Corporations Law

Front 1

What is a residual claimant?

Back 1

At the trough last, but gets the remainder.

Front 2

Why Delaware

Back 2

Corp can organize in any state. Delaware 101(a) anyone can form a corporation in Delaware.
Its legislature is very responsive to corporate interests.
The judiciary in Delaware is very talented b/c they have tremendous expertise in corporate law. (weeks and months vs. years)

Front 3

Who elects Directors Under DGCL 216

Back 3

Shareholders elect the directors.

Front 4

What is the Certificate of Incorporation?

Back 4

The corporation's constitution that can be amended with approval of the shareholders.

Front 5

What things require shareholder approval under DGCL 271

Back 5

Cannot sell a large portion of the corporation without shareholder approval. [think there are others like fundamental change]

Front 6

Who elects directors?

Back 6

Shareholders

Front 7

Who appoints officers?

Back 7

Directors

Front 8

Who are the directors?

Back 8

A bunch of old white guys.

Front 9

What is the classic agency problem?

Back 9

Separation of control and ownership.

Front 10

When under DGCL 122(9) are corporations allowed to make charitable donations?

Back 10

Delaware 122(9)
Make donations for the
Public welfare or for charitable,
Scientific or educational purposes, and in time of War or other national Emergency in aid thereof;

Front 11

What magic words are required to form a partnership?

Back 11

None, there are no particular magic words, and a partnership can be formed unintentionally.

Front 12

Can a corporation choose to impose personal liability of the company's debts to shareholders?

Back 12

Delaware 102(b)(6)
Yes, this [and the other provisions of DL 102(b)] is optional.

Front 13

Where are restrictions on transferability on corporate shares outlined in the Delaware code?

Back 13

Section 202

Front 14

When does a corporation end?

Back 14

DGCL 122(1)
A corporation is perpetual unless the corporate charter contains "a provision limiting the duration of the corporation's existence to a specified date;"

Front 15

What are the formalities for organizing a partnership?

Back 15

UPA 202(c)(3)
there are none, no magic words a person who receives profits from a business is assumed to be a partner unless the $$$ was received:
i) payment of debt
ii) for service as an independent contractor/employee
iii)or rent
iv)annuity
v)interest on loan
vi) sale by installment

Front 16

In partnership, who is an agent?

Back 16

UPA301(1)

Every partner is an agent of the business, in the course of the partnership [not so with a corporation]

Front 17

Does assignment of a LLC interest make an individual a member?

Back 17

DE LLC ACT 18-702(b)(1)
NO

Front 18

In an LLP can a member be held liable for the torts of a partner.

Back 18

The partnership assets can be held liable for the torts of a member but the personal assets of another member cannot be subject to liability for the torts of the offending member.

Front 19

Menard, Inc. v. Dage-MTI, Inc. 726 N.E.2d 1206 (Ind. 2000)

What is inherent authority?

Back 19

Rule: Agent has "inherent authority" if
(1) agent acts within usual and ordinary scope of authority
(2) 3RD party reasonably believes that agent had authority to carry out transaction
(3) 3rd had no notice that agent was not authorized

Front 20

Define Apparent Authority

Back 20

A third party's reasonable belief that the principal has authorized the acts of its agent.

Front 21

What creates Actual Authority

Back 21

by written words or other conduct of the principal which, reasonably interpreted, causes the agent to believe the principal desires him to act on the principals account.

Front 22

Describe the "duty of care"

Back 22

Absent fraud illegality conflict of interest, courts defer to BoD decision to act [or to not act] presuming that BoD was informed and that such (inaction) was in the best interest of the Corporation/Shareholder

Front 23

What did we learn from Walt Disney

Back 23

Absent fraud, illegality or self interests, courts defer to decisions of BOD so long as informed and good faith belief that such action is in the best interest of the corporation/shareholders. (BJR)

Front 24

What were the decision of the board in Walt Disney?

Back 24

To hire, to compensate, and to fire Ovitz.

