT IN GOOD FAITH Basic Standard of Care NYBCL §717(a). . Even if they violate the duty of caer.

Duty to act in good faith. DUTY OF LOYALTY Self-interested Transactions NYBCL §713 a. Duty to Act Lawfully d. When director is on one side of transaction  conflict duty to avoid conflicts. Disney case (supplement) – bad faith means youre not paying attention to your job. If you see director action that not self-interested but just nasty. b. who has the burden? 19 . Fairness analysis – more instrusive examination of transaction. Directors and Officers Liability Insurance (skim NYBCL §721726) a. dorector or officer engages in a transactrion with the firm  self interested transaction. but it basically says that the suit will go forward and part of the litigation will consider the effect of the provision. Good Faith. a. X. c. c. willful neglect of duty. Duty of Loyalty – §717 talks about it it.com abstract. making a decision just to thwart people. but the development is really from CL. Courts do nto defer to decisions. Courts have a hard time defining it. i. they have insurance.Duty to act lawfully – also a case on that. So everyone knows that and will allege all sorts of things. d.statutes that absolve you from liability fron duty of case oblications did not absolve you from duty of good faith.Downloaded From OutlineDepot. e. willfully not doing it or being spiteful. no court will absolve them from liability or §402b says NOT absolved from violatiosn of the law. It will only be dismissed if its specifically just a duty of care violation.

a. ii. If its an opportunity. but you have to show fairness. §713(e) Use of Corporate Assets. ii. Then the issue is is there any way for the interested party to shift the burden off of itself? i.NE harbor case. DE takes different position but were not being tested on DE. Statutory Approaches Compensation.com 1. NY 713. DE wont lower the standard for controlling SHs even if disinterested directors approved it. you have to disclose and give it to the firm. Competition with the Corporation. that just shifts the burden. Corporate opportunity . the analysis is fairness. If plaintiffs make the pleading burden defendants have burden to show the transactions was fair toe the firm.Downloaded From OutlineDepot. b. b. 20 . Controlling Shareholders – DE is just like NY: anytime oyu have a controlling SH doing a transaction with the firm he controls. Duties of Controlling Shareholders a. Controlling shareholders are fiduciaries. 1.transaction is not void or voidable simply because its self. 2. if disinterested SHs approved it  must show waste. Disinterested directors did it or disinterested shareholder approved it full disclosure of conflict and all relevant information.onterested. – in executive compensation Delaware is special – fanto wants us to know just that part of deleware law. The Corporate Opportunity Doctrine a. In DE: if disintereeested directors did it  business judgment rule. Waste and Shareholder Ratification NYBCL §515(d). but its still a fairness analysis.

Then it’s a fairness analysis. Han case.be particular in the complaint and establish a reasonable doubt. i. Delaware you need enhanced pleading. SHAREHOLDER SUITS Introduction NYBCL §626(b) Nature of Derivative Suit a. directors. 21 .rare that they are independat enough to shift the burden. NY. What deference does the at committee get? NY is fairly deferential if the committee made a good business judgment.was the committee independent in substance and in how it acted? If so. XI. Sale of Control – deals with CS selling a controlling share to someone else and getting a premium for it.com b. Sale of Control a. The law says that you can set up an independent negotiation ii. but we may just use our own judgment to decide if dismissal is appropriate. But its futile ! theyre al linteresetd . we may do that. concede the futility but appoint an independent litigation ncommittee that recommends the suit be dismissed.Downloaded From OutlineDepot. When is the controlling shareholder involved? When he wants to purchase some remaining interest in the firm. Often. Derivative suit: Have to go to the board to make demands. DE courts are not as deferential. if they are all involved. the burden shifts – they are hard on those committees . Cant sell it and take advantage of an unusual opportunity of the firm or sell it to someone else who will loot the firm.

nad if you do trade. outsiders have the dduty under the misappropriations theory not to trade on information that they take improperly from someone withom they have a confidential relationship. Having other s do the trading: Dirks.Downloaded From OutlineDepot. Companies are also liable for lying to the public. 3 general things: federal cause of action aimed at officeres. Plead the loss. Classic insider situation – cant trade unless you disclose. against a CO. and cant trade after you disclose until the information has been dispersed (texas case) ousiter theory – not only to insiders hve the duty. Ds. is it misappropriation or the classical insider theory? 22 . its accurate speaking… their misrepresentation had to cause your loss.com Individual (pro rata) Recovery Contemporaneous Ownership NYBCL §626(b) Demand on the Board and Termination of Derivative Actions on the Recommendation of the Board or Committee NYBCL §626© Indemnification XII.Hagan case.duty not to trade. INSIDER TRADING Common Law Background a. Rule 10b-5 b. disclose. that lack of material information shared the loss. SH suits are sometime saimed at the Co. its insider trading. O. Chiarella. The SEC generally beings suits on the insiders. controlling SHs . not the insiders. SHs has to show materiality and reliance. Against insiders. Tipper – tippee : is it material information? If so.info about a tender offer was only material because somoen was abou to do a tender offer.

