Þage of

Contents
@e naLure and Þurposes of Le CorporaLlon ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 3
SeparaLe legal exlsLence ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 3
lndeflnlLe uuraLlon ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 3
SeparaLlon of Cwnerslp and ConLrol ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 6
LlmlLed LlablllLy ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 6
Sareoldersƌ powers ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 6
Þlerclng Le corporaLe vell ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 6
Walkovszky vŦ CarlLon (1966) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 7
LnLerprlse LlablllLy ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 7
SeaŴLand Servlces vŦ Þepper Source (1991) Ŵ 8everse vell Þlerclng ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 7
8everse Þlerclng SLandard Ŵ lo te lbllllps ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 8
ln re Slllcone Cel 8reasL lmplanL ÞroducLs LlablllLy LlLlgaLlon (1993) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 8
SLro vŦ 8lackawk Poldlng CorpŦ (1971) Ŵ pŦ 243 of supplemenL ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 10
LnLlLy Colce ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 11
Ceneral parLnerslp ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 12
AdvanLages Lo general parLnerslps ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 12
ulsadvanLages of a general parLnerslp sLrucLure ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 12
8emember Lese facLors Lo conslder (from slldesţ llsLed ln leowlckţ and ln casebook ppŦ 88Ŵ90)ŦŦŦŦ 13
lenwlck vŦ unemploymenL CompensaLlon Commlsslon (1943) Ŵ pŦ 33 ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 13
MarLln vŦ ÞeyLon (1927) Ŵ andouL ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 13
uÞA Ƈ 13 ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 14
uÞA Ƈ 40 ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 14
LlmlLed ÞarLnerslp ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 14
LlmlLed LlablllLy ÞarLnerslp ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 14
LlmlLed LlablllLy LlmlLed ÞarLnerslp ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 14
LlmlLed LlablllLy Company ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 14
lormaLlon ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 13
ArLlcles of CrganlzaLlon Ŵ V203 ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 13
May nC@ vary Le nonŴwalvable rlgLs under V103(b)ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 13
Members' lnLeresL ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 16
Þlerclng Le LLC vell ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 17
CorporaLe lormaLlon ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 17
8ylaws ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 17
Þage 2 of

Calavlz vŦ 8erg (nŦuŦ CalŦ 2011) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 17
5ootbetoŴColf Motloe coŦţ NoŦ 9ţ locŦ vŦ comctoftţ locŦ ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 18
lnLernal Affalrs uocLrlne ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 18
Wy uelaware? ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 18
Þurpose of a CorporaLlon ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 20
uoJqe vŦ lotJ (1919) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 20
AŦlŦ 5mltb MfqŦ coŦ vŦ 8otlow (1933) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 20
8uslness !udgmenL 8ule ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 21
Slensky vŦ Wrlgley (1968) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 21
SLaLe Law llduclary uuLles ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 21
uuLy of Care ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 21
uCCL V ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 22
ltoocls vŦ uolteJ Ietsey 8ook (1981)ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 22
Clnemarkţ lncŦ vŦ @ecnlcolor ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 22
uuLy of LoyalLy vsŦ uuLy of Care ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 23
uuLy of LoyalLy Case Analysls ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 23
8oyet vŦ 8etooŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 23
uCCL V144 Ŷ lnLeresLed ulrecLors ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 23
CorporaLe CpporLunlLy @esL ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 24
SLaLe Law llduclary uuLlesţ CbllgaLlon of Cood lalLţ CompensaLlonţ and CverslgL ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 24
Zan vŦ @ransAmerlca CorpŦ (1947) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 24
lo te wbeelobtotot 1ecbooloqlesţ locŦ 5botebolJets lltlqotloo (1993) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 23
Sareolder 8aLlflcaLlon ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 23
ÞrlnclpalŴAgenL 8elaLlonslps ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 26
CorporaLe Cfflcers as AgenLsŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 26
AgenL AuLorlLy ln ConLracL ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 27
Mlll 5tŦ cbotcb of cbtlst vŦ noqoo (1990) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 27
uweck vŦ Nosset (2008) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 27
J70 leosloq cotpototloo vŦ Ampex cotpototloo (1976) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 28
AgenL AuLorlLy ln @orL ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 28
Pumble Cll Ǝ 8eflnlng CoŦ vŦ MarLln (1949) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 28
noovet vŦ 5oo Oll coŦ (1963) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 29
Motpby vŦ nollJoy loosţ locŦ (1973) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 29
CorporaLe Law uuLles and ÞroLecLlons of Cfflcers ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 30
SanLa le lndusLrlesţ lncŦ vŦ Creen (1977) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 33
Þage 3 of

lnslder @radlng ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 33
ulsLrlbuLlon of Þower 8eLween Sareolders and ManagersŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 33
loqlloq 8tosŦ Ŷ 8otoom Ǝ 8olley combloeJ 5bows vŦ loqlloq (1947) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 34
McOooJe vŦ 5tooebom (1934) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 34
clotk vŦ uoJqe (1936) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 33
Þroxy voLlng and ConLesLs ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 33
@oplcs and Cases 8elaLlng Lo Þroxles ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 33
levlo vŦ MCM (1967) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 36
oseofelJ vŦ loltcbllJ íoqloe Ǝ Altplooe cotpŦ (1933) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 36
IŦlŦ cose coŦ vŦ 8otok (1964)ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 37
SecurlLles Lxcange AcL V 14(a) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 37
SLC 8ules for Þroxy ConLesLs ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 38
8ases for Lxcludlng Sareolder ÞroposalsŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 38
Al5cMí vŦ AlC (2006) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 39
cAţ locŦ vŦ Al5cMí (2008) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 39
Sareolder Access ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 39
ctooe coŦ vŦ AoocooJo (1976) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 40
LlmlLaLlon Ŷ l8CÞ 8ule 23Ŧ1 ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 41
Sareolder LlLlgaLlonŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 41
ulrecL vsŦ uerlvaLlve SulLs ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 41
8aLlonal ÞlalnLlff and Le uemand 8equlremenL ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 42
uemand luLlllLy Ŷ Wen ls demand excused? ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 42
SLandards for revlewlng sareolder llLlgaLlon ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 42
lndependenL CommlLLees Ŷ lacLors consldered ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 42
ílseobetq vŦ llyloq 1lqet lloeţ locŦ (1971) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 42
Ctlmes vŦ uooolJ (1996) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 43
Motx vŦ Akets (1996) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 43
Aoetbocb vŦ 8eooett (1979) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 44
2opoto vŦ MolJoooJo (1981) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 44
lo te Otocle cotpŦ uetlvotlve lltlqotloo (2003) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 44
Mergersţ AcqulslLlonsţ and @akeovers ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 43
@ypes of AcqulslLlons ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 43
@ypes of Mergers ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 43
Cooslng 8eLween a Merger and an AsseL Sale ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 43
lottls vŦ Cleo AlJeo cotpŦ (1938) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 46
Þage 4 of

notltoo vŦ Atco ílecttoolcs (1963) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 46
Cas ouL MergersŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 47
coqqlos vŦ New íoqlooJ lottlots lootboll clob (1986) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 47
obklo vŦ lblllp AŦ noot cbemlcol cotpŦ (1983) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 48
ooscb vŦ cA cotp (1988) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 48
vC5ţ locŦ vŦ costlel (2000) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 48
cbeff vŦ Motbes (1964) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 49
uoocol cotpŦ vŦ Meso lettoleom (1983) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 49
evlooţ locŦ vŦ McAoJtews Ǝ lotbes nolJloqţ locŦ (1983) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 30
lotomooot commoolcotloos vŦ 1lme (1989) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 30
lotomooot commoolcotloos vŦ Ovc Netwotk (1994) ŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦŦ 30


Þage of

CuLllne
Mondayţ AugusL 29ţ 2011
10ť32 AM

lŦ unlLed SLaLes CorporaLe Law CaracLerlsLlcs
aŦ narrow ln Scope
lŦ Þrlmary concernsť
1Ŧ Sareolders / SLockolders
2Ŧ 8oards of ulrecLors
3Ŧ ManagemenL of CorporaLlon
4Ŧ @e CorporaLlon lLself
bŦ Compared wlL lnLernaLlonal corporaLe lawţ wlc covers almosL all sLakeolders of a
corporaLlon
llŦ @resold CuesLlons Lo Answer on any ypo
aŦ Are you ln a publlc or closely eld corporaLlon?
lŦ @e publlcly eld corporaLlon ls the on|y form LaL wlll be Lraded on a secondary
markeL
bŦ Wo owes wom waL?
lŦ ls Lere a flduclary duLy?
llŦ ls one of Le parLles an agenL of anoLer?
Tbe Nature and Purposes of tbe Corporation
lŦ 8aslc ALLrlbuLes of a CorporaLlon
aŦ @ere are of these
lŦ lormal CreaLlon
llŦ Legal personallLy / SeparaLe legal exlsLence
lllŦ LlmlLed LlablllLy
lvŦ SeparaLlon of ownerslp and conLrol
vŦ LlquldlLy Ŵ lreely allenable
vlŦ lndeflnlLe duraLlon
Separate legal existence
lŦ 8emember LaL Le corporaLlon ls a separate taxpayer
aŦ lf you come across a quesLlon dlscusslng Le separaLe legal exlsLence
lŦ MLn@lCn l@S @AxÞA?L8 S@A@uS
1Ŧ LvLn ll Ŵ you don'L know Le answer Lo Le quesLlon Ŵ profƌs advlce
Indefinite Duration
lŦ Ways ln wlc a corporaLlon may LermlnaLe Ŵ 4 ways
aŦ volunLary dlssoluLlon
bŦ Merger
cŦ 8ankrupLcy
dŦ ulssoluLlon by [udlclal decree
Þage of

Separation of Uwnersbip and Control
lŦ 8erle Ǝ Means arLlcle sLaLes
aŦ @aL Le separaLlon of ownerslp and conLrol produces a condlLlon were Le lnLeresLs
of Le owner and ulLlmaLe manager of Le company mayţ and ofLen doţ dlvergeŧ
Limited Liability
lŦ A sareolder of a corporaLlon ls noL personally llable for Le acLs or debL of Le corporaLlon
aŦ LxCLÞ@ LaL e may become personally llable by reason of ls own acLs or conducL
llŦ CreaLesL slngle dlscovery of modern Llmes
aŦ nlcolas Murray 8uLler Ŵ ÞresldenL of Columbla unlverslLy
Sbareboldersŏ powers
lŦ 8oards AC@ and sareolders 8LAC@
llŦ Sareolders are allowed Lo voLe on Ŵ 4 th|ngs
aŦ LlecLlon of dlrecLors
bŦ Any amendmenLs Lo Le arLlcles of lncorporaLlon
lŦ And bylawsţ generally speaklng
cŦ lundamenLal LransacLlons
lŦ Lxampleť Mergers
dŦ Cdds and endsţ suc as Le approval of lndependenL audlLors
lllŦ And LaLƌs abouL lL
aŦ @e buslness affalrs of every corporaLlon organlzed under Lls capLer sall be managed
by or under Le dlrecLlon of a board of dlrecLorsŧ
lŦ uCCL SecLlon 141(a)
Piercing tbe corporate veil
lŦ 8equlremenLs Ŵ @ere are 2 prongs
aŦ SeparaLeness
bŦ 8adness
llŦ SeparaLeness
aŦ AlLer ego rule
lŦ ls Le buslness Le ƍalLer egoƍ of Le person?
bŦ 8elevanL facLors
lŦ Commlngllng of funds
llŦ ulsregard for corporaLe formallLles
1Ŧ lallure Lo old sareolder meeLlngs
2Ŧ lallure Lo old board meeLlngs
3Ŧ lallure Lo keep mlnuLes of meeLlngs
4Ŧ lallure Lo keep separaLe books
3Ŧ lallure Lo lssue sLock
6Ŧ lallure Lo appolnL a board
7Ŧ lallure Lo adopL carLer or bylaws
lllŦ 8adness
aŦ @yplcally sown by Ŵ purposeful undercaplLallzaLlon
lŦ ls Lere enoug money on and for Le company Lo conducL lLs buslness?
Þage of

Walkovszky v. Carlton {ŵ9źź]
lŦ @axl Cab ln[ury Case
aŦ Cwner of cab company owned many oLer cab companlesţ all wlL only one or Lwo cabs
llŦ 8ule
aŦ A courL may dlsregard corporaLe form Lo prevenL fraud or acleve equlLy
lŦ ÞlL8ClnC @PL CC8ÞC8A@L vLlL
bŦ AbsenL an allegaLlon LaL Le defendanL was conducLlng buslness ln ls lndlvldual capaclLyţ a
complalnL carglng LaL Le an lndlvldual defendanL organlzed ls companles ln suc a
fragmenLed manner solely Lo llmlL ls llablllLy for personal ln[ury clalms ls lnsufflclenL Lo old
Le lndlvldual llable for Le clalm
Enterprise Liability
lŦ Can you make all of Le companles ln an organlzaLlon llable for Le ln[urles done by one
company?
aŦ lacLors Ŵ 11 of Lese
bŦ Common employees
cŦ Common record keeplng
dŦ CenLrallzed accounLlng
eŦ ÞaymenL of wages by one corporaLlon Lo anoLer corporaLlonƌs employees
fŦ Common buslness names
gŦ Servlces rendered by Le employees of one corporaLlon on bealf of anoLer
corporaLlon
Ŧ undocumenLed Lransfers beLween Le corporaLlons
lŦ unclear allocaLlon of proflLs and losses beLween Le corporaLlons
[Ŧ @e same offlcers
kŦ @e same sareolders
lŦ @e same Lelepone number
Sea-Land Services v. Pepper Source {ŵ99ŵ] - Reverse Veil Piercing
lŦ 8ule
lŦ lnablllLy Lo saLlsfy a [udgmenL ls lnsufflclenL Lo plerce Le corporaLe vell
llŦ ln order Lo plerce Le corporaLe vell and lmpose lndlvldual llablllLyţ a credlLor musL sow
1Ŧ @aL Lere was suc a unlLy of lnLeresL beLween Le lndlvldual and Le corporaLe
enLlLy LaL separaLe ldenLlLles no longer exlsLed
2Ŧ - LaL a fallure Lo do so would promoLe ƍln[usLlceƍ ln some way beyond leavlng a
credlLor unable Lo saLlsfy a [udgmenL
llŦ ueflned
1Ŧ Cnce you plerce Le vell upwards Lo a defendanLƌs personal lnLeresLsţ reverse
plerclng ls an aLLempL Lo Len plerce Le vell back down Lo oLer buslnesses LaL Le
defendanL owns
aŦ SLraLegy
lŦ ÞrevenLs a corporaLlon from movlng asseLs around Lo prevenL
paylng [udgmenLs agalnsL lL
lllŦ LxÞAnSlCn of plerclng docLrlne
1Ŧ 8LMLM8L8 LaL plerclng Le corporaLe vell only allows someone Lo recover up Lo
Le level of lnLeresL LaL Le defendanL eld ln a parLlcular company
aŦ 8everse plerclng goes dlrecLly afLer Le accounLs ln oLer corporaLlons
Þage of

lŦ @us lncreaslng Le amounL of Le [udgmenL recovered
Reverse Piercing Standard - In re Phllllpx
lŦ A courL may reverse plerce Le corporaLe vell and obLaln Le asseLs of a corporaLlon for Le
obllgaLlons of a conLrolllng sareolder or oLer corporaLe lnslder on|y upon a c|ear|ng show|ng
of |ntent that
aŦ @e conLrolllng lnslder and Le corporaLlon are alLer egos of eac oLer
bŦ !usLlce requlres Le subsLance of Le relaLlonslp over Le form because Le corporaLlon
flcLlon ls uLlllzed Lo perpeLraLe a fraud or Le defeaL of a rlgLful clalm
cŦ - an equlLable resulL ls acleved by plerclng
llŦ Wen lnnocenL sareolders or credlLors wlll be pre[udlced by reverse plerclngţ an equlLable
resulL ls noL acleved!
lllŦ CeckllsL
aŦ ls Lere a posslblllLy for an argumenL under espooJeot 5opetlot?
bŦ A masLer ls sub[ecL Lo Le llablllLy for Le ¾ of ls servanLs commlLLed wlle acLlng ln
Le scope of Lelr employmenL
cŦ 8esLaLemenL 2nd SecLlon 219(1) Ŵ Agency?
lŦ ls Lere a good argumenL for vell plerclng?
llŦ ls Lere a good argumenL for reverse vell plerclng?
lllŦ ls Lere a good argumenL for enLerprlse llablllLy?