Front 25

May a business my absolve directors for liability for breaches of the duty of care.what is

Back 25

Under DGCL 102(b)(7) a business my absolve directors for liability for breaches of the duty of care, with shareholder approval by an amendment to the charter or such a provision may be put in the charter from the beginning.

Front 26

Does 102(b)7 allow the limitationof liability for breach of the duty of loyalty?

Back 26

NO, breach of duty of care.

Front 27

What are the factors in supporting the BJR?

Back 27

Prior Knowledge
Availability of Docs
Market Test
Expert Opinion
Negotiations
Active Q and A
Meetings

Front 28

what breaches can 107(b)(7) not eliminate personal liability of a director for?

Back 28

i)breach of loyalty
ii) acts not in good faith
iii) 174 acts
iv) improper personal benefit

cannot be applied retroactively.

Front 29

one way ratchet test

Back 29

Some minimal objective standard that a director has to meet regardless of subjective facts(see Prichard case). If you have special skills (CPA) you may have to meet a higher standard.

Front 30

Will being a drunk widow give a director adequate protection under the Business Judgement rule?

Back 30

No. (see Prichard). A director must at minumum be informed. Walking around in a drunken stupor is not being informed.

Front 31

Stone v. Ritter (Duty to monitor)

Back 31

facts: total fraud run through a bank. Bank sets up custodial accounts and pays out interest to the crooks. Bank employees were not compliant with Bank Secrecy act and Anti Money Laundering Act. Bank board members want heads to roll over fines.
Shareholders argue: directors had a duty of care to monitor
Rule:Absent cause for suspicion it is not the duty of directors to establish a system of corporate system of espionage to detect wrongdoing [but] you cannot be informed without gathering information in the ordinary course.

Front 32

Standard of Liability under Stone v. Ritter

Back 32

We hold that caremark articulates an utter failure to implement a system of monitoring or a failure to monitor.

Front 33

DGCL 228 says what about consent of Stockholders in Lieu of a regular meeting?

Back 33

Consent of Stockholders in Lieu of a regular meeting is OK if you get their permission in writing and have enough votes.

Front 34

DOL

What does the delaware code say about "Interested Directors" and "Related Persons."

Back 34

DGCL §144
No contract between a corporation and one or more of its officers or a corporation and another corp where one or more directors are officers shall be void solely for that reason.
MBCA describes "related persons"

Front 35

What disclosure is required under DGCL §144?

Back 35

1. known to the board of directors
2. known to the shareholders and they vote for it
3. the terms of the contract in question are fair.

Front 36

Can a director rely on an expert under the BJR?

Back 36

DGCL - 141(e)
YES - A member of the [BoD] shall. . . be fully protected in relying in good faith upon the records of the corporation and upon such information. . . presented to the corporation by any of the corporation's officers or employees, . . . or [experts] selected with reasonable care by or on behalf of the corporation.

Front 37

DGCL §211(c) give a court what power regarding annual meetings and in what situations?

Back 37

If the annual meeting does not occur and no BoD is elected in lieu by 30 days after the date designated for the annual meeting, or if no date has been designated, for a period of 13 months after the latest to occur of the organization of the corporation, its last annual meeting or the last action by written consent to elect directors in lieu of an annual meeting, the Court of Chancery may summarily order a meeting to be held upon the application of any stockholder or director.

Hint 37

If there be a failure to hold the annual meeting or to take action by written consent to elect directors in lieu of an annual meeting for a period of 30 days after the date designated for the annual meeting, or if no date has been designated, for a period of 13 months after the latest to occur of the organization of the corporation, its last annual meeting or the last action by written consent to elect directors in lieu of an annual meeting, the Court of Chancery may summarily order a meeting to be held upon the application of any stockholder or director.

Front 38

What are the two typical requirements to instigate a "golden parachute."

Back 38

1. Change of control
2. Something terrible happens to the Executive like being fired or forced to move to AK

Front 39

DGCL §144(b) tells us what about directors needed for a quorum that authorizes a contract?

