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Law Outlines Corporations Outlines

Corporations Key Subjects Outline

Updated Corporations Key Subjects Notes

Corporations Outlines

Corporations

Approximately 34 pages

I hand wrote all my notes for this class and then used those notes to create this outline in order to prepare for the Final Exam. ...

The following is a more accessible plain text extract of the PDF sample above, taken from our Corporations Outlines. Due to the challenges of extracting text from PDFs, it will have odd formatting:

  1. Corporate Formation & Cert/Bylaw Amendments

  1. Cert of Incorporation

The overriding and controlling document of corporation’s governance

Must be filed with the secretary of state

Mandatory Inclusions: DE §102(a)

  1. Name w/ special word or abrev. (corp or inc. etc)

  2. Address of the offices, name of registered agent & address

  3. Nature of business to be conducted

  4. # of shares authorized to issue & if they are common or preferred

  5. Name & address of incorporator

Optional Provisions DE §102(b)

  1. Management of company

  2. Can give SH preemptive right to buy stock (get 1st chance to buy new stock, determined on your ownership %)

  3. Something that requires a larger majority on certain votes

  4. Something limiting time corporation exists (perpetual if don’t list)

  5. If you are going to have cumulative voting

  6. Provision that imposes personal liability on SHs

  7. Provision that limits personal liability of directors (102(b)(7))

  1. Bylaws DE §109

Not generally made public

Usually more detailed than cert of incorporation

Doesn’t have to be filed anywhere

Its basically the internal rules that govern the corporation

CERTIFICATE ALWAYS TRUMPS THE BYLAWS WHERE THEY CONFLICT, AND DECISIONS OF DIRECTORS ARE TRUMPED BY THE BYLAWS

  1. Amending the Documents

  1. Articles of Incorporation Amendments

  • Must be initiated by the directors, and then sent to SHs for approval per §242(b)

  1. Bylaw Amendments

  • SHs may propose amendments to the bylaws & by vote may amend the bylaws

  • In the certificate this power may also be given to the Directors but doing so doesn’t divest the SHs of the power also.

  1. Voting

  1. Straight Voting

  • Each SH gets to vote the # of his shares for each director.

  • Here, if a person owns 51% of the outstanding shares he can get the entire board.

  1. Cumulative Voting

  • SX/(D + 1)

  • S = the total # of shares actually voting (of all SHs)

  • X= the # of directors you want to elect

  • D= the # of directors to be elected

So for example if there are 9 directors to be elected and there are 1000 shares voting, then to be able to get 3 directors:

(1000)(3)/9+1=

3000/10=300 and so you would need 301 shares to elect 3 of the 9 directors.

You can cast a total # of votes equal to the # of your shares multiplied by the # of positions to be filled and can spread these votes among as many candidates as there are seats to be filled or concentrated in as few as 1 candidate

Example: if you own 2,000 shares and there are 9 directors to be elected then you get (2,000 x 9)= 18,000 votes

  1. Registration & Exemption

  1. Transactions Covered

  • If you sell a security then you have to register it with the securities commission

  • Security= any instrument that might be sold as an investment, look for investing in something and relying on the efforts of others for profit

  • You must disclose the financial condition of the corporation, information about management & registrant, financial statements and basically

  • “Material events & uncertainties which would cause reported financial info not to be necessarily indicative of future operating results or financial condition”

  1. Exemptions

There are basically 2 general exceptions to registration

  1. §4(2): Non-public offering

  • Buyer has to have knowledge & experience in finance & business to be able to evaluate risks

  • Must have access to info that would have had if required register

  • Can’t resell or redistribute

  • Can’t solicit or advertise

Use Reg D to see if 4(2) Applies:

504: Less than $1M

  • If sell less than $1M securities in a 12 month period then exempt so long as buyers sign something saying not reselling or distributing

  • Cannot use general solicitation/advertising

  • Buyer’s don’t have to be “accredited” (§501)

506: Limited Offer (Most Common)

  • Can only sell to 35 non-accredited investors (§501)

  • Can sell to unlimited # of accredited investors

  • All must sign no distribute or resell

  • **IF do sell to even 1 non-accredited buyer then the whole group has to get all kinds of disclosure info

  1. §3(a)(11): INTRAstate offering

  • If selling only in one state then don’t have to register

  1. Business Judgment Rule/ Intrinsic Fairness

  1. Fiduciary Duty of Loyalty

  1. Corporate Opportunity (GUTH)

A director may take the opportunity if:

  • Presented to him in an individual & not corporate capacity

  • The opportunity isn’t essential to the corp

  • The corp holds no interest or expectancy in the opportunity

  • He has not wrongfully used corp resources in pursuing the opportunity

  • Duty of loyalty is acting in good faith and with a reasonable belief that what you do is in the best interests of the corporation.

  • Just because the corp can’t afford to undertake it is not good cause not to present it to them first

  • Can’t take if corp able to financially exploit it and it is in their line of business which they have fundamental knowledge and experience with, and it would be logically adaptable to the corp’s current business.

  • Look for same types of business or relatedness, same field of experience, look at if competing with company or not.

  1. Conflict of Interest Transaction (GLOBE)

  • Conflicted Party:

  • On both sides, electricity one where negotiate both sides of a transaction and go to meeting

  • Don’t vote, don’t go to meeting, if negotiate speak up, process give time

  • Self Dealing: (Sinclair/Livien)

  • Sinclair cause sinven to declare dividends

  • When 1 person or group controls both sides of a transaction and takes a benefit to the Exclusion & detriment of the SHs

  • If have self-dealing transaction then don’t have business judgment rule but instead intrinsic fairness

  • Fair Dealing: this is process, look for timing issues, negotiations, did they rely on experts,

  • Fair Price: market price, independent valuation, prospects, etc.

  • Basically look for director on both sides of the equation/transaction

  • Sitting silent & not speaking up is not gonna protect you

  • Not voting alone is not enough to make you not-interested but will shift the burden to the other party to prove COI & unfair contract

  • Don’t attend and participate...

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