In re Silicone Cel Breast Implant Products Liability Litigation {ŵ99Ź]
lŦ 8ule
aŦ A parenL corporaLlon ls llable for lLs subsldlarles LorLs lf Le parenL conLrolled Le
subsldlary as lLs alLer ego
llŦ ls a subsldlary an alLerŴego or mere lnsLrumenLallLy of a parenL corporaLlon?
aŦ @esL Ŷ SubsLanLlal uomlnaLlon by parenL
lŦ lacLors consldered
1Ŧ ÞarenL and subsldlary ave common dlrecLors or offlcers
2Ŧ ÞarenL and subsldlary ave common buslness deparLmenLs
3Ŧ ÞarenL and subsldlary flle consolldaLed flnanclal sLaLemenLs and Lax
reLurns
4Ŧ ÞarenL flnances Le subsldlary
3Ŧ ÞarenL causes Le lncorporaLlon of Le subsldlary
6Ŧ Subsldlary operaLes wlL grossly lnadequaLe caplLal
7Ŧ ÞarenL pays Le subsldlary's salarles and expenses
8Ŧ Subsldlary recelves no buslness excepL
9Ŧ ÞarenL uses subsldlary properLy as lLs own
10Ŧ ually operaLlons of Le Lwo corporaLlons are / are noL kepL separaLe
11Ŧ Subsldlary does / does noL observe baslc corporaLe formallLles
aŦ Suc as
lŦ keeplng separaLe books and records
llŦ Poldlng sareolder and board meeLlngs
lllŦ 8LMLM8L8
aŦ Wen ln doubLţ look Lo Le Lax lncldence felL by Le corporaLlons
lŦ @ax ls ofLen a way Lo sow LaL one corporaLlon ls Le alLer ego of anoLer
lvŦ lormaLlon of a CorporaLlon
Þage of

aŦ PlsLorlcal perspecLlve
lŦ CorporaLlons were formed under a granL from Le sLaLe
1Ŧ @radlLlonallyţ Lls was a way Lo conLrol monopolles
aŦ nC@ used for lncorporaLlng general companles
bŦ AllocaLlon of Þower
lŦ An lnlLlal allocaLlon of power Lo Le board of dlrecLors may be deLermlned by
1Ŧ @e number of sares LaL are auLorlzed and dlsLrlbuLed
aŦ no exLra sares auLorlzed beyond Lose of Le lnlLlal offerlng?
lŦ lndlcaLes LaL Le sareolders ave noL glven a greaL
deal of dlscreLlon Lo Le board
bŦ LxLra sares are auLorlzed Lo be dlsLrlbuLed?
lŦ More dlscreLlon provlded Lo Le board
llŦ Þar value
1Ŧ @e sLaLed value of Le securlLy
aŦ lL ls Le mlnlmum conLrlbuLlon for lnvesLors Lo purcase a sare
of sLock wen lL ls lnlLlally lssued
vŦ Cwnerslp of Company vla Sares
aŦ May be broken down ln several ways
lŦ Lxampleť
1Ŧ LqulLy SecurlLles
aŦ Common SLock
lŦ voLlng Sares
llŦ 8esldual Clalm
1Ŧ @yplcally Le lasL debL pald ln Le case of
bankrupLcy
lllŦ Cwed flduclary duLles
1Ŧ @ls ls Le maln caLegory of sares LaL are
owed suc duLles
bŦ Þreferred sLock
lŦ ulvldend rlgLs are superlor Lo Lose of common sLock
llŦ Þreference ln llquldaLlon over common sLock
1Ŧ 8uL sLlll recover only afLer oLer credlLors
lllŦ Cnly rarely ave voLlng rlgLs
lvŦ Converslon rlgLs
1Ŧ May be converLed Lo common sLock
aŦ SomeLlmesţ vlce versa
vŦ ConLracL based
1Ŧ ÞarLlcularly ln venLure caplLal
aŦ @ere wlll be deLalled documenLaLlon
abouL waL Lrlggers some rlgLs under
preferred sLock
vlŦ uebL covenanLs
aŦ LlmlLaLlons on
lŦ lndebLedness
llŦ Llens
lllŦ lundamenLal canges
1Ŧ Mergersţ sales of asseLsţ eLcŦ
lvŦ 8esLrlcLed paymenLs
Þage of

vŦ lnvesLmenLs
vlŦ @ransacLlons wlL afflllaLes
vllŦ SaleŴlease backs
vlllŦ CaplLal expendlLures
lxŦ AmendmenLs Lo MaLerlal AgreemenLs
xŦ Canges ln llscal Þerlods
xlŦ Canges ln Llnes of 8uslness
xllŦ negaLlve Þledge Clauses
xlllŦ ÞaymenLs by Subsldlarles
xlvŦ 8ecomlng a Ceneral ÞarLner of AnoLer CrganlzaLlon
xvŦ SpeculaLlve @ransacLlons
xvlŦ Canges Lo Poldlng Company SLaLuLes
Strob v. Blackbawk Holding Corp. {ŵ9Żŵ] - p. ŶŸŹ of supplement
lŦ lssue
aŦ May a company lssue sares LaL do noL ave any economlc beneflLs Lo Lelr owners?
lŦ ln Lls caseţ only provlded voLlng rlgLs
llŦ Answer
1Ŧ ?es
llŦ 8ules
aŦ A corporaLlonƌs sares of class 8 sLockţ wlc permlL voLlng rlgLsţ are valld sares of
sLockţ noLwlLsLandlng Le facL LaL Le sLock ls noL enLlLled Lo dlvldends
bŦ Sares may represenL a proprleLary lnLeresL even lf Ley do noL enLlLle Le older Lo
dlvldends or oLer properLy


Þage of

Entity Cboice

***See 8uslness LnLlLles PandouL ÞÞŦ 13Ŵ23 for CarL and Model LnLlLy Colce Memo***



lŦ @resold CuesLlon Lo Ask for SeLLlng up a 8uslness LnLlLy
aŦ WaL does Le owner wanL from a menu of colces?
lŦ LlmlLed LlablllLy
1Ŧ ÞroLecLlon of Þersonal AsseLs
llŦ Lase of SLarLup
lllŦ Lase of conLlnulLy
lvŦ AblllLy Lo ralse caplLal
vŦ ConLrol
vlŦ LlmlLed governmenL reporLlng
vllŦ ÞroflLŴLaklng
vlllŦ LlmlLed regulaLory 8equlremenLs
lxŦ AllenablllLy
1Ŧ Lack of resLrlcLlons on
xŦ 8esLrlcLlon on Le allenablllLy of oLers
Þage 2 of

xlŦ Lase of exlL
xllŦ @ax bennles
llŦ @ypes
aŦ Sole proprleLerslp
lŦ A buslness owned by an lndlvldual
1Ŧ MosL common buslness form
llŦ no legal formallLles
lllŦ @oLal conLrol over Le managemenL
lvŦ ÞroprleLor ls enLlLled Lo all of Le proflLs buL musL bear all of Le losses of Le
company
Ceneral partnersbip
lŦ An assoclaLlon of @WC C8 MC8L ÞL8SCnS Lo carry on as coŴowners a buslness for proflL
aŦ unlLed ÞarLnerslp AcL (1914) SecLlon 6(l)
lŦ @ls model acL as been adopLed ln some form by every sLaL
llŦ MA!C8 downslde
aŦ @e defaulL seLLlng ls unllmlLed llablllLy for eac parLnerslp
lŦ All parLners ln a parLnerslp are [olnLly and severally llable for all obllgaLlons and
llablllLles of Le parLnerslp
Advantages to general partnersbips
lŦ Mlnlmal formallLles are requlred for organlzaLlon of a parLnerslpţ and ence organlzaLlonal
cosLs are llmlLed
llŦ Slnce a parLnerslp lnvolves more Lan one personţ Lls form of buslness enLlLy permlLs a
comblnaLlon of lndlvldual resources and LalenLsţ and auLorlLy Lo acL ls noL llmlLed Lo one
person
lllŦ ueclslonŴmaklng and acLlon can be lnformal
lvŦ @ere are no quallflcaLlon requlremenLs for dolng buslness ln oLer sLaLes
vŦ Mlnlmal reporLlng Lo governmenLal enLlLles ls requlred
vlŦ lf Le parLnerslp agreemenL so provldesţ a parLnerslp may conLlnue ln exlsLence afLer Le
deaLţ dlssoluLlonţ or wlLdrawal of a parLner
vllŦ 8uslness proflLs are sub[ecL Lo only one Laxţ aL Le lndlvldual parLner levelţ and are noL
sub[ecL Lo double Lax as would be Le case lf Le proflLs were earned by a C corporaLlon
vlllŦ 8uslness losses are avallable on parLners' personal lncome Lax reLurns and can offseL oLer
lncome (sub[ecL Lo Le passlve loss rules)
lxŦ Speclal allocaLlons may be made for lncome Lax purposes
xŦ ulsproporLlonaLe dlsLrlbuLlons may made Lo parLners
xlŦ A parLnerslp may be converLed Lo a llmlLed parLnerslpţ llmlLed llablllLy companyţ C
corporaLlon or S corporaLlon ln waL ls ordlnarlly a LaxŴfree LransacLlon
Disadvantages of a general partnersbip structure
lŦ Lac parLner as unllmlLed personal llablllLy for all obllgaLlons and llablllLles of Le buslness
llŦ @e general power of every parLner Lo acL on bealf of Le buslness requlres cauLlon ln Le
selecLlon of parLners and monlLorlng of parLners' acLlvlLles
lllŦ All parLners may parLlclpaLe ln managemenLţ poLenLlally maklng declslonŴmaklng
cumbersome and dlfflculL
lvŦ A parLnerslp ls dlssolved upon Le deaLţ dlssoluLlonţ lnsanlLyţ bankrupLcyţ or wlLdrawal
of any one parLnerţ lf noL oLerwlse speclfled ln Le parLnerslp agreemenL
Þage 3 of

vŦ 8uslness proflLs are Laxed as lncome Lo Le lndlvldual parLners andţ as a resulLţ may be
sub[ecL Lo selfŴemploymenL Laxţ as well as lncome

Remember tbese factors to consider {from slides, listed in Fenwlck, and in casebook pp. 88-
9Ŵ]
lŦ lnLenLlon of Le parLles
aŦ See Mottlo
llŦ 8lgL Lo sare ln Le proflLs
aŦ See leowlck
lllŦ CbllgaLlon Lo sare ln loss
lvŦ Cwnerslp and conLrol
vŦ CommunlLy and power ln admlnlsLraLlon
vlŦ Language ln agreemenL
vllŦ ConducL Lowards @(?)
vlllŦ 8lgLs on dlssoluLlon

Fenwick v. Unemployment Compensation Commission {ŵ9ŸŹ] - p. Źŷ
lŦ 8ule
aŦ A parLnerslp ls noL formed slmply by agreelng Lo sare proflLs beLween Lwo or more
people
bŦ A parLnerslp ls an assoclaLlon of Lwo or more persons Lo carry on os coŴowoets of a
buslness for proflL
llŦ 8eauLy sop case
lllŦ LlemenLs consldered ln deLermlnlng weLer an agreemenL ls a parLnerslp
aŦ 8lgL for parLles Lo sare ln proflLs
bŦ Cwnerslp and conLrol of Le parLnerslp properLy and buslness
cŦ CommunlLy of power ln admlnlsLraLlon
dŦ Language of Le agreemenL
eŦ 8lgLs of Le parLles on dlssoluLlon
Martin v. Peyton {ŵ9ŶŻ] - bandout
lllŦ 8ule
aŦ A loan agreemenL LaL allows for sarlng of proflLs as repaymenL does nC@ esLablls a
parLnerslp absenL Le lnLenL Lo do so
bŦ A parLnerslp ls creaLed by an express or lmplled conLracL beLween Lwo persons wlL
Le lnLenLlon Lo form a parLnerslp
lvŦ lssue
aŦ uoes Le loan of money ln excange for securlLles owned by Le debLor and a
percenLage of Le debLorƌs lncome creaLe a parLnerslp?
lŦ nope
vŦ lacLors
aŦ AppolnLmenL of a manager by Le loanlng parLy does noL necessarlly sow lnLenL
lŦ ln cases were Le appolnLmenL ls apparenLly Lo proLecL Le collaLeral
bŦ ManagemenLŴllke funcLlons may or may noL sow lnLenL
cŦ Þurcase opLlonsţ Loug unusualţ do noL prove lnLenL Lo creaLe a parLnerslp
Þage 4 of

UPA § ŵŹ
lŦ Cenerally
aŦ ÞarLners are petsooolly llable for Le obllgaLlons of Le parLnerslp
llŦ #All parLners are llable
aŦ !olnLly and severally for everyLlng cargeable Lo Le parLnerslp under VV 13
(ÞarLnerslp 8ound by ÞarLner's Wrongful AcL) and 14 (ÞarLnerslp 8ound by ÞarLner's
8reac of @rusL)
bŦ !olnLly for all oLer debLs and obllgaLlons of Le parLnerslpŤ buL any parLner may enLer
lnLo a separaLe obllgaLlon Lo perform a parLnerslp conLracL"
UPA § ŸŴ
lŦ Loans by parLners Lo Le parLnerslp are subordlnaLed Lo Le loans of credlLors oLer Lan
parLners
aŦ lmporLanL ln Mottlo
lŦ 8ecause Le buslness was lnsolvenLţ Len Le loans made by Le oLer parLles
would be subordlnaLed lf Ley were found Lo be parLners ln Le organlzaLlon
Limited Partnersbip
lŦ A llmlLed parLner ls nC@ personally responslble for Le obllgaLlons and llablllLles of Le
parLnerslp
llŦ Ceneral parLners are personally llable for all obllgaLlons and llablllLles of Le llmlLed parLnerslp
ln Le same manner as parLners ln a general parLnerslp

Limited Liability Partnersbip
lŦ A form of general parLnerslpţ creaLed under sLaLe general parLnerslp laws
llŦ ÞarLners are stotototlly relleved of all or parL of Lelr personal llablllLy for parLnerslp llablllLlesţ
debLsţ and oLer obllgaLlons