Back 39

(b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction.

Front 40

DOL
What question is answered by corporate opportunity doctrine?

Back 40

Whether a director is obligated to bring a corporate opportunity to the attention of the corporation.

Front 41

What is the major holding out of Beard v. Elster?

Back 41

Where independent and disinterested board of directors adopted stock option plan which granted options that could be exercised by optionee only while in employ of company subject to certain minor exceptions, and plan was ratified by stockholders, and employees, whose salaries were below average of salaries of employees in comparable companies, had knowledge of plan prior to its actual adoption and such knowledge acted as inducement to employees to remain in corporation's service as was intended by directors who adopted plan, stock options were valid.

Front 42

DOL
What is the primary holding from Irving Trust Co. v. Deutch, regarding corporate opportunity?

Back 42

Solvent corporation's directors cannot take over corporate contract for their own profit because of corporation's financial inability to perform contract.

Front 43

DOL
Can a former employee of a company make profit based upon the subject of his former agency?

Back 43

No, in Deutch, the court held "One joining fiduciary in enterprise, with knowledge that latter's personal interest is or may be antagonistic to his trust, becomes jointly and severally liable with him for profits of enterprise."

Front 44

DOL
How do we determine what constitutes a "business opportunity" under Delaware law?

Back 44

Rapistan Corp. v. Michaels
Court, when determining whether business opportunity is a corporate opportunity under Delaware law, must ascertain whether opportunity was presented to corporate officer in officer's individual or representative capacity; after determining manner in which opportunity was presented, court must determine nature of opportunity; and nature of opportunity is analyzed differently, depending on whether opportunity is presented to corporate official in official's individual or corporate representative capacity.

Front 45

When can an employee take an opportunity for him/herself

Back 45

Does it violate fiduciary duty
-How high up in the corp is the officer?[desirability favors plaintiffs too much, but established corporate policy or 'plan' is OK]
Quasi 144 inquiry?[did he tell them about it and they passed]
Were corporate resources used?

Essential - how bad does the corporation need this opportunity?
-Financial inability is suspect b/c a good opportunity will get the $$$.
Is it a corporate opportunity?
Is it in the same line of business?

Front 46

When is the 'plan' question not good enough factor in 'business opportunity' analysis?

Back 46

Irving v Deutch If the plan were too simple just to make money.

Front 47

What are the factors in resource analysis under 'business opportunity?'

Back 47

did they pay for it?
Is there a tight nexus?
- was it necessary (phone vs supercomputer) DGCL §122(17))

Front 48

What power does DL122(17)) give a company regarding 'business opportunity?

Back 48

Corporation may specify opportunities that they will not pursue.

Front 49

Burg v. Horn

Back 49

Plan:
Horns are running several businesses and bring the Burgs in on one of them.

Front 50

What rights and privilidges do Common Stock holder have?

Back 50

First in line as to voting power
Last in line as to the paying of dividends. [board of directors decides if/when to pay Delaware 170]

Front 51

What parts of the code deal with things the shareholders (common stock) must vote on?

Back 51

Fundemental changes in the company
216 - Corporation may specify quorum, but never less than 1/3 of outstanding voting shares.
242 - Amend its certificate of incorporation
251 - Merger or Consolidation
271 - Sale, lease or exchange of assets; consideration;
275 - dissolution

Front 52

When may the directors pay dividends under DGCL 170

Back 52

(a) may declare and pay dividends upon the shares of its capital stock, or to its members , either (1) out of its surplus, as defined in and computed in accordance with §§ 154 and 244 of this title, or (2) [if no surplus], out of its net profits for the fiscal year . . .and/or the preceding fiscal year.

Front 53

Delaware 102(a)(4)

Back 53

The type of stocks issued and the total number issued and par value shall be specified in the certificate of incorporation.

