LEB 320F 1st Edition Lecture 26 Outline of Last Lecture II Partner to partner and 3rds III Partners rights IV Partners duties a Advantages b Disadvantages c Management and control d Partnership agreement e Termination V Limited partnership a Duties b Advantages c Disadvantages d LP agreement e Dissolution and winding up VI Corporations VII Definitions Outline of Current Lecture VIII Corporations Continued a Formation b Oops c Disregarding the corp shield d Finance IX Ds Os SHs Directors officers shareholders Current Lecture Corp Continued o If it is a person does it have constitutional rights Some but not all Speech Some Self incrimination No o Responsibilities Some but not all Formation o Promoters o The midwife o Agent for non existent principal Oops o Imperfect revert to partnership Individual liability o De jure o De facto o Estoppel Disregarding the corp shied o Piercing o Shareholder liability o Thin capital o Failure to follow formalities o Commingle of assets o Rare result Naples v Keystone o New York cabs Finance o Shares Equity Evidence of ownership Right to control earnings remainder Common Preferred Priorities Bonds Debt Ds Os SHs Directors officers shareholders o Divorcing ownership from control o Rules to protecting owners from their managers o Why do we care as a society o SHs elect Ds and Ds hire Os o Each have different motivations Directors o Elected by SHs o Really o Can be removed usually requires cause o Staggered term o To protect SHs o Some companies allow cumulative voting o Voting agreements and trusts Role of Ds o How important is board composition to small companies Big companies Duties o 1 Care RPP Make informed decisions Smith v Van Gorkan Not in book Reasonable supervision o 2 Loyalty Put the interest of the company over your own Corp opp conflict of interest etc Leave and knock over a water pitcher Conflicts o Recuse and leave o Corp opportunity doctrine Fully and fairly disclose in writing o Your own transactions with your company Liability to SH o Business judgment rule new coke o Enron Officers o Role Board usually can remove contract issue Agency agency law Ordinary course of business Same duties Owners o Requirements for role o Own no legal title to corp property o No responsibility authority to manage o Can be creditors competitors SHs Owners o Rights Meetings Voting Cumulative Proxy Written authority Agreements and trusts Certificates Intangible P Dividends Microsoft If you have enough Ziddell v ziddell Inspection Proper purpose Rainforests no palm Dissolution Derivative suit Trump v Cheng Liabilities Generally not to 3rd SH agreements Watered stock Return illegal divs Majority SH in a private corp
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