LLM Law Outlines Corporation Outlines
The following is a more accessible plain text extract of the PDF sample above, taken from our Corporation Outlines. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Office hour: mon, wed 11:30am, by appointment mk1@nyu.edu; 11:15-12:35 Thurs class time; TA office hr: Wed 4-5
Basic Terms
Corporation: artificial and separate legal entity (give rise to problems which we will focus on)
Have assets and liabilities, enter into legal obligation through contract, can violate law, can sue/ to be sued
Separate from the stockholders/ shareholders (owners of the corporation/ shares of stocks – equity interest)
Shares/ shares of stock/ stock
We focus on public corporations with a large no. of shareholders
C.f. closely held/ privately held corporation
Creditors: people whom the corporation owe money to
Mostly people who lend money to the corporation
Directors/ managers: people with legal power to run the corporation
Note difference between directors and managers
We will focus on the relationship of powers and conflicts that arise between
Corporation, directors and shareholders;
Corporation, directors and creditors
Corporations
Form by: certificate of incorporation file at the state you want (e.g. Delaware) fee
In the US, 60% public companies are incorporated in Delaware – other states often look to Delaware
Companies need not have domicile in that state
Place of corporation affects internal affairs rules – e.g. subject to Delaware law and Court
Shareholders elect directors directors run the corporation directors owe duties to corporation and shareholders Shareholders approve “major” changes of a corporation
Basic Power Structure: Shareholder Elect Directors
General rule: one year term
Board of directors
Elected during the annual meeting of shareholders
Removal of directors before term expires
A. The Corporate Form
Corporation is the standard form of most large US firms, main features:
Limited liability for investors
Free transferability of investor interests
Legal personality (entity-attributable powers, indefinite life span, and purpose) and
Centralized management
State corporation statutes
establish the separate legal identity (from shareholders and directors)
provide rules governing relationships among shareholders, directors and mangers
Small/ closely-held corporation incorporated for tax/ liability purposes
Corporate law generally better suited to large firms with numerous shareholders (public firms)
Corporate form is designed to raise funds on capital markets
Incorporation process in Delaware
Filing a certificate of incorporation at the Secretary of State + pay fee
Can be done by anyone + for any lawful purpose
Sources of Corporate Law
State Corporation Law (most important)
Corporation Statutes
Corporations are primarily governed by the state corporation statute where it is incorporated
chosen from 50 states, regardless of where they conduct most of their operations
large US corps usually choose Delaware)
Delaware General Corporation Law (DGCL)
Ch 1-3: formation of a corporation
Subchapter 1: formation process, certificate of incorporation, by-laws
Subchapter 2: corporate powers
Subchapter 3: procedure requirements
Subchapter 4: directors and officer
Subchapter 5: stocks and dividends
Subchapter 6: stock transfer restrictions + Delaware anti-takeover provision
Subchapter 7: stockholder/ shareholder’s voting
Subchapter 8: change in certificate of incorporation/ equity capital structure
Subchapter 9: merger
Subchapter 10: major asset sales and dissolution
Subchapter 11: insolvency
Subchapter 12: raising of he dead
Subchapter 13: procedure for suing corporations
Subchapter 14: special provisions for corporations that elect to be ‘close’ corporations’,
Subchapters 15, 26’: non-Delaware corporations that want to do business in/ become domestic in Delaware
Subchapter 17: miscellaneous provisions – sections on taxes and fees
Shareholders/ stockholders
Main source of power: elect directors each year at AGM
Remove of director (other than when term ends on AGM) by:
Special meeting (in between annual meetings) or
Rule in Delaware: only board of director can call special meeting
Written consent (majority signing a form stating they want to remove them)
Directors: legal power to manage the corporation
Decide how to run the business operations, how much salary they receive, how much is distributed to shareholders in dividends, borrowing money, selling some additional stocks
Dividends – distributions to shareholders by the corporation, when and how much are determined by directors, not compulsory for the company to pay dividend [c.f. creditors must be paid principal and interests]
Not bound by shareholders in management
Officers of corporation (CEO/ CFO/ COO/President):
Individuals who help directors to manage day-to-day business operations
Directors can delegate rights to officers, bound by directions given to them by the board
Inside directors/ management (directors that are also officers)
Mostly have 2: CEO and president
Advantages over outside – full time job to run corporation more information + paid a lot more + care more about professional reputation + more influential (since officers are subordinate to directors)
Varies in different companies: some board rubber stamps officers; some don’t
C.f. outside directors
don’t spend much time managing the company
picked by inside directors
receive a relatively small amount of compensation
Law provides that all directors have equal powers, but the real power is often exercised by CEO
Shareholder management power – must approve “major” changes
Directors have general power to manage corporation, but extraordinary decisions require shareholders’ approval:
Dissolution of corporation, liquidation
Sale by corporation of all its assets
Merger of corporation with another corporation (become one corp that holds all assets + owe all liabilities previously held/ owed by either one)
Amendment to certificate of incorporation
Consolidation
State Case Law – Directors duties
Duty of care: not to be negligent in managing the corporation – to make...
Buy the full version of these notes or essay plans and more in our Corporation Outlines.
Corporation with Kahan Autumn 2018...
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