Hint 53

(4) If the corporation is to be authorized to issue only 1 class of stock, the total number of shares of stock which the corporation shall have authority to issue and the par value of each of such shares, or a statement that all such shares are to be without par value. If the corporation is to be authorized to issue more than 1 class of stock, the certificate of incorporation shall set forth the total number of shares of all classes of stock which the corporation shall have authority to issue and the number of shares of each class and shall specify each class the shares of which are to be without par value and each class the shares of which are to have par value and the par value of the shares of each such class. The certificate of incorporation shall also set forth a statement of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, which are permitted by § 151 of this title in respect of any class or classes of stock or any series of any class of stock of the corporation and the fixing of which by the certificate of incorporation is desired, and an express grant of such authority as it may then be desired to grant to the board of directors to fix by resolution or resolutions any thereof that may be desired but which shall not be fixed by the certificate of incorporation. The foregoing provisions of this paragraph shall not apply to corporations which are not to have authority to issue capital stock. In the case of such corporations, the fact that they are not to have authority to issue capital stock shall be stated in the certificate of incorporation. The conditions of membership of such corporations shall likewise be stated in the certificate of incorporation or the certificate may provide that the conditions of membership shall be stated in the bylaws;

Front 54

T/F The corporate charter must specify the number of shares of the company?

Back 54

True Delaware 102(a)(4)

Front 55

What is the par value?

Back 55

The minimum value that stock can be sold for.

DEL 153(a)
(a) Shares of stock with par value may be issued for such consideration, having a value not less than the par value thereof, as determined from time to time by the board of directors, or by the stockholders if the certificate of incorporation so provides.

Front 56

under DGCL 242(a)(3), once a company issues its capital stock, are they stuck?

Back 56

No, they can amend provided the amendment would have been OK if it had been originally placed in the charter.

Hint 56

242. Amendment of certificate of incorporation after receipt of payment for stock; nonstock corporations.

(a) After a corporation has received payment for any of its capital stock, it may amend its certificate of incorporation, from time to time, in any and as many respects as may be desired, so long as its certificate of incorporation as amended would contain only such provisions as it would be lawful and proper to insert in an original certificate of incorporation filed at the time of the filing of the amendment; and, if a change in stock or the rights of stockholders, or an exchange, reclassification, subdivision, combination or cancellation of stock or rights of stockholders is to be made, such provisions as may be necessary to effect such change, exchange, reclassification, subdivision, combination or cancellation. In particular, and without limitation upon such general power of amendment, a corporation may amend its certificate of incorporation, from time to time, so as:

(1) To change its corporate name; or

(2) To change, substitute, enlarge or diminish the nature of its business or its corporate powers and purposes; or

(3) To increase or decrease its authorized capital stock or to reclassify the same, by changing the number, par value, designations, preferences, or relative, participating, optional, or other special rights of the shares, or the qualifications, limitations or restrictions of such rights, or by changing shares with par value into shares without par value, or shares without par value into shares with par value either with or without increasing or decreasing the number of shares, or by subdividing or combining the outstanding shares of any class or series of a class of shares into a greater or lesser number of outstanding shares; or

Front 57

WHat does Delaware 242(b)(2) require to protect shareholders of a class of stock from having their interest dwarfed by an issuing of stock.

Back 57

Holders of outstanding shares of a class shall be entitled to vote "as a class upon a proposed amendment . . "

