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25 Cards in this Set
- Front
- Back
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What determines if action within scope of agency?
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§ Conduct "of the kind" agent hired to perform
§ Did tort occur on the job? Frolic v. detour □ Frolic - new independent journey □ Detour - mere departure from assigned task § Agent intent to benefit the principal, even only in part. |
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Exceptions when intentional tort within scope of agency
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□ Specifically authorized by principal
□ Natural from nature of the employment □ Motivated by a desire to serve the principal |
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Duties agents owe principals
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○ Care
Obedience - Obey reasonable instructions Loyalty § No self-dealing - receiving benefit to detriment of principal § Usurping principal's opportunity Secret Profits |
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Agency principles in partnership
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Partners are agents of the partnership for carrying on usual partnership
Partnership is bound by torts committed by partners in scope of partnership business. Partnership is bound by Ks entered by partners w/ authority. |
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Definition of General Partnership
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an association of 2 or more persons who are carrying on as co-owners of a business for profits.
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Priority of Distribution at Dissolution of Partnership
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Outside/Inside creditors
Captial contributions of Ps Profits/Surplus |
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How does corp adopt promoter's preincorporation K?
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§ (1) express board of directors resolution or
(2) Implied Adoption thru knowledge of K & acceptance of its benefits |
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Rules regarding promoters and secret profits
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(a) Promoters are fiduciaries of each other and the corporation. Therefore promoters cannot make a secret profit on their dealing w/ the corporation.
a) Sale to corporation of property acquired by the promoter before becoming a promoter: profit recoverable by corporation only if sold for more than FMV b) Sale to corporation of property acquired by promoter after becoming a promoter: any profit recoverable by the corporation (even if sold @ FMV) |
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Corporate Formation
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a) Incorporators: merely sign & file the Articles of Incorporation with the state
b) The Articles MUST include: (a) Authorized Shares – maximum # of shares corporation is authorized to issue \ corp may always sell less à can only increase by amending the articles. (b) Purpose – general purpose and perpetual duration (valid and will be presumed). a) If specific purpose stated and then goes outside specific purpose = ultra vires activity. i) State can enjoin the ultra vires activity ii) The corp may sue its own directors & officers for losses cased by UV activity. (c) Agent and address of registered office (agent=corp’s official legal representative) (d) Incorporators (list of) (e) Name of Corporation (must include indicia of corp status) (e.g. corporation, inc. corp.) |
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Requirements for board meeting
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(a) Unless all directors consent in writing to act w/o a meeting, a mtg is required for all board behavior
(b) Notice of director’s meeting can be set in bylaws. (c) Proxies are not allowed. Also, no voting agreements. Must have quorum to start/majority of present to pass |
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Elements of duty of care
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Acted in good faith
With care ordinarily prudent person in like position would exercise In a mannder directors reasonable believe to be in best interests of the corp |
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Duty of Loyalty - Director - Rule, types
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A director owes the corp a duty of loyalty & may not receive an unfair benefit to the detriment of the corporation or its shareholders, unless there ahs been material disclosure and independent ratification.
(a) Self-dealing (b) Usurp |
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Duty of Loyalty - Methods of Ratification
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Ratification – Directors may defend a claim by obtaining independent ratification through
(a) majority vote of independent directors, (b) majority vote of committee of at least 2 independent directors, or (c) majority vote of shares held by independent shareholders. |
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Officers - Key Points
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1. Owe the same duties of loyalty & care as directors
2. Are agents of the corporation and bind the corporation by their unauthorized activities 3. Corporations must have a President, Secretary, & Treasurer Directors have virtually unlimited powers to select officers & may remove them from office @ any time, but corp will be liable for breach of K damages |
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When MAY a corp permissivle indemnify a director
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(a) Liability to 3P or settlement w/ the corporation BUT
Director/officer shows that she acted in good faith and that believed conduct was in corp’s best interest; |
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What may determine whether to grant permissive indemnity
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a) Majority of Independent Directors approves it, will get it
b) Committee of @ least two independent directors approves it, will get it c) Majority of shares held by independent shareholders vote for it, will get it d) A special legal counsel’s opinion recommends it |
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Proxy - Definition/When revocable
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(i) writing (fax or email generally valid), (ii) signed by record shareholder, (iii) directed to secretary of a corporation, (iv) authorizing another to vote the shares; (v) valid only for 11 months
(a) Proxies are freely revocable unless: (1) they say they are irrevocable AND (2) they are coupled with an interest |
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Pooled/Block voting methods
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a) Voting trust (hard way): formal declaration of voting power to voting trustee enforceable for up to 10 years. Needs (1) written trust agreement (2) typically filed w/ corp (3) transfer of shares to voting trustee (4) shareholders get trust certificates (5) shareholders retain all other rights except for voting (6) duration of usually 10 years unless extended by agreement.