Limited Liability Limited Partnersbip
lŦ A Þ8Cl lAvC8l@L
llŦ varles by sLaLe law
aŦ LŦgŦ Ŷ CA does noL allowţ buL recognlzes ouL of sLaLe enLlLles
lŦ @exasţ Coloradoţ and uL allow
bŦ A llmlLed llablllLy llmlLed parLnerslp ls a llmlLed parLnerslpţ formed under Le
appllcable sLaLe llmlLed parLnerslp sLaLuLeţ wlc also speclflcally reglsLers and Lereby
provldes llablllLy proLecLlon Lo Le general parLners
Limited Liability Company
lŦ ALLrlbuLes
aŦ Cross beLween a parLnerslp and a corporaLlon
lŦ @ax advanLages of parLnerslp
1Ŧ CorporaLlons are Laxed Lwlce
aŦ neL proflLs
bŦ Sareolder dlvldends
2Ŧ LLC
aŦ neL proflL ls dlsLrlbuLed Lo lnvesLors
lŦ @en Laxed as lncome
Þage of

llŦ LlmlLed llablllLy of corporaLlons
lllŦ AcLlve parLlclpaLlon ln managemenL
bŦ CannoL Lrade sLocks ln secondary markeLs
Formation
lŦ llle ArLlcles of CrganlzaLlon
aŦ unlform LlmlLed LlablllLy Company AcL V 202(a)
lŦ CrganlzaLlon
1Ŧ Cne or more persons may organlze a llmlLed llablllLy companyţ
conslsLlng of one or more membersţ by dellverlng arLlcles of
organlzaLlon Lo Le offlce of Le SecreLary of SLaLe for flllng
2Ŧ @yplcally sLaLuLes requlre LaL Le name speclfy LLC or some oLer
deslgnaLlon wlc noLlfles lnLeresLed parLles of Le Lype of company
3Ŧ MusL deslgnaLe Le offlce and agenL for servlce of process
4Ŧ urafL operaLlng agreemenL
aŦ @e baslc conLracL governlng Le affalrs of a llmlLed llablllLy
company and sLaLlng Le varlous rlgLs and duLles of Le
members
Articles of Urganization - VŶŴŷ
lŦ MusL conLaln
aŦ @e name of Le company
bŦ Address of Le lnlLlal deslgnaLed offlce
cŦ @e name and sLreeL address of Le lnlLlal agenL for servlce of process
dŦ @e name and address of eac organlzer
eŦ WeLer Le company ls Lo be a Lerm company andţ lf soţ waL Lerm
fŦ WeLer Le company ls managerŴmanaged andţ lf soţ Le name and address of eac
lnlLlal manager
gŦ WeLer one or more of Le members of Le company are Lo be llable for lLs debLs and
obllgaLlons under V303©
llŦ May also conLaln
aŦ Þrovlslons permlLLed Lo be seL forL ln an operaLlng agreemenL or
bŦ MaLLers noL lnconslsLenL wlL law
May NUT vary tbe non-waivable rigbts under VŵŴŷ{b]
lŦ @e operaLlng agreemenL conLrols ln any lnsLance were
aŦ ueclslons lnvolve managersţ membersţ and members' Lransferees
bŦ Þersonsţ oLer Lan Le managersţ membersţ and members' Lransfereesţ wo
reasonably rely on Le arLlcles Lo Lelr deLrlmenL
llŦ SecLlon 103(b) Ŷ CperaLlng AgreemenLs May nC@
aŦ unreasonably resLrlcL a rlgL Lo lnformaLlon or access Lo records under V408
bŦ LllmlnaLe Le duLy of loyalLy
lŦ @oug Le agreemenL may
1Ŧ lu speclflc Lypes of caLegorles of acLlvlLles LaL do nC@ vlolaLe Le duLy
of loyalLyţ lf noL maLerlally unreasonable Anu
2Ŧ Speclfy Le number and percenLage of members or dlslnLeresLed
managers LaL may auLorlze or raLlfyţ afLer full dlsclosure of all
maLerlal facLsţ a speclflc acL or LransacLlon LaL would oLerwlse vlolaLe
Le duLy of loyalLy
Þage of

cŦ unreasonable reduce Le duLy of care under V409 (c ) or V601 (b)(3)
dŦ LllmlnaLe Le obllgaLlon of good falL and falr deallng under V 409 (d)
lŦ Poweverţ Le agreemenL may deLermlne Le sLandards by wlc Lls obllgaLlon
ls Lo be measuredţ so long as Lese sLandards are noL manlfesLly unreasonable
eŦ vary Le rlgL Lo expel a member ln an evenL speclfled under V 601 (6)
fŦ vary Le requlremenL Lo wlnd up Le LLC buslness
gŦ 8esLrlcL Le rlgLs of a personţ oLer Lan a managerţ memberţ or members' Lransferee
of a member's dlsLrlbuLlonal lnLeresL
Members' Interest
lŦ llnanclal 8lgLs
aŦ ÞroflL and Loss Sarlng
lŦ AbsenL and conLrary agreemenL
1Ŧ ÞroflLs and losses are allocaLed accordlng Lo Le members' conLrlbuLlons
2Ŧ uefaulL parLnerslp rule
bŦ WlLdrawal
lŦ Member may wlLdraw and demand paymenL of ls/er lnLeresL upon glvlng
Le noLlce speclfled ln Le sLaLuLe or Le LLC operaLlng agreemenL
cŦ AsslgnmenL of lnLeresLs
lŦ unless oLerwlse provlded ln LLC agreemenL
llŦ ManagemenL rlgLs
aŦ Lac member as equal rlgLs ln Le managemenL of LeLLC
lŦ unless oLerwlse agreed
llŦ MosL maLLers are declded by a ma[orlLy voLe
1Ŧ uLLCA V404 (a)(2)
lllŦ Some maLLers requlre a unanlmous voLe
1Ŧ uLLCA V 404(c )
aŦ AmendmenL of Le operaLlng agreemenL
bŦ AuLorlzaLlon or raLlflcaLlon of acLs or LransacLlons under 103
(b)(2)(ll)
lŦ Wlc would oLerwlse vlolaLe Le duLy of loyalLy
cŦ An amendmenL Lo Le ArLlcles of CrganlzaLlon
dŦ Compromlseţ as among membersţ of an obllgaLlon of a member
Lo make a conLrlbuLlon or reLurn money or oLer properLy pald
or dlsLrlbuLed ln vlolaLlon of Le uLLCA
eŦ Compromlse of an obllgaLlon Lo make a conLrlbuLlon under V
402(8)
fŦ lnLerlm dlsLrlbuLlons
gŦ Admlsslon of new members
Ŧ use of company properLy Lo redeem an lnLeresL
lŦ ConsenL Lo dlssolve Le company
[Ŧ Walver of Le rlgL Lo ave Le company's buslness wound up
and LermlnaLed
kŦ ConsenL of members Lo merge
lŦ Saleţ leaseţ excange ţ or oLer dlsposal of allţ or subsLanLlally
all of Le company's properLy wlL or wlLouL goodwlll
Þage of

Piercing tbe LLC Veil
lŦ MlnnesoLa sLandard
aŦ May plerce Le vell wen
lŦ An enLlLy lgnores Le corporaLe formalllLles and acLs as Le alLer ego or
lnsLrumenLallLy of Le sareolder Anu
llŦ @e llablllLy llmlLaLlons of Le corporaLe form resulLs ln ln[usLlce or ls
fundamenLally unfalr
llŦ uLLCA V 303(b)
aŦ @e fallure of a LLC Lo observe Le usual company formallLles or requlremenLs relaLlng
Lo Le exerclse of lLs company powers or managemenL of lLs buslness ls nC@ ground for
lmposlng personal llablllLy on members or managers for llablllLles of Le company

Corporate Formation


lŦ @resold Analysls
aŦ 8emember Lo look Lo Le dlagram above and ask
lŦ WaL are Le parLles aLLempLlng Lo geL ouL of Le rlgLs above
1Ŧ WaL ls Le cllenL aLLempLlng Lo accomplls ln formlng Lls company?
aŦ LlmlLed LlablllLy ls ALWA?S an lssue
lŦ LxcepL ln llorlda were a person's ome and asseLs are
proLecLed as a maLLer of law
Bylaws
lŦ 8ylaws may conLaln any provlslonţ noL lnconslsLenL wlL Le law or Le cerLlflcaLe of
lncorporaLlonţ relaLlng Lo Le buslness of Le corporaLlonţ Le conducL of lLs affalrsţ and lLs
rlgLs or powers ţ or Le rlgLs and powers of lLs sLockoldersţ dlrecLorsţ offlcersţ or employees
aŦ uCCL V 109
llŦ 8emember Lls lmporLanL aLLrlbuLe of bylaws
aŦ CuLllnes wo may adopLţ amendţ or repeal Le bylaws
lŦ May be elLer expanslve or resLrlcLlve rules
Calaviz v. Berg {N.D. Cal. ŶŴŵŵ]

lŦ Cne of many sulLs lnvolvlng Cracle 8ylaws
llŦ Scenarlo
aŦ Pere a bylaw was passed by Cracle wlc provlded a conLracLual forum clause LaL all
acLlons musL be eard ln uL
lŦ Poweverţ Lls was noL adopLed durlng Le orlglnal flllng
llŦ nor ln Le ArLlcles of lncorporaLlon
bŦ ÞlalnLlff brougL sulLţ board passed 8ylawţ and moved Lo dlsmlss
lŦ Clalmed LaL Le forum clause was accepLed because of Le plalnLlff's conLlnued
ownerslp ln Le company
cŦ lorum clause musL be glven effecL unless Lere ls a sowlng LaL
lŦ lLs lncorporaLlon lnLo Le conLracL was Le resulL of fraudţ undue lnfluence or
overweenlng bargalnlng power
Þage of

llŦ @e selecLed forum ls so gravely dlfflculL LaL Le complalnlng parLy wlllţ for all
pracLlcal purposesţ be deprlved of lLs day ln courL C8
lllŦ LnforcemenL of Le clause would conLravene sLrong publlc pollcy of Le forum
ln wlc Le sulL ls brougL
lllŦ Cracle losL
Southern-0ulf Murlne Co., No. 9, Inc. v. Cumcruft, Inc.
lŦ 8lack LeLLer Law
aŦ Lack of formal corporaLe sLaLus does nC@ excuse nonperformance
bŦ A defendanL may noL lnLerpose as a defense Lo a breac of conLracL LaL a plalnLlff
corporaLlons lacked Le capaclLy Lo conLracL because lL was no lncorporaLed aL Le Llme
lL execuLed Le conLracLţ unless Le defendanL can sow LaL Le fallure Lo lncorporaLe
caused acLual arm Lo defendanL
llŦ Analysls
aŦ 8ule proLecLs companles LaL are formedţ as ereţ for a slngleŴpurpose
lŦ CorporaLe formaLlon ls ofLen one of Le lasL sLeps ln a slmllar LransacLlon
lllŦ lacLs
aŦ Company slgned an agreemenL Lo purcase a vesselţ buL dld noL lncorporaLe unLll afLer
Le agreemenL was sealed
bŦ Company laLer lncorporaLed ln Le Cayman lslands due Lo flnanclal concerns
lŦ 8uL Le owner advlsed CamcrafL LaL Le company ad raLlfled Le agreemenL
cŦ Meanwlleţ Le boaL became muc more valuable and CamcrafL argued LaL Le
conLracL ad never been formed
lvŦ lssue
aŦ uoes a parLy's fallure Lo ave lncorporaLed before slgnlng a conLracL wlL Le defendanL
render a conLracL unenforceable?
lŦ nope
Internal Affairs Doctrine
lŦ @e law of Le sLaLe of lncorporaLlon conLrols corporaLe governance law lssues
aŦ Lxample
lŦ A @exas courL resolvlng a dlspuLe regardlng Le lnLernal affalrs of a corporaLlon
lncorporaLed ln uelaware would use uelaware Law Lo declde
bŦ key scenarlo
lŦ 8elaLlonslp among Le corporaLlon and lLs offlcersţ dlrecLorsţ and sareolders
cŦ lnLernal vsŦ exLernal
lŦ uebaLable
1Ŧ Þrobably lnLernal
aŦ 8lgL of sareolders Lo voLe
2Ŧ Þrobably exLernal
aŦ 8lgL of a sareolder Lo lnspecL Le books of a corporaLlon
Wby Delaware?
lŦ 8elncorporaLlon lnLo uelaware ls easy
aŦ Powever leavlng ls dlfflculL
lŦ 8equlres an unanlmous declslon from Le sareolders Lo Lransfer ouL
llŦ Wy coose uL Ŷ Accordlng Lo commenLaLors
Þage of

aŦ ConLenLs of Le law
bŦ LxperLlse Ŷ and speclallzed Cancery CourLs
cŦ ueveloped case law
lŦ Lases predlcLlons on ouLcomes
dŦ 8esources
eŦ uL counsel encourage lncorporaLlon wlLln Le sLaLe
fŦ ÞaL dependency
lŦ We do lL because we've always done lL
gŦ Perd menLallLy
lŦ Lverybody else ls dolng lL
lllŦ 8ace Lo Le Lop or boLLom?
aŦ 8ace Lo Le boLLom
lŦ Wllllam LŦ Cary Ŷ leJetollsm ooJ cotpotote low (83 ?ale LŦ!Ŧ 663)
1Ŧ Argued LaL uL sLrucLured lLs corporaLe law Lo appeal Lo corporaLe
managemenL
aŦ Wlc resulLed ln lax legal sLandards LaL favor managemenL
over sareolders
bŦ 8ace Lo Le Lop
lŦ 8alp WlnLer
1Ŧ Argued LaL markeL consLralnLs creaLe lncenLlves for managers Lo
coose Le corporaLe law LaL maxlmlzes flrm value
lvŦ Cancery CourL
aŦ Pas !ux for all clalms arlslng ln equlLy
lŦ lncludes
1Ŧ CorporaLe maLLers
2Ŧ @rusLs and esLaLes
3Ŧ CLer flduclary maLLers
4Ŧ 8eal esLaLe dlspuLes
3Ŧ Ceneral commerclal and conLracLual maLLers
vŦ nevada AlLernaLlve Ŷ Þrof fave
aŦ Wy lncorporaLe Lere?
lŦ nC @Ax
1Ŧ no corporaLe lncome Lax
2Ŧ no Laxes on CorporaLe Sares
3Ŧ no franclse Lax
4Ŧ no personal lncome Lax
3Ŧ no franclse Lax on lncome
6Ŧ no lnerlLance or glfL Laxţ no unlLary Laxţ no esLaLe Lax
7Ŧ Mlnlmal employer Lax
8Ŧ CompeLlLlve sales and properLy Lax raLes
llŦ LxLremely lg vell plerclng sLandard
1Ŧ MusL sow fraud or manlfesL ln[usLlce
aŦ PlgesL sLandard ln Le counLry
2Ŧ 8elnsLaLemenL of enLlLles as Le effecL of sowlng LaL a corporaLlon
was always ln good sLandlng
aŦ @us proLecLlng Le corporaLe vell
bŦ CorporaLe revlval procedures are slmple
lllŦ LL alŦ Ŷ See Class 7 pŦ 4
Þage 2 of

Purpose of a Corporation
lŦ WaL ls Le purpose of a corporaLlon?
aŦ #A corporaLlon ls organlzedŧ prlmarlly for Le proflL of Le sLockoldersŧ @e powers of
dlrecLors are Lo be employed Lo LaL endŦ"
lŦ @e dlscreLlon of dlrecLors ls llmlLed Lo aclevlng Lls endţ and may noL be used
Lo reduce proflLs or provlde nonŴdlsLrlbuLlon of Lose proflLs Lo Le sLockolders
ln order Lo dlverL Lem Lo oLer purposes
oJge v. ForJ {ŵ9ŵ9]
lŦ 8lack LeLLer Law
aŦ A forŴproflL corporaLlon musL pay dlvldends absenL a [usLlflable buslness reason
bŦ AlLoug a corporaLlon's dlrecLors ave dlscreLlon ln Le means Ley coose Lo make
producLs and earn a proflLţ Le dlrecLors may noL reduce proflLs or wlLold dlvldends
from Le corporaLlon's sareolders ln order Lo beneflL Le publlc
llŦ lssue
aŦ May courLs lnLerfere wlL a corporaLlon's lnLernal operaLlons by revlewlng a board's
declslon orderlng Le paymenL of dlvldends Lo lLs sareolders?
lŦ ?ep
lllŦ lacLs
aŦ lord MoLor CoŦ wanLed Lo llmlL lLs dlvldends Lo sLockolders so LaL lL could bulld a new
planL and lncrease capaclLy
lŦ Poweverţ Lls expanslon was noL Lo lncrease proflLsţ buL unlLs of producLlon
1Ŧ Wlc would acLually lower overall proflLs
bŦ SLockolder brougL sulL
lŦ uodge brosŦ were acLually compeLlLorsţ even Loug Ley owned sares