Hint 57

(2) The holders of the outstanding shares of a class shall be entitled to vote as a class upon a proposed amendment, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would increase or decrease the aggregate number of authorized shares of such class, increase or decrease the par value of the shares of such class, or alter or change the powers, preferences, or special rights of the shares of such class so as to affect them adversely. If any proposed amendment would alter or change the powers, preferences, or special rights of 1 or more series of any class so as to affect them adversely, but shall not so affect the entire class, then only the shares of the series so affected by the amendment shall be considered a separate class for the purposes of this paragraph. The number of authorized shares of any such class or classes of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the corporation entitled to vote irrespective of this subsection, if so provided in the original certificate of incorporation, in any amendment thereto which created such class or classes of stock or which was adopted prior to the issuance of any shares of such class or classes of stock, or in any amendment thereto which was authorized by a resolution or resolutions adopted by the affirmative vote of the holders of a majority of such class or classes of stock.
(a) After a corporation has received payment for any of its capital stock, it may amend its certificate of incorporation, from time to time, in any and as many respects as may be desired, so long as its certificate of incorporation as amended would contain only such provisions as it would be lawful and proper to insert in an original certificate of incorporation filed at the time of the filing of the amendment; and, if a change in stock or the rights of stockholders, or an exchange, reclassification, subdivision, combination or cancellation of stock or rights of stockholders is to be made, such provisions as may be necessary to effect such change, exchange, reclassification, subdivision, combination or cancellation. In particular, and without limitation upon such general power of amendment, a corporation may amend its certificate of incorporation, from time to time, so as:

(1) To change its corporate name; or

(2) To change, substitute, enlarge or diminish the nature of its business or its corporate powers and purposes; or

(3) To increase or decrease its authorized capital stock or to reclassify the same, by changing the number, par value, designations, preferences, or relative, participating, optional, or other special rights of the shares, or the qualifications, limitations or restrictions of such rights, or by changing shares with par value into shares without par value, or shares without par value into shares with par value either with or without increasing or decreasing the number of shares, or by subdividing or combining the outstanding shares of any class or series of a class of shares into a greater or lesser number of outstanding shares; or

Front 58

What is capital appreciation, and do preferred stockholders get it.

Back 58

No, the return on preffered stock is fixed by contract so as the company's value increases the value of the stock will not.

Front 59

What is participation in prefered stock?

Back 59

It allows preferred stock holders to get common stock dividends if the payout is over a certain amount. (helps them have it both ways when things get really good for the company)

Front 60

Do Debt holders enjoy capital appreciation?

Back 60

Maybe. Normally they do not, but they may have a conversion provision built into the contract. There may also be capital appreciation provisions for early payoff.

Front 61

How much is a corp worth?

Back 61

Assets = Liability + Owner's Equity

Front 62

What are assets of a corp

Back 62

Cash, Equipment, property, inventory, materials

Front 63

What are Liabilities and owner equities?

Back 63

Debt and Stock

Front 64

Delaware 173

Back 64

DUTIES OF CORPS MEMBERS

The Corps shall render and perform, free of charge, such professional services in respect to the medical examination and sanitary cleaning of the mouths and teeth of the children in the public schools of this State as shall be ordered and directed by the Secretary or the Secretary's designee and shall instruct the children in oral hygiene and diet, when and as directed by the Secretary or the Secretary's designee.

Front 65

Delaware 174

Back 65

Director is liable for unlawful action, unless the director dissents and then the director may be exonerated from damages if the dissent to the action is recorded in the minutes.

Hint 65

DEL CODE § 174 : PERSONS SERVING WITH ARMED FORCES

(a) No agency created by a power of attorney in writing given by a principal who is at the time of execution, or who, after executing such power of attorney, becomes either:

(1) A member of the armed forces of the United States; or

(2) A person serving as a merchant seaman outside the limits of the United States, included within the 50 states and the District of Columbia; or

(3) A person outside the limits by permission, assignment or direction of any department or official of the United States government in connection with any activity pertaining to or connected with the prosecution of any war in which the United States is then engaged, shall be revoked or terminated by the death of the principal, as to the agent or other person who, without actual knowledge or actual notice of the death of the principal, has acted or acts, in good faith, under or in reliance upon such power of attorney or agency, and any action so taken, unless otherwise invalid or unenforceable, shall be binding on the heirs, devisees, legatees or personal representative of the principal.