whats sale of all or substantially all the assets ? its quantitiative / qualitative. Jurusprudence on Asset Sale. the voting and appraisal IS as you structured it. Appraisal Remedy NYBCL §623 Statutory Mergers CLASSICAL MERGERS NYBCL §§901-906. Wont reshuffle nad apply the law like PA.Downloaded From OutlineDepot. maybe a tender offer followd by a short form merger. CORPORATE COMBINATIONS 1) what are technicalities associated with it? 2) Who has votes? 3) Who has appraisal rights? Fiduciary development – if it’s a controlling SH in a merger  fairness inquiry. 910 SMALL SCALE MERGERS SHORT FORM MERGERS DeFacto Merger NYBCL §913 a. DE says that if you structure it one way. Sale of Substantially All the Assets NYBCL §909 a. Solomon case .com Elements of 10b-5 Liability for short-swing trading Common Law Revisited XIII. there is no fairness inquiry. There are ways aroundit. Alaska. De Facto Merger is just PA saying “the law says x but well call it something else. Triangular Mergers and Share Exchanges NYBCL 913 Freezeouts Going Private 23 .

loyalty and liability cant be contracted around. Ask: did you see a threat? Did you respond to threat? Courts allow pretty significant responses if a Co. Invest $ in firm. CORPORATE FORM Creature of the state for defined purposes.com XIV. Generally what to boards to? Defend themselves. same big issues. Still need certificate and acknowledgement by the state. Contrasted this with a partnership because LL is one of the beauties of the corporate form. doesn’t want to be sold. (wont ask any detail about the Williams act ) our focus on tender offer is all about how does the board behave. transferring interest. TENDER OFFERS NYBCL §912 a. distribution. and 24 . authority of agent. loyalty. with limited powers. but mostly pships are heavily contracted. Charitable contributions have to be reigned in so that its focus remains shareholder profit. formation can be done thru circumstances or agreement where corp form is more formal. the for profit purpose. (and other major issues) that’s probably all you need to know. NO RUPA on exam Agency: Sole proprietor hires employees. Is this fairness? If you see a takeover ask if there was coercion . Tender Offers – development of the fiduciary duty. But now its evolved to something with broad purposes and unlimited powers. Limited Liability. but we wont defer to you. you have to focus on the shareholder value. No LLCs no LPs no tax no pship accounts. a focus on profit for shareholders (which we came back to in Revlon and paramount cases--) this becomes the norm of corporate law. When you decide to sell. management. NOTES FROM LAST CLASS>>>>> Agency and Partnership How do each legal form deal with liability. intermediate unocal standard .Downloaded From OutlineDepot. Court says : You can put up defenses. Ultra vires doctrine isn’t that significant anymore. given how broad corporate powers may be. And that its s default form. Nothing else. capitalize it. authority to act for firm. Corporate purpose: dodge motors case.