.P. Smlth Mfg. Co. v. Burlow {ŵ9Źŷ]
lŦ 8lack LeLLer Law
aŦ A corporaLlon need noL ave speclflc auLorlLy Lo make valld carlLable conLrlbuLlons
bŦ A corporaLlon may make reasonable carlLable conLrlbuLlonsţ even ln Le absence of
express auLorlLy Lo do so
llŦ lssue
aŦ May a corporaLlon make carlLable conLrlbuLlons ln Le absence of any speclflc
auLorlzaLlon ln Le company's carLer or sLaLe sLaLuLes?
lŦ ?ep
lllŦ lacLs
aŦ MfgŦ company regularly made conLrlbuLlons Lo Le local communlLy and Lo ÞrlnceLon
unlverslLy
lŦ Cwner argued LaL lL esLabllsed goodwlll
llŦ SLockolders argued LaL Ley ad no auLorlLy
lvŦ Analysls
aŦ Þubllc pollcy supporLs Lese Lypes of donaLlons
bŦ ÞlalnLlff dld noL sow LaL Lese donaLlons forwarded personal lnLeresLsţ Lerefore Ley
were okay
vŦ 8esulL
aŦ Many aLLorneys now place a quallfler LaL a corporaLlon ls formed Lo carry on any lawful
purpose for wlc a corporaLlon may be organlzed
Þage 2 of

lŦ ln Le company carLer
Business )udgment Rule
lŦ A sareolder falls Lo sLaLe a cause of acLlon unless lL alleges LaL a corporaLlon's dlrecLors'
conducL was causlng a flnanclal loss Lo Le sareolder ooJ was based on
aŦ lraud
bŦ lllegallLyţ C8
cŦ ConfllcL of lnLeresL
llŦ WaL may dlrecLors conslder?
aŦ ÞA SLaLuLe
lŦ 8esL lnLeresLs of Le corporaLlon may lnclude
1Ŧ SorL and longŴLerm conslderaLlons may lnclude Le effecLs upon
aŦ Sareolders
bŦ Lmployees
cŦ Suppllers
dŦ CusLomers
eŦ CredlLors
Sblensky v. Wrigley {ŵ9ź8]
lŦ 8lack LeLLer Law
aŦ ueclslons by offlcers and dlrecLors are proLecLed by Le buslness [udgmenL rule
bŦ @o sLaLe a cause of acLlonţ a sareolder musL allege Lo overall Llngs
lŦ @e declslon was causlng a flnanclal loss Lo Le company
llŦ Anu
lllŦ @e declslon was based on one of Lree foundaLlons
1Ŧ lraud
2Ŧ lllegallLy
3Ŧ ConfllcL of lnLeresL
cŦ @ls was Le flrsL sLaLemenL of Le 8uslness !udgmenL 8ule
State Law Fiduciary Duties
Duty of Care
lŦ omeo vŦ Ametlcoo íxptess (1976)
aŦ @e quesLlon of weLer or noL a dlvldend ls Lo be declaredŧ ls excluslvely Le maLLer of
buslness [udgmenL for Le board of dlrecLors
lŦ More Lan lmprudence or mlsLaken [udgmenL musL be sown
1Ŧ @e courL wlll noL lnLerfere unless a clear case ls made for fraudţ
arblLrarlnessţ or breac of LrusL
bŦ 8lack LeLLer Law
lŦ A corporaLlon's dlrecLors are noL llable merely because a beLLer course of acLlon
exlsLed
llŦ A complalnL alleglng LaL some course of acLlon oLer Lan LaL Laken by Le
board would ave been beLLer does noL glve rlse Lo a cause of acLlon for
damages
llŦ 5mltb vŦ voo Cotkom (1983)
aŦ 8lack LeLLer Law
Þage 22 of

lŦ @e buslness [udgmenL rule presumes all declslons made by a company's
dlrecLors are lnformed declslons
llŦ @e 8!8 presumes LaLţ wen maklng buslness declslonsţ dlrecLors acL on an
lnformed baslsţ ln good falLţ and ln Le company's besL lnLeresLs
bŦ lssue
lŦ ls a board negllgenL ln approvlng a proposed casŴouL mergerţ lf Le merger
was noL Le producL of lnformed buslness [udgmenLţ Le board acLed ln a
grossly negllgenL manner ln approvlng amendmenLs Lo Le proposalţ and Le
board falled Lo dlsclose all maLerlal facLs LaL Ley knew or sould ave known
before obLalnlng Le sLockolders' approval?
1Ŧ ?ep
cŦ Analysls
lŦ @e 8!8 presumes Le good falLţ lnformed consenLţ and besL lnLeresLs prongs
ln Le dlrecLors favor
1Ŧ Poweverţ a plalnLlff may overcome Lls presumpLlon
dŦ 8equlremenLs for an lnformed declslon
lŦ MusL conslder all lnformaLlon reasonably avallable Lo Lem before maklng Le
declslon
1Ŧ lf Le board does noL conslder
aŦ @ey musL lmmedlaLely cure Le defecLs Lo Le declslonŴmaklng
process as soon as Ley learn of Le problem
DCCL V

lŦ A cerLlflcaLe of lncorporaLlon may llmlL Le personal llablllLy of a person slLLlng on Le board
Lo Le company or lLs sLockolders for breaces of a flduclary duLyţ buL may nC@ ellmlnaLe
or reduce Le duLles of
aŦ LoyalLy Lo Le organlzaLlon
bŦ Cood falL
cŦ lmproper personal beneflLs
Frunclx v. UnlteJ jerxey Bunk {ŵ98ŵ]
lŦ 8lack LeLLer Law
aŦ ulrecLors musL dlllgenLly dlscarge Lelr duLles
bŦ ulrecLors ave Le duLy Lo acL onesLly and ln good falL wlL Le same degree of
dlllgenceţ careţ and Le skllls LaL a reasonably prudenL person would use ln slmllar
clrcumsLances
llŦ lssue
aŦ Can Le lnaLLenLlve and unlnLeresLed dlrecLor be eld personally llable for a
corporaLlon's acLlons?
lŦ ?ep
Cinemark, Inc. v. Tecbnicolor
lŦ Sareolder derlvaLlve sulL opposlng a mergerţ were Le plalnLlff clalmed a vlolaLlon of Le
duLy of care
llŦ vlolaLlon of duLy of care requlres Lwo pronged analysls
aŦ uld Le dlrecLor(s) vlolaLe Le duLy of care?
lŦ lf yes Ŷ conLlnue
Þage 23 of

llŦ lf no Ŷ Len plalnLlff loses
bŦ lf dlrecLor vlolaLed Le duLy of care
lŦ @en Le defendanL musL sow #enLlre falrness" of LransacLlon
1Ŧ lacLors
aŦ @lmlngţ negoLlaLlonţ and sLrucLure of LransacLlon
bŦ ulsclosure and approval by dlrecLors
cŦ ulsclosure and approval by sareolders
Duty of Loyalty vs. Duty of Care
lŦ lf a case lnvolves Le duLy of care
aŦ MusL sow
lŦ Lack of care
llŦ Cross negllgence
llŦ lf a breac of Le duLy of loyalLy ls alleged
aŦ MusL sow a confllcL of lnLeresL
lŦ nC@ a gross confllcL
bŦ lf confllcL ls found
lŦ @en board musL sow enLlre falrness of LransacLlon
Duty of Loyalty Case Analysis
lŦ lnLeresLed ulrecLor @ransacLlons
aŦ 8oyet
bŦ lewls
cŦ 8eolbooo
llŦ CorporaLe CpporLunlLles
aŦ 8toz
bŦ í8oy
lllŦ uomlnanL Sareolders
aŦ 5loclolt
bŦ 2obo
Buyer v. Berun
lŦ 8lack LeLLer Law
aŦ 8ule requlrlng dlrecLors' undlvlded loyalLy avolds posslblllLy of fraud and Le LempLaLlon
of selfŴlnLeresL
bŦ A dlrecLor does noL breac ls or er flduclary duLy by approvlng a radlo adverLlslng
program ln wlc Le wlfe of Le corporaLe presldenLţ wo was also a member of Le
board of dlrecLorsţ was one of Le feaLured performers
DCCL VŵŸŸ - Interested Directors
lŦ A conLracL beLween a corporaLlon and one or more of lLs dlrecLors or offlcers ls noL vold
solely because for Lls reason
aŦ MusL be dlsclosed Lo
lŦ ulrecLors
llŦ Sareolders
bŦ MusL be falr aL Le Llme LaL lL ls auLorlzed or raLlfled
llŦ no lnLeresLed dlrecLor LransacLlon sall be vold or voldable solely because of Le
lnvolvemenL of Le lnLeresLed dlrecLorţ so long as
Þage 24 of

aŦ lL was dlsclosed and auLorlzed by Le dlslnLeresLed dlrecLors C8
bŦ ulsclosedţ knownţ and approved by sareolders C8
cŦ ls a falr LransacLlon

Corporate Upportunity Test
lŦ lour facLors
aŦ ls Le corporaLlon flnanclally able Lo Lake Le opporLunlLy?
bŦ ls Le opporLunlLy ln Le corporaLlon's llne of buslness?
cŦ uoes Le corporaLlon ave an lnLeresL or expecLancy ln Le opporLunlLy?
dŦ uoes an offlcer or dlrecLor creaLe a confllcL of lnLeresL by Laklng Le opporLunlLy?
llŦ MusL sow eac
lllŦ Ma[or cases
aŦ 8toz vŦ cellolot lofo 5ystems
bŦ lo te í8oy 5botebolJets´ lltlqotloo
State Law Fiduciary Duties, Ubligation of Cood Faitb, Compensation, and
Uversigbt
lŦ Cwed by wom Lo wom?
aŦ ulrecLors Lo sLockolders
lŦ voo Cotkom
bŦ SomeLlmes
lŦ ulrecLors Lo credlLors
1Ŧ ltoocls
aŦ very rare
llŦ uomlnanL sareolders Lo mlnorlLy sareolders
1Ŧ 5loclolt
2Ŧ 2obo
llŦ ConLenL of flduclary duLles
aŦ uuLy of care
lŦ Cross negllgence SLandard
1Ŧ voo Cotkom
bŦ uuLy of loyalLy
lŦ lnLeresLed dlrecLor LransacLlons
1Ŧ 8oyet
2Ŧ 8eolbooo
llŦ CorporaLe CpproLunlLles
1Ŧ 8toz
2Ŧ lo te e8oy
lllŦ uomlnanL sareolders
1Ŧ 5loclolt
2Ŧ 2obo
Zabn v. TransAmerica Corp. {ŵ9ŸŻ]
lŦ 8lack LeLLer 8ule
aŦ A sLockolder voLlng as a dlrecLor musL voLe ln all sareolders' besL lnLeresLs
Þage 2 of

bŦ lf a sLockolder wo ls also a dlrecLor ls voLlng as a dlrecLorţ e or se represenLs all
sLockolders ln Le capaclLy of a LrusLee and cannoL use Le dlrecLor's poslLlon for ls or
er personal beneflL Lo Le deLrlmenL of oLer sLockolders
llŦ Analysls
aŦ ulrecLors knew of Le posslblllLy of a ma[or sLockolder's rlgL Lo redeem a large
number of saresţ because lL was ln Le company carLer
lŦ Poweverţ Ley dld noL dlsclose Lls facL Lo oLer sareolders
bŦ Alsoţ Ley declded Lo call Le class A sares ln order Lo beneflL olders of class 8 sares
ln a llquldaLlon of Le company
lŦ ulrecLors possessed Le class 8 sares
In re Wheelubrutor 1echnologlex, Inc. ShureholJerx Iltlgutlon {ŵ99Ź]
lŦ 8lack LeLLer Law
aŦ SLockolders musL be fully lnformed wen Ley raLlfy an lnLeresLed LransacLlon
bŦ An lnLeresLed LransacLlon beLween a corporaLlon and lLs dlrecLors ls noL voldable lf lL ls
approved ln good falL by a ma[orlLy of fully lnformedţ dlslnLeresLed sLockolders
llŦ lacLs
aŦ Sareolders sued Le company's dlrecLors for breac of flduclary duLyţ alleglng LaL Le
proxy sLaLemenL lssued ln connecLlon wlL lLs merger was mlsleadlng
lllŦ Analysls
aŦ @e sLandard of provlng LaL a declslon ls no fully lnformed ls falrly lg
lŦ MusL be dlrecL evldence of lnformaLlon belng lnLenLlonally wlLeld from
sLockolders or belng so grossly dlsLorLed LaL no reasonable person could
deLermlne lL was noL Le LruL
bŦ AllegaLlons of noL Laklng sufflclenL Llme Lo lnform oneself of Le lnformaLlon ls noL
sufflclenL Lo deem a declslon unlnformed
Sbarebolder Ratification
lŦ ulfferenL effecLsţ dependlng on Le flduclary duLy vlolaLed
aŦ vlolaLlon of a duLy of care
lŦ voo Cotkom
1Ŧ lf Le LransacLlon meeLs wlL approval of a ma[orlLy of sareolders
afLer full dlsclosure
aŦ Clalm ls exLlngulsed
lŦ unless Le plalnLlff ls able Lo esLablls glfL or wasLe
1Ŧ AlmosL lmposslble
bŦ vlolaLlon of a duLy of loyalLy by a dlrecLor
lŦ wbeelobtotot
1Ŧ lf Le LransacLlon ls approved by a ma[orlLy of dlslnLeresLed
sareolders afLer full dlsclosure
aŦ 8urden slfLs Lo Le plalnLlff
lŦ SLandard of proof ls Le 8uslness !udgmenL 8ule
1Ŧ ÞlalnLlff musL sow
aŦ ClfL or wasLe
bŦ Cross negllgence / confllcL
2Ŧ Cr Le clalm drops ouL
cŦ vlolaLlon of duLy of loyalLy by a domlnaLlng sareolder
Þage 2 of

lŦ AfLer Le approval by a ma[orlLy of dlslnLeresLed sareolders afLer full
dlsclosure
1Ŧ 8urden slfLs Lo Le plalnLlff
aŦ LnLlre falrness
lŦ ÞlalnLlff musL sow LaL Le LransacLlon was unfalr
Principal-Agent Relationsbips
lŦ Legal SLandard for Agency 8elaLlonslp
aŦ Agency ls a relaLlonslp LaL resulLs from
lŦ @e manlfesLaLlon of consenL by Þrlnclpal (Þ) LaL an AgenL (A) sall acL
1Ŧ Cn Þ's bealfţ Anu
2Ŧ Sub[ecL Lo Þ's conLrolţ Anu
llŦ A's consenL Lo so acL
llŦ 8esLaLemenL 3
rd
V1Ŧ01 (Agency)
aŦ Agency encompasses a wlde and dlverse range of relaLlonslps and clrcumsLancesŦ
lŦ @e elemenLs of commonŴlaw agency are presenL ln Le relaLlonslps of
1Ŧ LmployerŴemployee
2Ŧ CorporaLlon and offlcer
3Ŧ CllenL and lawyer
4Ŧ ÞarLnerslp and general parLner
lllŦ @ypes of auLorlLy
aŦ AcLual auLorlLy
lŦ Cccurs wen an agenL acLs ln suc a way LaL Le acLlons are
1Ŧ necessary or
2Ŧ lncldenLal Lo aclevlng Le prlnclpal's ob[ecLlves
aŦ As Le agenL reasonably percelves Le prlnclpal's manlfesLaLlons
and ob[ecLlves wen Le agenL decldes Lo acL
llŦ 8esLaLemenL 3
rd

lllŦ May be elLer
1Ŧ Lxpress
2Ŧ lmplled
bŦ ApparenL
lŦ @e power eld by an agenL or oLer acLor Lo affecL a prlnclpal's legal relaLlons
wlL Llrd parLles wen
1Ŧ A Llrd parLy reasonably belleves Le acLor as auLorlLy Lo acL on
bealf of Le prlnclpal and
aŦ @aL bellef ls Lraceable Lo Le prlnclpal's manlfesLaLlons
lŦ 8esLaLmenL 3
rd
V2Ŧ03
Corporate Ufficers as Agents
lŦ Wen can an agenL blnd Le prlnclpal?
aŦ ConLracLs
lŦ uoes Le agenL ave auLorlLy Lo enLer lnLo Le conLracL?
1Ŧ A prlnclpal ls sub[ecL Lo llablllLy upon conLracLs made by an agenL acLlng
wlLln Le auLorlLy lf
aŦ made ln proper formţ and
bŦ wlL Le undersLandlng LaL Le prlnclpal ls a parLy
Þage 2 of

lŦ 8esLaLemenL 2
nd
V144
llŦ Mlll 5tŦ cbotcb
lllŦ uweck
lvŦ J70 leosloq
bŦ @orLs
lŦ nomble Oll
llŦ 5oo Oll
lllŦ nollJoy loos
llŦ Wen are prlnclpals bound by LorLs commlLLed by Llrd parLles?
aŦ @urns on
lŦ ServanL / Lmployee relaLlonslpţ versus lndependenL ConLracLor
llŦ Also Ŷ MusL be wlLln Le Scope of LmploymenL
1Ŧ uld Ley devlaLe?
aŦ lrollc?
bŦ ultto vltes?
bŦ ServanL
lŦ An agenL performlng servlces ln Le masLer's affalrs
1Ŧ Wose pyslcal conducL ls conLrolled or ls sub[ecL Lo Le rlgL of conLrol
by Le masLer
llŦ 8esLaLemenL 3
rd

