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LLM Law Outlines Corporation Outlines

The Corporate Structure Outline

Updated The Corporate Structure Notes

Corporation Outlines

Corporation

Approximately 210 pages

Corporation with Kahan Autumn 2018...

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:

    1. Limited liability for investors

    2. Free transferability of investor interests

    3. Legal personality (entity-attributable powers, indefinite life span, and purpose) and

    4. 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

  1. State Corporation Law (most important)

    1. 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:

          1. Special meeting (in between annual meetings) or

            • Rule in Delaware: only board of director can call special meeting

          2. 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:

          1. Dissolution of corporation, liquidation

          2. Sale by corporation of all its assets

          3. Merger of corporation with another corporation (become one corp that holds all assets + owe all liabilities previously held/ owed by either one)

          4. Amendment to certificate of incorporation

          5. Consolidation

    2. State Case Law – Directors duties

      1. 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.