delaying election.com that’s the extent of your risk.Downloaded From OutlineDepot. If its touched. Its mechanical. If you hve no par stock the board can move everything to surplus. repurchase can be selective (unless it’s a tender offer) they both have to come out of surplius (we had a case where a Co.) typically management puts up a slate of directors. Put up your own slate and try to get the most votes. Legal capital. how you capitalize and how you take $ out.( lack of capital. but the main access for a public firm is the federal regulators.Shareholders  (elected@ meeting) Board  (appointed @ meeting) Officers Shareholder votes on board by plurality (not maj. Bylaws may allow nominations in another way. what happens is : the capital is affected. Its their only real power. Dividend. When might you look to the shareholder and disregard the corporate form? If corp is a legal person. then par value x # of shares is the legal capital. Can buy back shares only out of surplus as well. get $ in return. 25 . cant be touched. A share is designated with a par value. can get access to contest management maybe a shareholder list. Blesias cases – a board cant interfere with a shareholder’s rights (these are more often involved in a takeoerattempt where the management tries to play around with election rules to avoid takeover--. Investors who are distant from management don’t have to worry that theyre responsible for more. its assets are shrinking so that the claims (the value) shrink as well. the officers have more power and the directors are really just there once a month. Also. equitable reasons to pierce? A creditor might be allowed to look to the shareholder only when the firm doesn have enough $$ (taxicab case--) Legal Capital – how to capitalize the firm: issue shares.adding board seats. once defined. you cant infringe on shareholders voting right. reevaluated its assets and said – we have these assets which are worth more than the book says now (book was using original $$ cost.Payment of the dividend comes from surplus. you cant infringe on it. funds go in & out w/o record) you might pierce it. Equity claim is part legal and part surplus.BUT FOR a compelling justification. – rarely used. the rest is surplous. -. but a proxy fight is the way to take control of a board. if it doesn’t function as a person. Variations – the structure of power runs the other way in reality. Proxy process allows other names to come forward. Often. youre in bankruptcy. Piercing the Corporate Veil. Inspection right – demand to see balance sheet.) Governance. Court scrutinized that area for actions that are infringement).the equity account gets bigger. it means the firm is in trouble. shareholders have a claim to it. SH power is their vote. Dividends have to be across the board.

Whatever it is. The money isn’t just sending out the statement but planning and persuading shareholders. law allows restrictions on transfers Dissolution – corporate form is a creation of the state. ? problems occur when there is a falling out with one party who is no longer a manager. naj.Do whats necessary to make a proper decision – gather information. Look at accommodations of small firm setting and some of the basics of the corporate form Managers are shareholders. nad the controlling shareholder can say. Private Suit. FIDUCIARY DUTIES OF BOARD MEMBERS – these are in the law.com Proxy statement – the information given to public shareholders when a vote is required fo them When they ask for your vote. but a close corp or partnership it’s a choice. Shareholder proposals . etc. youll get 2 proxy statements. they have to give you a proxy statement… company says give me your vote. monitor.in that way. theyre like partnerships. where the duties developed from decisions by equitable courts.Downloaded From OutlineDepot. comes from salary. is only a shareholder. but its within the directors discretion to spend the money to defend themselves. CLOSE CORPORATIONS – privately held. then 26 . One alternative is to petition for dissolution because of oppression. deliberate. Proxy contests are very expensive. NYBCL 1104 allows for dissolution in the case of deadlock. Officer. Proxy by contract can be irrevocable Transfer Restrictions – might want to restrict it. so state wont let it die.if you get a materially misleading proxy statement . What happens when the sameperson is a SH. so you can have afalling out and dissolve. How does law accommodate this setting? Shareholders have duty to aone another in this setting. keep it in the family. In a contest. you can sue Mills case _ VA bank case define materiality and also when you can or cant sue. ill buy all their shares. The current issue is – can shareholders put names of people on the proxy statement – the proposals are mostly used to push companies around on policy. don’t dissolve. ask for information from experts. SH can be in control. $ doesn’t come from dividends. and ill cast it for you. but fanto says theyre primarily creatures of equity. Director. etc.look at what he highlighted (14a8) those are the grounds to exclude proposals. Duty of Care. Proxy was an essential link in the transaction. Shareholders have parternship like dutues toward the minority shareholder §620 of NYBCL says board doesn’t dominate. its pressure on the board. or maybe its institutional shareholders that recommend that they get rid of the poison pill.

DE102b7 after smith v.Downloaded From OutlineDepot. In DE: if disintereeested directors did it  business judgment rule. Courts have a hard time defining it. willfully not doing it or being spiteful.when can directors invoke the proivision in the certificate that relieves them from liaibltiy? Want to make sure that complaint is fully explored . This is a little abstract. they act not with negligence but gross negligence often you cant recover damages from that breach. seems to be procedural also. van gorken. Even if they violate the duty of caer.transaction is not void or voidable simply because its self.the court wont scrutinize your decision. Courts do nto defer to decisions. who has the burden? If plaintiffs make the pleading burden defendants have burden to show the transactions was fair toe the firm. but it basically says that the suit will go forward and part of the litigation will consider the effect of the provision. – in executive compensation Delaware is special – fanto wants us to know just that part of deleware law. dorector or officer engages in a transactrion with the firm  self interested transaction. willful neglect of duty. 27 . NY 713. Duty of Loyalty – §717 talks about it it. If you see director action that not self-interested but just nasty. It will only be dismissed if its specifically just a duty of care violation.statutes that absolve you from liability fron duty of case oblications did not absolve you from duty of good faith.Directors have it.onterested. if disinterested SHs approved it  must show waste. Duty to act in good faith. Disney case (supplement) – bad faith means youre not paying attention to your job. DE takes different position but were not being tested on DE. When director is on one side of transaction  conflict duty to avoid conflicts. (2 part) duty to set up monitoring systems know that supervisory system is in place caremart case. So everyone knows that and will allege all sorts of things. no court will absolve them from liability or §402b says NOT absolved from violatiosn of the law. states also relieved directors from liability. Insurance. Absolved from Liabiltiy. a court wont just dismiss because relief cant be granted. but you have to show fairness. Duty to act lawfully – also a case on that. Fairness analysis – more instrusive examination of transaction.com make a business decision… THEN if those are met. Then the issue is is there any way for the interested party to shift the burden off of itself? Disinterested directors did it or disinterested shareholder approved it full disclosure of conflict and all relevant information. making a decision just to thwart people. but the development is really from CL.