1Ŧ Þrlnclpal conLrols or as Le rlgL Lo conLrol Le manner and means of
Le agenL's performance of work
cŦ lndependenL ConLracLor
lŦ A person wo agrees Lo carry ouL a some Lask
1Ŧ 8uL ls noL sub[ecL Lo Le prlnclpal's conLrol ln dolng so
llŦ Þrlnclpal seLs forL Le deslred resulL
1Ŧ 8uL does noL ave Le rlgL Lo Lell Le agenL ow Lo acleve LaL resulL
Agent Autbority in Contract
Mlll St. Church of Chrlxt v. Hogun {ŵ99Ŵ]
lŦ 8lack LeLLer Law
aŦ ConLlnuous pasL auLorlzed acLs sufflclenLly confer lmplled auLorlLy on an agenL
bŦ lmplled auLorlLy ls acLual auLorlLy LaL Le prlnclpal lnLended Le agenL possess and
lnclude suc powers as are pracLlcally necessary Lo carry ouL Le delegaLed duLles
llŦ lacLs
aŦ ÞlalnLlff was ln[ured afLer belng lred by a curc employee Lo palnL Le lnslde of Le
curc
lllŦ Analysls
aŦ lf acLual auLorlLy does noL exlsLţ buL a Llrd parLy reasonably belleves from Le
prlnclpal's acLlons LaL auLorlLy exlsLsţ oppoteot auLorlLy ls creaLed

weck v. Nuxxer {ŶŴŴ8]
lŦ lacLs
aŦ SeLLlemenL beLween an aLLorney and former offlcer of company
bŦ Cwner of corporaLlon evenLually clalmed LaL Le aLLorney dld noL possess auLorlLy Lo
make Le agreemenL
Þage 2 of

llŦ lssue
aŦ uld Le aLLorney ave a rlgLţ as an agenLţ Lo blnd Le owner of Le company (Le
prlnclpal) Lo Le agreemenL?
lŦ ?ep
lllŦ Conveyance of AuLorlLy
aŦ Þrlnclpal lnformed agenL Lo #do waL you wanL or undersLand" and lnformed Llrd
parLles LaL #e can Lalk ln my name" and LaL e was #auLorlzed Lo seLLle Lls case"
lvŦ ApparenL auLorlLy rule
aŦ A prlnclpal ls bound by an agenL's apparenL auLorlLy wlc e knowlngly permlLs Le
agenL Lo assume of wlc e olds Le agenL ouL as possesslng
Ż%Ÿ Ieuxlng Corporutlon v. mpex Corporutlon {ŵ9Żź]
lŦ lacLs
aŦ Sale of compuLer core memorles
bŦ Salesman for Ampex (defendanL) senL over a quoLe wlL a slgnaLure block for 370
Leaslng
lŦ @ere was also a slgnaLure block for Ampexţ wlc was unslgned
llŦ Salesman agreed Lo Le llsL prlce wlL 370
llŦ lssue
aŦ uld Le salesman ave apparenL auLorlLyţ even Loug Le slgnaLure block was
unslgned?
lŦ ?ep
lllŦ 8lack LeLLer Law
aŦ An agenL as apparenL auLorlLy Lo blnd Le prlnclpal wen Le prlnclpal acLs ln suc a
manner as would lead a reasonably prudenL person Lo suppose LaL Le agenL ad Le
auLorlLy e purporLs Lo exerclse
lŦ lurLermoreţ absenL knowledge on Le parL of Llrd parLles as Lo Le conLraryţ
an agenL as Le apparenL auLorlLy Lo do Lose Llngs wlc are usual and
proper Lo Le conducL of Le buslness wlc e ls employed Lo conducL
bŦ lL ls reasonable for Llrd parLles Lo presume LaL one employed as a salesman as Le
auLorlLy Lo blnd ls employer Lo sell
lŦ unless Le prlnclpal does someLlng afflrmaLlvely Lo dlspel suc a noLlon
Agent Autbority in Tort
Humble Uil & Refining Co. v. Martin {ŵ9Ÿ9]
lŦ 8lack LeLLer Law
aŦ Cwner ls llable for an operaLor's negllgence lf Le owner dlrecLs Le manner under
wlc Le sLaLlon ls operaLed
bŦ Cne wo malnLalns conLrol over a buslness enLerprlse's operaLlonţ even lf lL enLrusLs Le
operaLlon Lo one acLlng wlLouL meanlngful dlscreLlonţ ls llable as a prlnclpal for Le
negllgence of Lose enLrusLed wlL ls buslness
llŦ lacLs
aŦ Pumble owned Le servlce sLaLlon and Le producLs
lŦ 8uL conLracLed wlL Scnelder for Le operaLlon of Le sLaLlon
bŦ Car rolled ouL of Le sLaLlon and ran over some people
lllŦ lssue
Þage 2 of

aŦ ls Le oll coŦ responslble for Le acLlons Laken by someone operaLlng lLs sLaLlon under
conLracL?
lŦ ?ep
bŦ Look Lo
lŦ A quesLlon of facLţ relaLlng Lo Le amounL of conLrol Le company exerLs over
Le franclse operaLlon
1Ŧ no brlgL llne rule
2Ŧ CaseŴbyŴcase analysls
Hoover v. Sun Oll Co. {ŵ9źŹ]
lŦ 8lack LeLLer Law
aŦ no agency exlsLs lf an oll company does noL conLrol a servlce sLaLlon's operaLlons
bŦ Agency arlses lf a prlnclpal reLalns Le rlgL Lo conLrol Le deLalls of Le dayŴLoŴday
operaLlon of Le agenL's buslness
llŦ lacLs
aŦ ÞlalnLlff caugL flre due Lo an employee's negllgence aL Le servlce sLaLlon owned by
Sun Cll company and operaLed by a Llrd parLy
bŦ @lrd parLy pald a lease Lo operaLe Le sLaLlon wlc varled based on
lŦ @e amounL of gasollne sold on a monLly basls
llŦ Also ad an agreemenL Lo purcase Sun Cll producLs for reLall saleţ provlded
LaL Sun Cll provlded Le adverLlslng maLerlals necessary
cŦ Also sLaLlon employees wore Sunoco unlforms and were vlslLed regularly by Sun Cll
salesmen Lo Lake orders
lllŦ ueclslon Lurned on
aŦ @lrd parLy bore Le rlsk of proflL and loss
bŦ @lrd parLy deLermlned lLs own buslness ours
cŦ @lrd parLy acLually managed Le workforce
dŦ @lrd parLy posLed ls name as proprleLor of Le esLabllsmenL
Murphy v. HollJuy Innx, Inc. {ŵ9ŻŹ]
lŦ 8lack LeLLer Law
aŦ A franclse agreemenL LaL provldes an operaLlon sysLem for a franclsee does noL
esLablls a prlnclpalŴagenL relaLlonslp
bŦ lf a franclse conLracL so regulaLes Le acLlvlLles of Le franclsee as Lo vesL Le
franclser wlL conLrol wlLln Le deflnlLlon of agencyţ Le agency relaLlonslp arlsesţ
even lf Le parLles expressly deny lL
llŦ lacLs
aŦ ÞlalnLlff sllpped and fell ln a moLel
bŦ Sued Le corporaLe eadquarLers
lllŦ Analysls
aŦ lf Le franclser does noL conLrol Le dally acLlvlLlesţ Len no pŴa relaLlonslp exlsLs
Þage 3 of


Corporate Law Duties and Protections of Ufficers
lŦ llduclary uuLles
aŦ Cootlet vŦ 5teveos
lŦ Peld LaL offlcers of uL corporaLlons expllclLly owe Le flduclary duLles of
care and loyalLy Lo Lelr corporaLlon
llŦ Model 8uslness CorporaLlons AcL V8Ŧ42 Ŷ SLandards for ConducL for Cfflcers
aŦ An offlcerţ wen performlng ln suc a capaclLy sall acL
lŦ ln good falL
llŦ WlL care LaL a person ln a llke poslLlon would reasonably exerclse under
slmllar clrcumsLances and
1Ŧ ln a manner Le offlcer reasonably belleves ls ln Le besL lnLeresLs of
Le corporaLlon
lllŦ ÞroLecLlons
aŦ Callfornla CorporaLlons Code V204(a)(10)
lŦ Þrovlslons may llmlL Le personal llablllLy for a dlrecLor for breac of ls
duLles wlL some caveaLs
1Ŧ May noL be an lnLenLlonal mlsconducL or culpable vlolaLlon of law
2Ŧ no llmlL Lo llablllLy for acLlons LaL a dlrecLor belleves Lo be conLrary
Lo Le besL lnLeresLs of Le corporaLlon or sareolders
aŦ Cr LaL lnvolve an absence of good falL
bŦ Cr lmproper personal beneflL
3Ŧ no llmlL for reckless dlsregard for dlrecLor's flduclary duLles
Þage 3 of

aŦ Was acLually awareţ or sould ave been awareţ LaL Le
duLy exlsLed
4Ŧ CannoL excuse llablllLy due Lo an #unexcused paLLern of lnaLLenLlon"
bŦ uelaware Code V 102(b)(7)
lŦ LlmlLs are posslble on duLlesţ so long as Ley do noL lnclude
1Ŧ 8reac of loyalLy
2Ŧ lnLenLlonal mlsconducL
3Ŧ lmproper personal beneflL
cŦ nevada
lŦ A plalnLlff musL prove elLer
1Ŧ uefendanL's acL consLlLuLed a breac of flduclary duLles
2Ŧ @aL breac lnvolved elLer
aŦ lnLenLlonal mlsconducLţ or
bŦ A knowlng vlolaLlon of Le law
llŦ Lx@8LMLL? lg sLandard
lvŦ 8esponslble CorporaLe Cfflcer uocLrlne
aŦ LlmlLed docLrlne
lŦ no consldered dormanL
1Ŧ LxCLÞ@ţ lL may apply ln cerLaln beovlly teqoloteJ loJosttles
2Ŧ Congress musL be falrly expllclL ln a sLaLuLe LaL lL lnLends Lls
sLandard Lo apply
bŦ lncreases corporaLe llablllLy
lŦ Worrylng for boards and execuLlves
1Ŧ Allows for clvll and even crlmlnal llablllLy for a corporaLlon vlolaLes a
law
aŦ AbsenL a dlrecLor or offlcer even knowlng abouL Le
vlolaLlon
vŦ @e uuLy Lo ulsclose
aŦ @wo sLaLuLes
lŦ SecurlLles AcL of 1933
1Ŧ AkA
aŦ 33 AcL
bŦ SecurlLles AcL
2Ŧ ConLenL
aŦ 8egulaLes Le offerlng or sale of new securlLles
3Ŧ Scope
aŦ @ransacLlonal
lŦ 8eglsLraLlon sLaLemenL musL be flled wlL Le SLC
llŦ ÞrospecLus musL be dlsLrlbuLed Lo lnvesLors
bŦ 8equlred ln connecLlon wlL any publlc sale of securlLles
lŦ unless Lere ls an exempLlon
llŦ SecurlLles Lxcange AcL of 1934
1Ŧ AkA
aŦ Lxcange AcL
bŦ 34 AcL
2Ŧ 8egulaLes Secondary MarkeL AcLlvlLy
aŦ Soţ wlll noL apply Lo closed corps?
bŦ CreaLed Le SLC
Þage 32 of

3Ŧ V 10(b)
aŦ unlawful for anyone Lo useţ dlrecLly or lndlrecLlyţ any means
of lnLersLaLe commerce
lŦ @o use or employ any manlpulaLlve or decepLlve
devlce or conLrlvance
llŦ ln conLravenLlon of any rules employed by Le SLC
1Ŧ nC@ selfŴexecuLlng
bŦ MusL be ln connecLlon Lo any purcase or sale of a securlLy
vlŦ 8oslc locŦ vŦ levlosoo (1988)
aŦ 8lack LeLLer Law
lŦ Sareolders deLermlne wlc omlLLed facLs are maLerlal
llŦ An omlLLed facL ls maLerlal lf Lere ls a subsLanLlal llkellood LaL Le
averageţ reasonable sareolder would ave consldered lL lmporLanL
knowledge Lo ave before decldlng ow Lo voLe
bŦ lacLs
lŦ Company lssued Lree sLaLemenLs dlsclalmlng LaL lL lnLended Lo merge
wlL anoLer company
llŦ Sareolders sold sLock
lllŦ Company Len merged wlL anoLer company
1Ŧ Wlc lL ad acLually planned Lo do
vllŦ @radlLlonal analysls of a V 10(b)(3) clalm
aŦ SclenLer
lŦ MusL lnLenLlonally wlLold or provlde false lnformaLlon
1Ŧ negllgence does noL sufflce
2Ŧ 8ecklessnessţ oweverţ mlgL
bŦ ÞroxlmaLe cause
lŦ ÞlalnLlff musL sow LaL Le mlssLaLemenL caused Le arm
1Ŧ lf a company lssued an unduly opLlmlsLlc press release
aŦ @en Le plalnLlff musL sow LaL lL unnecessarlly ralsed Le
prlce of Le securlLy
2Ŧ ln 8oslcţ Le mlssLaLemenLs caused Le sLocks Lo Lrade for a lower
value Lan Ley would ave oLerwlse
cŦ MaLerlallLy
lŦ Ceneral sLandard
1Ŧ SubsLanLlal llkellood LaL Le dlsclosure would ave been deemed
maLerlal by a reasonable lnvesLor
2Ŧ So LaL lL alLered Le LoLal mlx of lnformaLlon made avallable
aŦ 8ased on Le probablllLy and magnlLude of lLs affecL
dŦ 8ellance
lŦ @radlLlonal elemenL of fraud
1Ŧ Þurcaser or seller musL rely on Le sLaLemenL wen enLerlng lnLo a
LransacLlon
llŦ lraud on Le MarkeL @eory
1Ŧ Coes Lo
aŦ 8ellance
2Ŧ ÞresumpLlon LaL Le lnvesLor relled on Le lnLegrlLy of Le markeL
prlce
aŦ So Le lnvesLor need noL ave seen mlsrepresenLaLlon
Þage 33 of