Shareholder Voting Agreement (easy way): agmt in WRITING to vote shares as requires in that agmt à binding, enforceable on all signers w/ no time limit & no filing required |
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Limitations on Controlling SH
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○ Cannot cause corp to take actions that unfairly prejudice minority SH
○ Cannot sell corp to looters § Liable for dmgs if so unless reasonable measures taken to investigate buyer ○ Can be held liable for sale of shares at premium if premium paid to buy corporate office for private gain. GET MORE § Includes sale where SH agrees to sell Bd seats by agreeing to vote off bd members and replace § Essentially cannot sell corporate assets for profit via a premium on share price - must disgorge profits if so |
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Procedural steps for fundamental change
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1. Resolution by Board at Valid Meeting
2. Notice of Special Meeting 3. Approval by: (a) majority of shares entitled to vote and (b) by majority of any voting group adversely affected by the change. (c) Except: no shareholder approval required for “short-form” merger where a parent corporation that owns 90% or more of stock in its subsidiary merges with the subsidiary. 4. Appraisal (right of): (a) Actions by shareholder to perfect the right: a) Before shareholder vote, file written notice of objection & intent to demand payment b) Do not vote in favor of the proposed change c) Make prompt written demand to be bough out (b) If the shareholder and corporation cannot agree to value ct has power to appoint expert appraiser to value the shares & appraisal will be binding on parties. 5. File Notice with the State (Articles of Merger or Articles of Amendment) |
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Elements of 10b5 claim
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Fraudulent conduct
-Material statement/omission -Scienter In connection w purchase or sale of securities by P -No private suits for aiding and abetting |
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Elements of Insider trading
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Liability for: Anyone who breaches duty of trust and confidence owed to (i) issuer, (ii) SHs of issuer, (iii) in case of misappropriators, another person who is the course of the material nonpublic info.
b) Duty breached if: -Breached by trading on material, nonpublic inside info -Breached also by tipping someone else for any improper purpose/benefit if tippee trades. (what if tippee does not TRADE?) |
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Tipper/Tippee Liability
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c) Tippers
1) Must make disclosure for improper purpose/benefit 2) Tippee must trade (WOULD IT BE ENOUGH IF TIPPEE THEN TIPPED SOMEONE ELSE AND THEY TRADED?) d) Tippees i) Trade on material nonpublic info received from tipper (an insider???) ii) Tipper must have breached a duty iii) Tippee must KNOW Tipper breached a duty |
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Misappropriator Liability
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e) Misappropriators
i) Liability for: a. Trading on information b. In breach of duty of trust owed to source of info A. Duty Owed When (any of these 3 satisfy): 1. Person agrees to maintain info in confidence 2. Person communicating info and receiver have history of sharing confidences, so person should know confidentiality expected 3.Info received from spouse, child, parent, or sibling, unless can prove no grounds for thinking it was confidential |
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16b Short Swing Profits - key points
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1. Applies when
(a) Big corporation: reporting corporation – (1) listed on a national exchage or (2) at least 500 shareholders and $10 million in assets (b) Big shot defendant – officer, director, more than 10% shareholder All profits recoverable by corp |