DE wont lower the standard for controlling SHs even if disinterested directors approved it. its insider trading. outsiders have the dduty under the misappropriations theory not to trade on information that they take improperly from someone withom they have a confidential relationship. disclose.be particular in the complaint and establish a reasonable doubt. and cant trade after you disclose until the information has been dispersed (texas case) ousiter theory – not only to insiders hve the duty.info about a tender offer was only material because somoen was abou to do a tender offer. against a CO. its accurate speaking… their misrepresentation had to cause your loss. Plead the loss. Derivative suit: Have to go to the board to make demands.3 general things: federal cause of action aimed at officeres. The law says that you can set up an independent negotiation – Han case. What deference does the at committee get? NY is fairly deferential if the committee made a good business judgment. the burden shifts – they are hard on those committees . Tipper – tippee : is it material information? If so. The SEC generally beings suits on the insiders. we may do that. NY. nad if you do trade. SHs has to show materiality and reliance. the analysis is fairness. DE courts are not as deferential. if they are all involved. directors. concede the futility but appoint an independent litigation ncommittee that recommends the suit be dismissed. Controlling shareholders are fiduciaries. Chiarella.Hagan case. that just shifts the burden. is it misappropriation or the classical insider theory? 28 . When is the controlling shareholder involved? When he wants to purchase some remaining interest in the firm. Cant sell it and take advantage of an unusual opportunity of the firm or sell it to someone else who will loot the firm.Downloaded From OutlineDepot. But its futile ! theyre al linteresetd . you have to disclose and give it to the firm. Insider Trading. Having other s do the trading: Dirks. Ds. Against insiders. controlling SHs . Then it’s a fairness analysis. Sale of Control – deals with CS selling a controlling share to someone else and getting a premium for it.NE harbor case. Delaware you need enhanced pleading. but we may just use our own judgment to decide if dismissal is appropriate. Classic insider situation – cant trade unless you disclose. but its still a fairness analysis. Controlling Shareholders – DE is just like NY: anytime oyu have a controlling SH doing a transaction with the firm he controls. SH suits are sometime saimed at the Co. O.duty not to trade. If its an opportunity.rare that they are independat enough to shift the burden. not the insiders. Companies are also liable for lying to the public. that lack of material information shared the loss.com Corporate opportunity . Often.was the committee independent in substance and in how it acted? If so.

Ask: did you see a threat? Did you respond to threat? Courts allow pretty significant responses if a Co.Downloaded From OutlineDepot. DE says that if you structure it one way.com MERGERS – know mechanics Asset Sale – Triangular Mergers Short form mergers 900s and 910 Always ask: 1) what are technicalities associated with it? 2) Who has votes? 3) Who has appraisal rights? Jurusprudence on Asset Sale. Solomon case . 29 . Court says : You can put up defenses. but we wont defer to you. (wont ask any detail about the Williams act ) our focus on tender offer is all about how does the board behave. De Facto Merger is just PA saying “the law says x but well call it something else. the voting and appraisal IS as you structured it. Nothing else. Fiduciary development – if it’s a controlling SH in a merger  fairness inquiry. doesn’t want to be sold.whats sale of all or substantially all the assets ? its wuantitiative / qualitative. Is this fairness? If you see a takeover ask if there was coercion . Alaska. Generally what to boards to? Defend themselves. There are ways aroundit. you have to focus on the shareholder value. Wont reshuffle nad apply the law like PA. there is no fairness inquiry. maybe a tender offer followd by a short form merger. When you decide to sell. Tender Offers – development of the fiduciary duty. intermediate unocal standard .

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