3Ŧ 8asls
aŦ ln an open and developed securlLles markeLţ Le prlce of a
company's sLock ls based on avallable maLerlal lnformaLlon
regardlng Le company and lLs buslness
4Ŧ uefendanL may rebuL by
aŦ Sowlng LaL professlonals were noL decelved
bŦ lf Le Lrue lnformaLlon enLered Le markeL anywayţ desplLe
any mlssLaLemenLs
cŦ Speclflc plalnLlffs would ave sold Le securlLy anyway
Santa Fe Industries, Inc. v. Creen {ŵ9ŻŻ]
lŦ 8lack LeLLer Law
aŦ A parenL may merge lLself wlL lLs subsldlary ln some cases
bŦ under Le sorLŴform merger sLaLuLeţ a parenL company may merge lLself wlL lLs
subsldlary lf Le parenL owns aL leasL 90Ʒ of Le subsldlary's sLock and lf Le parenL
company's board approves Le acLlon
llŦ Analysls
aŦ Congress dld noL lnLend Lo provlde for prlvaLe acLlons for a vlolaLlon for V10(b)(3)
lŦ 8elaLes only Lo lnformaLlon released for publlc offerlng of securlLles
Insider Trading
lŦ Ceneral 8ule
lŦ Were an lnslder as maLerlalţ nonŴpubllc lnformaLlon an lnslder musL do one of
Lwo Llngs before Lradlng
1Ŧ ulsclose Le lnformaLlon
2Ŧ AbsLaln from Lradlng unLll Le lnformaLlon as been dlsclosed
llŦ ultks vŦ 5íc
aŦ @lp Case
lŦ A Llpee (recelver of a Llp) assumes a flduclary duLy Lo Le sareolders of a
corporaLlon noL Lo Lrade on maLerlalţ nonŴpubllc lnformaLlon only wen
1Ŧ @e lnslder as breaced ls flduclary obllgaLlon Lo Le sareolders by
dlscloslng Le lnformaLlon
2Ŧ Anu
aŦ @e Llpee knows or sould ave known of Le breac
llŦ AbsenL some personal galnţ Lere as been no breac of duLy Lo sLockolders
lllŦ uŦ5Ŧ vŦ O´noqoo
aŦ ALLorney rlpplng off cllenL case
bŦ MlsapproprlaLlon @eory
lŦ A flduclary's ooJlscloseJ use of lnformaLlon belonglng Lo ls prlnclpal fot
petsoool qolo
1Ŧ ConsLlLuLes fraud ln connecLlon wlL Le purcase or sale of a securlLy
aŦ And Lus vlolaLes 8ule 10bŴ3
Distribution of Power Between Sbarebolders and Managers
lŦ Closely Peld CorporaLlons
aŦ CaracLerlsLlcs
lŦ Small number of sLockolders
Þage 34 of

llŦ no ready markeL for corporaLe sLockţ Anu
lllŦ SubsLanLlal ma[orlLy of sLockolder parLlclpaLlon ln managemenLţ dlrecLlonţ and
operaLlons of Le corporaLlon
llŦ Sareolder voLlng Ŷ lmporLanL! MulLlple Slldes on Lls Loplc
aŦ @ree rules
lŦ 8ule 1 ƹ Approval by a ma[orlLy of all sares enLlLled Lo voLe
1Ŧ Means ln a case of 1000 sareolders
aŦ @aL a voLe musL recelve 301+ voLes Lo pass
lŦ nC MA@@L8 WPA@
llŦ 8ule 2 ƹ Approval lf voLes casL ln favor ƽ voLes casL agalnsL
1Ŧ Approval musL ave a larger number
aŦ @o Þassţ even lf noL all sareolders are presenL
lllŦ 8ule 3 ƹ Approval by a ma[orlLy of sares presenL
1Ŧ MusL be alf Le presenL sares +1 Lo pass
lllŦ Sareolder voLlng ArrangemenLs
aŦ voLlng @rusLs
lŦ Sareolders convey legal LlLle Lo Lelr sLock Lo a voLlng LrusLee
1Ŧ ÞursuanL Lo Le Lerms of a LrusL arrangemenL
aŦ @rusLees may be glven full or llmlLed dlscreLlon Lo voLe Le
sares
bŦ voLlng Þoollng AgreemenLs
lŦ 8lnd some of Le sareolders Lo voLe LogeLer
1Ŧ See loqlloq 8tosŦ
cŦ lrrevocable Þroxles
lŦ Clve proxy Lo voLe
llŦ lrrevocable
1Ŧ AlLoug someLlmes sub[ecL Lo conLlngency or some perlod of Llme
dŦ lnvalld agreemenL example
lŦ McOooJe
1Ŧ An agreemenL among some sareolders Lo elecL eac oLer as
dlrecLors and Lo appolnL eac oLer as offlcersţ wlL sLlpulaLed salarles
lngllng Brox. - Burnum & Bulley ComblneJ Showx v. lngllng {ŵ9ŸŻ]
lŦ 8lack LeLLer Law
aŦ SLockolders may make blndlng agreemenLs on ow Lo voLe Lelr sLock
bŦ A sareolder may agree wlL anoLer sareolder Lo voLe ls or er sLock ln a
parLlcular way
llŦ Analysls
aŦ @e agreemenL ln Lls case was noL lnvalld because lL was noL
lŦ unlawful
llŦ AgalnsL Þubllc Þollcy
lllŦ @ake advanLage of Le remalnlng sLockolder
McquuJe v. Stonehum {ŵ9ŷŸ]
lŦ 8lack LeLLer Law
aŦ Sareolder AgreemenLs may noL resLrlcL a board's auLorlLy
bŦ A sareolder agreemenL may noL conLrol a board of dlrecLors' exerclse of [udgmenL
llŦ Analysls
Þage 3 of

aŦ Wlle dlrecLors owe Lelr loyalLy Lo Le corporaLlon and Lo Le sareoldersţ Le
sareolders need noL exlblL loyalLy Lo anyoneŦ
lŦ Slnce close corporaLlons ofLen blend Lese Lwo caLegorles
1Ŧ Legal counsel musL ensure LaL Le parLles appreclaLe Le dlsLlncLlon
and LaL Ley follow Le formallLles dlcLaLed by Lese dlsLlncL roles
Clurk v. oJge {ŵ9ŷź]
lŦ 8lack LeLLer Law
aŦ Sareolder agreemenLs regardlng offlcers' employmenL may be enforceable
bŦ A sareolder agreemenL regardlng employmenL of cerLaln lndlvlduals as offlcers ls
enforceable lf Le dlrecLors are tbe sole sbotebolJets
llŦ Analysls
aŦ SLrlcL aderence Lo corporaLe formallLles ls noL demanded lf no one oLer Lan Le
parLles Lo Le agreemenL wlll feel any lmpacL from enforclng an agreemenL
Proxy Voting and Contests
Topics and Cases Relating to Proxies
lŦ ConLesLs for CorporaLe ConLrol
aŦ @resold Concern
lŦ Wen can proxy sollclLaLlon expenses be pald ouL of corporaLe funds?
bŦ Cases
lŦ levlo vŦ MCM
llŦ oseofelJ
llŦ Sareolder proposals
aŦ @resold concern
lŦ Wen can sareolder proposals be excluded from proxy maLerlals?
bŦ Cases
lŦ loveobelm vŦ ltopools 8tooJsţ l1uŦ
llŦ Al5cMí vŦ AlCţ locŦ
lllŦ cAţ locŦ
lllŦ Sareolder lnspecLlon rlgLs
aŦ @resold concern
lŦ Wo geLs sareolder llsL?
1Ŧ Access Lo Le ldenLlLy of Le ma[or sareolders?
bŦ Cases
lŦ ctooe coŦ vŦ AoocooJo
llŦ 5tote íxŦ elŦ llllsboty vŦ nooeywell
lllŦ 5oJlet vŦ Nc cotpŦ
lvŦ Þroxy ConLesL Ŷ CaracLerlsLlcs
aŦ A sareolder sollclLs voLes ln opposlLlon Lo Le lncumbenL board of dlrecLors
lŦ @ls sareolder ls known as #Le lnsurgenL"
bŦ @wo Lypes of Le mosL Lyplcal proxy conLesLs
lŦ LlecLoral conLesLs
1Ŧ lnsurgenL runs a slaLe of dlrecLors ln an elecLlon ln opposlLlon Lo Le
slaLe of dlrecLors nomlnaLed by Le lncumbenL board
llŦ lssue conLesLs
Þage 3 of

1Ŧ Sareolder urges fellow sLockolders Lo voLe no on a mergerţ for
example
cŦ 8elmbursemenL for expenses
lŦ levlo rule
1Ŧ lncumbenLs may be relmbursed from Le Lreasury of Le corporaLlon
aŦ So long as Le amounL ls noL
lŦ Lxcesslve
bŦ And meLods were noL
lŦ unfalr
llŦ lllegal
llŦ oseofelJ rule
1Ŧ CorporaLlon may pay for proxy sollclLaLlon wlL cerLaln conslderaLlons
aŦ AmounL musL be reasonable
bŦ ConLesL musL lnvolve pollcy quesLlons
cŦ May nC@ be a #purely personal power sLruggle"
lllŦ lnsurgenL relmbursemenL
1Ŧ Cnly ls approved by Le sareolders Ŷ oseofelJ
2Ŧ 8oard musL acL lnlLlally
3Ŧ 8equlremenLs
aŦ Þollcy and noL personal
bŦ 8easonable and proper expense
cŦ MusL wln Le proxy conLesL Anu
dŦ Wln sareolder raLlflcaLlon
4Ŧ uld Ley lose Le conLesL?
aŦ no relmbursemenL Lo lnsurgenLs
Ievln v. M0M {ŵ9źŻ]
lŦ 8lack LeLLer Law
aŦ CorporaLe managemenL may use corporaLe asseLs Lo provlde sareolders wlL
lnformaLlon LaL ls relaLlve Lo Le voLe
bŦ lncumbenL managemenL may make reasonable use of corporaLe asseLs Lo lnform
sareolders of lLs poslLlon ln a proxy conLesL lnvolvlng corporaLe pollcy lssues
llŦ lacLs
aŦ Sareolder brougL sulL
lŦ Clalm
1Ŧ ManagemenL was uslng lllegal and unfalr meLods of communlcaLlng
wlL sLockolders and forced Le corporaLlon Lo bear expenses of proxy
sollclLaLlon
lllŦ key facLor
aŦ Were Le expenses reasonable?
oxenfelJ v. FulrchllJ Fnglne & lrplune Corp. {ŵ9ŹŹ]
lŦ 8lack LeLLer Law
aŦ AbsenL a clalm LaL Le expenses were unwarranLedţ excesslveţ or oLerwlse lmproper
lŦ @en a corporaLlon may relmburse facLlons for a pollcy conLesL
1Ŧ 8uL nC@ one lnvolvlng a personal power conLesL
llŦ lacLs
aŦ CorporaLlon used funds Lo relmburse boL sldes ln a proxy conLesL
Þage 3 of

lŦ lncumbenL board losL Le proxy conLesL
1Ŧ 8uL Le corporaLlon relmbursed Lem for Lelr expenses afLer new
board was lnsLalled
2Ŧ Company raLlfled Le paymenLs Lo Le old board
bŦ Sareolder brougL sulL
lllŦ key
aŦ CnL? works wen Le lncumbenL board loses and lnsurgenL wlns
lŦ lnsurgenL loses?
1Ŧ no oseofelJ relmbursemenL
j.I. Cuxe Co. v. Boruk {ŵ9źŸ]
lŦ 8lack LeLLer Law
aŦ Þroxy maLerlals conLalnlng false and mlsleadlng sLaLemenLs glve rlse Lo a prlvaLe rlgL of
acLlon
bŦ lL ls unlawful Lo sollclL a proxy or consenL auLorlzaLlon uslng false and mlsleadlng
sLaLemenLs
lŦ And a courL may enforce a prlvaLe rlgL of acLlon for resclsslon or damages
llŦ lacLs
aŦ Sareolders found ouL LaL Le proxy maLerlals used by case used Lelr name wlLouL
permlsslon ln referrlng Lo a poLenLlal merger
lŦ As parL of Le company's efforLs Lo obLaln approval for Le merger
1Ŧ Argued LaL suc a false sLaLemenL vlolaLed V14(a) of Le SecurlLy
Lxcange AcL
lllŦ Analysls
aŦ MusL conslder Le followlng four facLors ln deLermlnlng weLer a sLaLuLe glves rlse Lo a
prlvaLe cause of acLlon
lŦ ls Le plalnLlff one of Le class for wose beneflL Le sLaLuLe was enacLed?
1Ŧ lf yesţ conLlnue
llŦ ls Lere any lndlcaLlon of leglslaLlve lnLenL Lo provlde a remedy or deny one?
1Ŧ May be
aŦ LxpllclL
bŦ lmpllclL
lllŦ ls lL conslsLenL wlL Le underlylng purposes of Le leglslaLlve sceme?
lvŦ ls Le cause of acLlon one LaL ls LradlLlonally relegaLed Lo sLaLe law?
Securities Excbange Act V ŵŸ{a]
lŦ lL ls unlawful for a person Lo use Le mall or an lnsLrumenLallLy of lnLersLaLe commerce Lo sollclL
any proxy
aŦ @aL ls ln conLravenLlon wlL Le rules and regulaLlons lald ouL by Le SLC
llŦ SollclL lncludes
aŦ 8equesLs Lo furnlsţ revokeţ or wlLold proxles
bŦ CommunlcaLlons LaL lndlrecLly accomplls suc a resulLţ C8
cŦ A sLep ln a caln of communlcaLlons deslgned Lo ulLlmaLely accomplls suc a resulL
lllŦ LxempLlons
aŦ Þubllc sLaLemenLs of ow a sareolder lnLends Lo voLe and lLs reasons for dolng so
bŦ Þersons wo do noL seek #Le power Lo acL as proxy for a securlLy older"
lŦ lor example
Þage 3 of

1Ŧ A newspaper edlLorlal advlslng Lo voLe for or agalnsL a measure or
lncumbenL managemenL ls exempLed
cŦ SollclLaLlons of 10 or fewer persons
dŦ lurnlslng of proxy advlce by someone wlL wom Le sareolder as a buslness
relaLlonslp
SEC Rules for Proxy Contests


Bases for Excluding Sbarebolder Proposals
lŦ Sareolder proposals may be excluded for any of Le followlng reasons
aŦ noL a proper sub[ecL of acLlon by sareolders
bŦ lllegal
cŦ vlolaLes proxy rules
dŦ Þersonal grlevance or beneflL
eŦ MaLLer beyond power of flrm Lo effecLuaLe
fŦ 8elaLes Lo flrm's ordlnary buslness operaLlons
gŦ 8elaLes Lo board of dlrecLors elecLlon
Ŧ SubmlLLed ln Le pasL wlLouL wlnnlng supporL
llŦ 8equlremenLs for geLLlng a proposal lnLo Le company's maLerlals
aŦ MusL own elLer $2ţ000 or 1Ʒ of Le ouLsLandlng sLock ln Le corporaLlon for longer
Lan one year
bŦ Þroxy sLaLemenL musL be 300 words or less
cŦ MusL send a represenLaLlve Lo Le meeLlng
lllŦ SLeps
aŦ lf Le corporaLlon's managemenL belleves LaL Le proposal may properly be excluded
lŦ Sould flle a noLlce wlL Le SLC advlslng LaL lL lnLends Lo exclude Le lssue
Þage 3 of

bŦ lf Le SLC agrees
lŦ @en lL wlll lssue a #noŴacLlon" leLLer
1Ŧ SLaLes LaL Le sLaff wlll noL recommend LaL Le SLC Lake any acLlon
agalnsL Le lssuer lf Le proposal ls ellmlnaLed
cŦ SLC lnLermedlaLe poslLlon
lŦ Wlll send a leLLer Lo Le parLy ptoposloq Le lssue
1Ŧ And sLaLe LaLţ aL presenLţ lL may be excluded
aŦ 8uL wlll also provlde suggesLlons for canges LaL may be made
Lo Le leLLer Lo prevenL lLs excluslon
dŦ SLC dlsagrees wlL excluslon
lŦ lL wlll noLlfy Le company LaL lL may Lake acLlon lf Le proposal ls excluded
FSCMF v. I0 {ŶŴŴź]
lŦ 8lack LeLLer Law
aŦ @e SLC as subsLanLlal dlscreLlon Lo adopL new lnLerpreLaLlons of lLs own regulaLlons
lŦ ln llgL of canges ln Le caplLal markeLs or even a slfL ln Le Commlsslon's
regulaLory approac
1Ŧ Powever
aŦ lL as a duLy Lo explaln lLs deparLure from prlor norms
llŦ Analysls
aŦ An agency's lnLerpreLaLlon of a law made aL Le Llme Le regulaLlon was lmplemenLed
conLrols
lŦ unless LaL agency ls able Lo provlde sufflclenL reason wy a new lnLerpreLaLlon
sould be allowed
C, Inc. v. FSCMF {ŶŴŴ8]
lŦ 8lack LeLLer Law
aŦ Sareolders' rlgLs Lo amendţ adopLţ or repeal bylaws ls legally sacrosancL
lŦ And may noL be llmlLed nonŴconsensually by anyone oLer Lan Le leglslaLure
1Ŧ Poweverţ Lls power does noL exLend Lo conLrolllng Le buslness affalrs
of Le corporaLlon
aŦ Wlc ls lefL solely Lo Le board of dlrecLors
lŦ unless oLerwlse speclfled ln Le arLlcles of
lncorporaLlon
bŦ Sareolders may cange or add bylaws LaL provlde for fuLure procedures ln cerLaln
slLuaLlons
lŦ Poweverţ Ley may noL affecL Le process by wlc Le company accompllses
lLs dayŴLoŴday work
llŦ Analysls
aŦ lf Le proposed bylaw ls one LaL wlll llmlL or prevenL dlrecLors from exerclslng Lelr full
managerlal power ln clrcumsLances were Lelr flduclary duLles may oLerwlse requlre
Lem Lo acL
lŦ ls noL allowable
Sbarebolder Access
lŦ SLC 8ule 14aŴ7
aŦ ManagemenL of Le corporaLlon musL elLer
lŦ Mall lnsurgenL's maLerlals for lL C8
Þage 4 of

llŦ Þrovlde a sareolder llsL Lo Le lnsurgenL
llŦ uCCL V220(b)
aŦ Any sLockolder
lŦ Cr ls aLLorney
bŦ May make a wrlLLen demand Lo a corporaLlon
lŦ under oaL
1Ŧ SLaLemenL musL sow Le purpose for examlnlng Le records
cŦ Company musL provlde access
lŦ uurlng normal buslness ours
llŦ lor any proper purpose
lllŦ And musL allow Le requesLlng parLy Lo
1Ŧ Make coples
2Ŧ LxLracLs
lvŦ lrom
1Ŧ Company's sLock ledger
2Ŧ LlsL of lLs sLockolders
3Ŧ CLer books and records
dŦ MusL be #reasonably relaLed" LaL person's lnLeresL as a sLockolder
lllŦ uCCL V220 (c )
aŦ lf sareolder only seeks access Lo Le sareolder llsL
lŦ 8urden ls on Le corporaLlon Lo sow LaL Le reason ls lmproper
bŦ lf sareolder seeks access Lo C@PL8 recordsţ besldes Le sareolder llsL
lŦ @en Le burden ls on Le sareolder Lo prove Le requlslLe proper purpose
lvŦ Þurposes
aŦ Þroper
lŦ lnvesLlgaLe alleged corporaLe mlsmanagemenL
llŦ CollecLlng lnformaLlon relevanL Lo sare value
lllŦ CommunlcaLlng wlL fellow sLockolders ln connecLlon wlL a planned proxy
conLesL
bŦ lmproper
lŦ ALLempLlng Lo dlscover proprleLary buslness lnformaLlon for Le beneflL of a
compeLlLor
llŦ Secure prospecLs for personal buslness
lllŦ lnsLlLuLe sLrlke sulLs
Crune Co. v. nuconJu {ŵ9Żź]
lŦ 8lack LeLLer Law
aŦ A corporaLlon musL granL a requesL for access Lo a sareolder llsL Lo enable Lender
offer dlscusslons
bŦ A corporaLlon musL granL a sareolder wo wanLs Lo dlscuss a Lender offer's Lerms
wlL Le corporaLlon's sareolders access Lo Le sareolder llsL
lŦ unless Le corporaLlon can esLablls a wrongful purpose
llŦ lacLs
aŦ Acqulrlng flrm wanLed access Lo LargeL's sareolder llsL Lo dlsLrlbuLe Le Lender offer Lo
Le LargeL's sareolders
lŦ @argeL refused
lllŦ Analysls
Þage 4 of

aŦ @e SLC does allow Le corporaLlon Lo proLecL Le lnformaLlon on lLs sareolders ln
some cases
lŦ lor lnsLance
1Ŧ A corporaLlon ls [usLlfled ln refuslng access Lo lLs sareolder llsL lf lL
belleves Le llsL wlll be sold
bŦ Poweverţ good falL and a proper purpose wlll overcome Lese proLecLlons
Limitation - FRCP Rule Ŷŷ.ŵ
lŦ A derlvaLlve acLlon may noL be malnLalned lf lL appears LaL Le plalnLlff does noL
aŦ lalrly and adequaLely represenL Le lnLeresLs of sareolders or members wo are
slmllarly slLuaLed ln enforclng Le rlgL of Le corporaLlon
llŦ @e complalnL musL be verlfled and musL sLaLe Ŷ wlL parLlcularlLy
aŦ Any efforL by Le plalnLlff Lo obLaln Le deslred acLlon from Le dlrecLors andţ lf
necessary
lŦ lrom Le sareolders or members
bŦ @e reasons for noL obLalnlng Le acLlon
lŦ @ls ls known as Le uemand 8equlremenL
Sbarebolder Litigation
Direct vs. Derivative Suits
lŦ ulrecL
aŦ lf Le ln[ury ls one Lo Le plalnLlff as a sLockolder and lm lndlvldually and noL Le
corporaLlon
lŦ Lxamples
1Ŧ voLlng rlgLs
aŦ ílseobetq
2Ŧ AbdlcaLlon clalm for nonŴmoneLary rellef
aŦ Ctlmes
llŦ uerlvaLlve
aŦ lf Le ln[ury ls Lo Le corporaLlon
bŦ 8rougL by Le sareolder and asserLs rlgLs belonglng Lo Le corporaLlon
lŦ 8ecause Le board as falled Lo asserL Lose rlgLs
cŦ CorporaLlon ls Le nomlnal defendanL ln Le acLlon
dŦ AmounL recovered belongs Lo Le corporaLlon
eŦ Lxamples
lŦ Lxcesslve compensaLlon
1Ŧ Ctlmes
2Ŧ Motx
lllŦ Analysls
aŦ Look Lo wo suffered Le alleged arm
lŦ @e corporaLlon?
llŦ @e sulng sLockolders?
bŦ Anu
cŦ Wo would recelve Le beneflL lf of any recovery or oLer remedy
lŦ @e corporaLlon?
llŦ @e sLockolders?
Þage 42 of

Rational Plaintiff and tbe Demand Requirement
lŦ A raLlonal plalnLlff wlll flle Le sulL prlor Lo maklng Le demand
aŦ Consequences of noL maklng a demand are Lrlvlal
lŦ SllgL delay wlle demand ls made
bŦ Þreserves Le rlgL Lo llLlgaLe Le lssue
cŦ Analysls of uL cases as noL found a slngle lnsLance were demand was made prlor Lo a
sulL belng flled
Demand Futility - Wben is demand excused?
lŦ uL sLandard
aŦ Ctlmes / Atoosoo
lŦ uemand ls excused wen Lere ls reasonable doubL as Lo
1Ŧ Ma[orlLy of Le board as a maLerlal lnLeresL or
2Ŧ Ma[orlLy of Le board lacks lndependenceţ C8
3Ŧ Callenged LransacLlon ls noL a producL of a valld exerclse of buslness
[udgmenL
llŦ n? sLandard
aŦ Motx vŦ Akets
lŦ Ma[orlLy of dlrecLors are lnLeresLed parLlesţ C8
llŦ ulrecLors falled Lo lnform Lemselvesţ C8
lllŦ Callenged LransacLlon could noL ave been Le producL of sound buslness
[udgmenL
Standards for reviewing sbarebolder litigation
lŦ ZapaLa @wo SLep (uelaware)
aŦ SLep 1
lŦ lnqulry lnLo Le lndependence and good falL of Le commlLLee
llŦ lnqulry lnLo Le bases supporLlng Le commlLLee's recommendaLlon
bŦ SLep 2
lŦ CourL may apply lLs own buslness [udgmenL Lo see lf lL agrees wlL Le dlsmlssal
or noL of a sulL
llŦ Auerbac Analysls (n?)
aŦ ulLlmaLe declslon ls covered by Le buslness [udgmenL rule
bŦ !udlclal lnqulry ls sLlll allowed ln respecL Lo
lŦ ulslnLeresLed lndependence of Le speclal commlLLee
llŦ Adequacy of lnvesLlgaLlon by commlLLee
Independent Committees - Factors considered
lŦ uld any of Le commlLLee members recelve compensaLlon from Le corporaLlon?
llŦ Are Ley oLerwlse members of Le larger board?
lllŦ Are commlLLee members wllllng Lo reLurn compensaLlon Lo corporaLlon Lo preserve
lndependenceţ lf necessary?
lvŦ Are Lere any oLer maLerlal Lles Lo conslder?
Flxenberg v. Flylng 1lger Ilne, Inc. {ŵ9Żŵ]
lŦ 8lack LeLLer Law
aŦ An acLlon Lo reverse corporaLe acLlons LaL deprlved sareolders ln a volce ln Le
operaLlon of Le company ls noL derlvaLlve
Þage 43 of

bŦ An acLlon seeklng Lo overLurn a reorganlzaLlon and merger LaL deprlved an acqulred
corporaLlon's sareolders from avlng a volce ln Le survlvlng buslness corporaLlon's
buslness operaLlon ls a personal acLlon
lŦ 8aLer Lan a derlvaLlve acLlon under n? law
1Ŧ uerlvaLlve acLlons would ave requlred posLlng a securlLy for Le
corporaLlon's cosLs
llŦ lacLs
aŦ Ma[or sareolder brougL an acLlon Lo en[oln a reorganlzaLlon and merger ln a
company on bealf of lmself and all sareolders ln Le dlssolvlng enLlLy
lŦ 8ecauseţ posL mergerţ Le new company would noL allow Le sareolders Lo
ave any say ln Le buslness operaLlon
lllŦ Analysls
aŦ @e dlsLlncLlon beLween derlvaLlve and dlrecL acLlons ls prlmarlly only of use ln largeţ
publlcly eld corporaLlons
lŦ MosL closed corporaLlons wlll noL need Lese devlces
0rlmex v. onulJ {ŵ99ź]
lŦ 8lack LeLLer Law
aŦ A sLockolder musL demand Le board brlng an acLlon before e brlngs a derlvaLlve sulL
bŦ A sareolder need noL make a demand LaL a company's board lnsLlLuLe a lawsulL
before brlnglng a derlvaLlve sulL on bealf of Le corporaLlon on Le sowlng LaL Le
demand would be fuLlle
lŦ And lf demand ls made an re[ecLedţ Le sulL may proceed lf Le plalnLlff ls able
Lo sow LaL Le re[ecLlon was wrongful
llŦ lacLs
aŦ ÞlalnLlff learned of generous compensaLlon package of senlor execuLlve
lŦ uemanded LaL Le corporaLlon cancel Le conLracL
bŦ 8oard re[ecLed ls demand
lllŦ Analysls
aŦ A plalnLlff musL make a demand prlor Lo movlng forward wlL a sulL wen
lŦ Pe does noL belleve LaL Le demand ls fuLlle
llŦ And e belleves LaL Le declslon of Le board ls noL of sound buslness
[udgmenL
bŦ Cnce demand ls made and re[ecLed
lŦ @e presumpLlon ls LaL Le board acLed properly
1Ŧ unless Le plalnLlff can sow LaL lL was wrongfully re[ecLed
Murx v. kerx {ŵ99ź]
lŦ 8lack LeLLer Law
aŦ @e plalnLlff musL provlde more Lan conclusory sLaLemenLs Lo esLablls LaL a demand
would be fuLlle
bŦ A plalnLlff esLabllslng LaL a demand on Le company's board would be fuLlle musL
sow elLer
lŦ @aL Le measure furLers Le board's selfŴlnLeresL C8
llŦ @e callenged LransacLlon was so egreglous on lLs face LaL lL could noL ave
been Le producL of sound buslness [udgmenL
llŦ lacLs
Þage 44 of

aŦ Sareolder brougL a derlvaLlve sulL based on Le lncreased compensaLlon of l8M
execuLlves wlle proflLs decllned
lllŦ Analysls
aŦ Slnce Le allegaLlons lnvolved paymenL of execuLlves made by Le same execuLlves
slLLlng on Le board of dlrecLorsţ Le selfŴlnLeresL prong was saLlsfled
bŦ Poweverţ plalnLlff losL because se falled Lo sLaLe ow se came Lo Le concluslon LaL
Le board ad compensaLed lLself excesslvely
uerbuch v. Bennett {ŵ9Ż9]
lŦ 8lack LeLLer Law
aŦ A board of dlrecLors may granL auLorlLy Lo a speclal commlLLee Lo make
recommendaLlons on a derlvaLlve clalm
bŦ A speclal llLlgaLlon commlLLee's deLermlnaLlon forecloses furLer lnqulry lnLo a maLLerţ
provlded LaL Le commlLLee's lnvesLlgaLlon ls booo flJe
llŦ lacLs
aŦ A corporaLlon appolnLed a speclal commlLLee Lo lnvesLlgaLe Le basls of a derlvaLlve sulL
carglng Le mlsmanagemenL of corporaLe funds
lŦ Commlsslon deLermlned LaL Le sulL sould be LermlnaLed
uputu v. MulJonuJo {ŵ98ŵ]
lŦ 8lack LeLLer Law
aŦ lnLeresLed board members may appolnL a dlslnLeresLed commlLLee Lo lnvesLlgaLe
llLlgaLlon
bŦ Wlle a ma[orlLy of a board may lack Le lndependence Lo evaluaLe a derlvaLlve clalmţ
Le LalnL of selfŴlnLeresL ls noL necessarlly sufflclenL Lo prevenL Le board from
delegaLlng Le evaluaLlon Lo an lndependenL commlLLee provlded LaL
lŦ @e commlLLee ls composed of dlslnLeresLed board members wo may
recommend dlsmlssal of a sareolder's acLlon
llŦ lacLs
aŦ ÞlalnLlff sareolder sued Le corporaLlon ln a derlvaLlve acLlon wlLouL maklng a prlor
demand of Le board
lŦ under Le uemand luLlllLy Leory
bŦ ÞlalnLlff sued Le board and Le corporaLlon
lŦ lour years laLerţ as Le sulL was sLlll developlng
1Ŧ Many of Le orlglnal board ad lefL and been replaced
llŦ @e new board creaLed a speclal llLlgaLlon commlLLee Lo lnvesLlgaLe
1Ŧ Wlc deLermlned LaL Le sulL sould be dlsmlssed
lllŦ Analysls
aŦ SomewaL crlLlclzed case
bŦ Þrovldes a raLer low urdle for a board belng sued Lo [ump Lo geL Le sulL dlsmlssed
In re Orucle Corp. erlvutlve Iltlgutlon {ŶŴŴŷ]
lŦ 8lack LeLLer Law
aŦ ulrecLors wlL Lles Lo wrong doers are noL lndependenL
bŦ A dlrecLor's lack of lndependence Lurns on weLer Le dlrecLor lsţ for any subsLanLlal
reason
lŦ lncapable of maklng a declslon wlL only Le besL lnLeresLs of Le corporaLlon ln
mlnd
Þage 4 of

llŦ lacLs
aŦ Sareolders brougL a derlvaLlve sulL alleglng mlsmanagemenL by Le board of
dlrecLors
bŦ 8oard lnsLlLuLed a speclal llLlgaLlon commlLLee eaded by a promlnenL legal professor
cŦ Cn dlscoveryţ lL was deLermlned LaL some of Le board members ad some Lles wlL
Le legal professor
lllŦ Analysls
aŦ Lven Loug Le lnvesLlgaLlon was Lorougţ Le llLlgaLlon commlLLee could noL be
consldered lndependenL
lŦ @erefore lLs recommendaLlon was noL proLecLed
Mergers, Acquisitions, and Takeovers
Types of Acquisitions
lŦ Merger
llŦ Sales of asseLs
lllŦ @ender offer
lvŦ SLock purcase
vŦ Þroxy conLesL
Types of Mergers
lŦ ue focto
aŦ lottls vŦ Cleo AlJeo cotpŦ
bŦ notltoo vŦ Atco ílecttoolcs
cŦ ooscb vŦ cA
llŦ lreeze ouL mergers
aŦ coqqlos vŦ New íoqlooJ lottlots lootboll clob
bŦ obklo vŦ noot
lllŦ LLC Merger
aŦ vC5ţ locŦ vŦ costlel
Cboosing Between a Merger and an Asset Sale
lŦ ConslderaLlons
aŦ @ax consequences?
bŦ Lase of Lransferrlng conLrol
lŦ Merger
1Ŧ auLomaLlc end of consLlLuenL corporaLlonsţ excepL Le survlvlng
organlzaLlon
llŦ AsseL Sale
1Ŧ @argeL company remalns ln exlsLence
aŦ SeparaLe sLep Lo dlssolve
cŦ Lase of Lransferrlng asseLs
lŦ Merger
1Ŧ @lLle Lo all properLy Lransfers auLomaLlcally Lo Le survlvlng company
llŦ AsseL sale
1Ŧ uocumenLs musL be prepared and flled for eac asseL belng sold
dŦ Lase of passlng conslderaLlon
Þage 4 of

lŦ Merger
1Ŧ Survlvlng company passes dlrecLly Lo nonŴdlssenLlng sareolders
llŦ AsseL sale
1Ŧ More compllcaLed
aŦ ulvldend
bŦ LlquldaLlon and dlvldend
eŦ Successor llablllLy
lŦ Merger
1Ŧ Survlvlng company succeeds Lo all llablllLles of consLlLuenL corporaLlons
llŦ AsseL sale
1Ŧ no assumpLlon of llablllLles unless parL of a wrlLLen agreemenL
aŦ Some LorL excepLlons
fŦ Sareolder voLlng
lŦ Merger
1Ŧ Approval by boL company's sareolders ls requlred
llŦ AsseL sale
1Ŧ Approval by potcbosloq corporaLlon's sareolders ls generally nC@
requlred
gŦ Appralsal rlgLs
lŦ Merger
1Ŧ Sareolders of boL corporaLlons ave appralsal rlgLs
llŦ AsseL sale
1Ŧ ln mosL sLaLes
aŦ Sareolders of Le selllng corporaLlon geL appralsal rlgLs
bŦ Sareolders of purcaslng corporaLlon do noL
2Ŧ uelaware
aŦ nelLer parLy geLs appralsal rlgLs
Furrlx v. 0len lJen Corp. {ŵ9Ź8]
lŦ 8lack LeLLer Law
aŦ Sareolders ave dlssenLers' rlgLs ln a ue focto merger LaL ls dlsgulsed as an asseL
sale
bŦ lf a conLemplaLed LransacLlon's resulL ls Le same as a mergerţ Le LransacLlon ls a Je
focto merger
lŦ And Le LargeL corporaLlon's sareolders ave Le rlgL Lo dlssenL and recelve
falr value for Lelr sares
llŦ lacLs
aŦ Mlnnow Swallows Le Wale LransacLlon
bŦ uefendanL corporaLlon wanLed Lo acqulre anoLer companyţ and Len ave Le smaller
LargeL company remaln ln exlsLence as Le operaLor
cŦ Arranged for Le acqulslLlon as an asseL sale Lo Le smaller company
lllŦ Analysls
aŦ @e dlsLlngulslng facLor ln a merger lsţ ln addlLlon Lo Le sale of asseLsţ Le acqulrlng
company also Lakes responslblllLy for Le dlssolvlng company's llablllLles
bŦ CLer sLaLes ave decllned Lo follow Lls case
Hurlton v. rco Flectronlcx {ŵ9źŷ]
lŦ 8lack LeLLer Law
Þage 4 of

aŦ CorporaLlons may legally effecL a merger uslng Le sLaLuLory provlslons appllcable Lo an
asseL sale
bŦ A reorganlzaLlon plan LaL requlres one corporaLlon Lo sell lLs asseLs Lo a second
corporaLlon ln excange for sLock ln Le second corporaLlon and LaL calls for Le flrsL
corporaLlon Lo llquldaLe and dlsLrlbuLe Le second corporaLlon's sares Lo lLs
sLockolders consLlLuLes a permlsslble Je focto merger
llŦ lacLs
aŦ @wo companles selllng Le same producLs declded Lo mergeŦ
bŦ @e flrsL company agreed Lo merge for an allocaLlon of sLock
cŦ Cnce Le merger was compleLe Le flrsL company was Lo dlssolve and dlsLrlbuLe Le
sares used ln Le purcase Lo lLs sLockolders
dŦ @wo sareolders LaL were noL presenL aL Le meeLlng were Lls was approved suedţ
clalmlng Le process was lllegal
lllŦ Analysls
aŦ ConLrary Lo Cleo AlJeo Lls case allowed Le merger Lo go forward afLer applylng
lŦ @e docLrlne of lndependenL legal slgnlflcance of corporaLe acLs
1Ŧ AcLs of Le corporaLlon Laken ln compllance wlL Le provlslons of one
secLlon of Le uCCL need noL be LesLed agalnsL Le requlremenLs of
anoLer
aŦ @oug Le resulLs may be Le same
Casb out Mergers
lŦ Merger Lo buy ouL sareolders
llŦ Sareolder approval of merger as requlred by sLaLe law
lllŦ Sareolders may elLer
aŦ @ake Le cas
bŦ Cr enforce appralsal rlgLs
lŦ lf any under sLaLe law
cŦ C8 callenge Le merger as a #freeze ouL"
Cogglnx v. New FnglunJ Putrlotx Footbull Club {ŵ98ź]
lŦ 8lack LeLLer Law
aŦ lrozen CuL mlnorlLy sareolders are enLlLled Lo damages lf Lere ls no valld corporaLe
ob[ecLlve Lo a merger
bŦ lf a company cannoL sow LaL a freezeŴouL merger served a valld corporaLe ob[ecLlve
beyond advanclng Le ma[orlLy sareolder's personal lnLeresLs
lŦ @e mlnorlLy sareolders wo were #frozen ouL" by Le merger are enLlLled Lo
rellef
llŦ lacL
aŦ Crlglnal owner of Le ÞaLrloLs wanLed Lo reclalm full ownerslp of Le Leam
bŦ SLrucLured a merger were oLer sareolders were forced Lo excange Lelr sLocks for
cas
lllŦ Analysls
aŦ Cnce sareolders prove LaL a merger was wrongfully accompllsedţ Ley may recelve
compensaLory and punlLlve damages and may llLlgaLe Le value of Le merged
corporaLlon's sLock
Þage 4 of

ubkln v. Phlllp . Hunt Chemlcul Corp. {ŵ98Ź]
lŦ 8lack LeLLer Law
aŦ Ma[orlLy sareolders owe a flduclary duLy LaL goes beyond refralnlng from lllegal
acLlvlLy
bŦ Ma[orlLy sareolders owe a flduclary duLy Lo mlnorlLy sareolders and may noL
unfalrly manlpulaLe Le Llmlng of a merger Lo avold paylng Le mlnorlLy sareolders
Le prlce agreed upon as parL of an earller LransacLlon
llŦ lacLs
aŦ Larger company was merglng wlL a smaller company
bŦ Þurcased a block of sLock wlL an agreemenL Lo purcase anoLer block of sLock aL a
seL prlce wlLln a year
cŦ lL Len walLed unLll Le one year perlod passed
dŦ A week laLer lL offered sareolders $3 less Lan Le agreed upon prlce
lllŦ Analysls
aŦ lf Le prlce of Le sLock ad skyrockeLedţ Len PunL would ave exerclsed Lelr purcase
opLlon
bŦ Slnce Le prlce fellţ Ley unfalrly walLed unLll Le explraLlon of Le opLlon perlod Lo save
money
uuxch v. C Corp {ŵ988]
lŦ 8lack LeLLer Law
aŦ ConverLlng sares Lo cas Lo compleLe a merger does noL call a legally dlsLlncL process
lnLo quesLlon
bŦ ÞursuanL Lo uCCL and Le lndependenL legal slgnlflcance docLrlne a sareolder ln a
corporaLlon underLaklng Lo converL sares lnLo cas as parL of a merger ls noL enLlLled
Lo rlgLs provlded sareolders under a dlsLlncL provlslon of Le corporaLe law
addresslng Le redempLlon
llŦ lacLs
aŦ Sareolder brougL sulL clalmlng LaL Le cas ouL merger was acLually a llquldaLlon
lŦ Wlc would Lrlgger a redempLlon clause ln Le arLlcles of lncorporaLlon and
enLlLle lm Lo $100 per sare
1Ŧ lnsLead of Le agreed upon $66 as parL of Le merger
lllŦ Analysls
aŦ @e rlse of notltoo agaln
bŦ Seems Lo supporL Le docLrlne LaL was denled ln Cleo AlJeo
cŦ Slnce sareolders are deemed Lo know Le law wen Ley purcase sares
lŦ @e sareolder sould ave known LaL a merger ls noL Le same Llng (or ln
Le same secLlon of law) as Le rlgL of redempLlon of sares
1Ŧ @ereforeţ Le merger was noL forced Lo follow Le redempLlon
guldellnes seL forL ln Le oLer secLlon
0S, Inc. v. Cuxtlel {ŶŴŴŴ]
lŦ 8lack LeLLer Law
aŦ 8oard members cannoL wlLold noLlce of a meeLlng from a dlrecLor ln order Lo assure a
resoluLlon's passage
bŦ Managers LaL fall Lo provlde noLlce Lo all board members of Lelr lnLenL Lo old a
meeLlng or seek consenL Lo a wrlLLen resoluLlon vlolaLe Lelr flduclary obllgaLlons Lo one
anoLer
Þage 4 of

lŦ Lven lf Ley belleve LaL keeplng an lndlvldual member from voLlng aL Le
meeLlng ls ln Le company's besL lnLeresLs
llŦ lacLs
aŦ MlnorlLy owners ln an LLC dlsLrusLed Le ablllLy of Le ma[orlLy owner Lo conLlnue Lo
operaLe Le buslness
bŦ SecreLly arranged Lo merge Le company ln suc a way as Lo suL ouL Le ma[orlLy
owner from conLrol
lllŦ Analysls
aŦ @e buslness Laken care of aL suc meeLlngs ls volJoble buL noLţ per seţ vold
Cheff v. Muthex {ŵ9źŸ]
lŦ 8lack LeLLer Law
aŦ A board may sLop sareolders efforLs Lo cange Le company's caracLer
bŦ lf a company's board slncerely belleves LaL buylng ouL a dlssldenL sLockolder ls
necessary Lo malnLaln proper buslness pracLlcesţ Len Le board ls noL llable for Le
declslon
lŦ Lven lfţ ln lndslgLţ Le declslon may noL ave been Le besL one avallable
llŦ lssue
aŦ May a board Lrade lLs own sLock Lo frusLraLe an ouLslde lnvesLor's efforLs Lo llquldaLe
Le company or cange lLs caracLer Lo Le deLrlmenL of Le company and lLs
sareolders?
lŦ ?esţ so long as Le board acLed on Lelr bellef LaL Le ouLslde lnvesLor ad a
repuLaLlon for rulnlng oLer LargeL companles
lllŦ Analysls
aŦ @e courL requlres more Lan bare allegaLlons Lo supporL Le board's clalm LaL lL was
proLecLlng Le company from desLrucLlon
Unocul Corp. v. Mexu Petroleum {ŵ98Ź]
lŦ 8lack LeLLer Law
aŦ A selfŴLender offer may dlsallow a LakeŴover bldder's parLlclpaLlon
bŦ A board may use corporaLe funds Lo purcase lLs own sares Lo remove a LreaL Lo
corporaLe pollcy and
lŦ May deny Le dlssldenL sareolder Le rlgL Lo parLlclpaLe ln Le selfŴLender
offer provlded LaL
1Ŧ @e acLlons are moLlvaLed ouL of genulne concern for Le company and
lLs sareolders Anu
2Ŧ @aL Le proposed defenslve measures are noL ouL of balance wlL Le
LreaL's slgnlflcance
llŦ lacLs
aŦ Mesa made a osLlle Lakeover bld Lo acqulre unocal
lŦ @wo Llered bld
1Ŧ Cffered Lo buy 37Ʒ of Le ouLsLandlng sares for $34
2Ŧ AfLer lL acqulred 37Ʒţ lL would pay for Le resL wlL [unk bonds wlc
may or may noL ave been worL less Lan LaL
bŦ unocal made lLs own Lwo Llered offer
lŦ lL would purcase Le sLocks for a lger prlce
llŦ And lf Mesa recelved Le 37Ʒ of Le sLock
Þage of

1Ŧ @en Ley would purcase Le remalnlng ouLsLandlng sares uslng debL
securlLles
lllŦ Analysls
aŦ @wo sLep process
lŦ llrsL
1Ŧ Was Lere a LreaL?
aŦ MusL be a danger Lo
lŦ CorporaLe pollcy Anu
llŦ CorporaLe effecLlveness
2Ŧ Was Le defenslve maneuver reasonableţ ln llgL of Lls LreaL?
aŦ Was lL proporLlonal?
llŦ Second
1Ŧ lf Le answers Lo Le quesLlon above are yesţ
aŦ @en buslness [udgmenL rule applles
evlon, Inc. v. McnJrewx & Forbex HolJlng, Inc. {ŵ98Ź]
lŦ 8lack LeLLer Law
aŦ @e board of dlrecLors of an acqulred company musL maxlmlze Le company's value for
Le beneflL of lLs sareolders
bŦ uL law permlLs agreemenLs Lo foresLall osLlle forces from acqulrlng a company
lŦ 8uL Le meLods may no breac Le dlrecLor's flduclary duLy
1Ŧ Cnce Le sale becomes lnevlLableţ lL ls lncumbenL on Le board Lo
ensure Le lgesL posslble prlce for Le sareolders
llŦ Analysls
aŦ @ls case does nC@ creaLe any new flduclary duLles
lŦ Cnly allows for closer scruLlny of Le defenslve measures a board underLakes ln
Le sale of a company
bŦ WellŴpleaded complalnL requlremenL of plalnLlffs ls sLlll ln place
Purumount Communlcutlonx v. 1lme {ŵ989]
lŦ 8lack LeLLer Law
aŦ lf a merger ls more Lan an asseL saleţ Len a board may decllne a compeLlng bld LaL
may yleld a beLLer prlce
bŦ lf a board ls pursulng a merger for sLraLeglc reasons beyond merely Le sale of anoLer
company's asseLsţ lL may decllne Lo enLerLaln a compeLlng bld LaL may yleld a lger
sorLŴLerm galn for lLs sareolders ln favor of a merger LaL ensures greaLer longŴrange
galns
Purumount Communlcutlonx v. qC Network {ŵ99Ÿ]
lŦ 8lack LeLLer Law
aŦ ln a corporaLe saleţ a board musL opLlmlze Le prlce for lLs sareolders and LreaL
compeLlng bldders equally
bŦ A board selllng lLs corporaLlon as a duLy Lo obLaln Le besL value for lLs sareolders
and cannoL glve preference for one of Le compeLlng bldders
llŦ Analysls
aŦ ÞaramounL lnslsLed so sLrongly on Le LransacLlon lL agreed upon wlL vlacom LaL lL
refused Lo belleve LaL a beLLer deal may exlsL for Le company and lLs sareolders
bŦ ÞaramounL refused Lo conslder prlce and long Lerm debL

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