(b) An affidavit executed by the attorney-in-fact or agent setting forth that he has not or had not, at the time of doing any act pursuant to the power of attorney, received actual knowledge or actual notice of the revocation or termination of the power of attorney, by death or otherwise, or notice of any facts indicating the same, shall, in the absence of fraud, be conclusive proof of the nonrevocation or nontermination of the power at such time. If the exercise of the power requires execution and delivery of any instrument which is recordable under the laws of this State, such affidavit (when authenticated for record in the manner prescribed by law) shall likewise be recordable.

(c) No report or listing, either official or otherwise, of "missing" or "missing in action," as such words are used in military parlance, shall constitute or be interpreted as constituting actual knowledge or actual notice of the death of such principal or notice of any facts indicating the same, or shall operate to revoke the agency.

(d) This section shall not be construed so as to alter or affect any provision for revocation or termination contained in such power of attorney. (Code 1935, § 3673A; 45 Del. Laws, c. 228, § 1; 25 Del. C. 1953, § 174.)

Front 66

Whom may a BoD member rely upon as to dividends or redemption.

Back 66

§ 172. Liability of directors and committee members as to dividends or stock redemption.

A member of the board of directors, or a member of any committee designated by the board of directors, shall be fully protected in relying in good faith upon the records of the corporation and upon such information, opinions, reports or statements presented to the corporation by any of its officers or employees, or committees of the board of directors, or by any other person as to matters the director reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the corporation, as to the value and amount of the assets, liabilities and/or net profits of the corporation or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid, or with which the corporation's stock might properly be purchased or redeemed.

8 Del. C. 1953, § 172; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186, § 10; 66 Del. Laws, c. 136, § 5.;

Front 67

Del 170

Back 67

(1) out of its surplus, as defined in and computed in accordance with §§ 154 and 244 of this title, or (2) in case there shall be no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.

Hint 67

§ 170. Dividends; payment; wasting asset corporations.

(a) The directors of every corporation, subject to any restrictions contained in its certificate of incorporation, may declare and pay dividends upon the shares of its capital stock, or to its members if the corporation is a nonstock corporation, either (1) out of its surplus, as defined in and computed in accordance with §§ 154 and 244 of this title, or (2) in case there shall be no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If the capital of the corporation, computed in accordance with §§ 154 and 244 of this title, shall have been diminished by depreciation in the value of its property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, the directors of such corporation shall not declare and pay out of such net profits any dividends upon any shares of any classes of its capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired. Nothing in this subsection shall invalidate or otherwise affect a note, debenture or other obligation of the corporation paid by it as a dividend on shares of its stock, or any payment made thereon, if at the time such note, debenture or obligation was delivered by the corporation, the corporation had either surplus or net profits as provided in clause (1) or (2) of this subsection from which the dividend could lawfully have been paid.

(b) Subject to any restrictions contained in its certificate of incorporation, the directors of any corporation engaged in the exploitation of wasting assets (including but not limited to a corporation engaged in the exploitation of natural resources or other wasting assets, including patents, or engaged primarily in the liquidation of specific assets) may determine the net profits derived from the exploitation of such wasting assets or the net proceeds derived from such liquidation without taking into consideration the depletion of such assets resulting from lapse of time, consumption, liquidation or exploitation of such assets.

8 Del. C. 1953, § 170; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186, § 9; 59 Del. Laws, c. 106, § 5; 64 Del. Laws, c. 112, § 17; 67 Del. Laws, c. 376, § 5; 69 Del. Laws, c. 61, § 3; 72 Del. Laws, c. 123, § 3.;

Front 68

What value must be given to a corporation in exchange for an issuance of capital stock under DGCL 154?

Back 68

A value greater than that of the amount of capital stock in question at par value.

Hint 68

§ 154. Determination of amount of capital; capital, surplus and net assets defined.

Any corporation may, by resolution of its board of directors, determine that only a part of the consideration which shall be received by the corporation for any of the shares of its capital stock which it shall issue from time to time shall be capital; but, in case any of the shares issued shall be shares having a par value, the amount of the part of such consideration so determined to be capital shall be in excess of the aggregate par value of the shares issued for such consideration having a par value, unless all the shares issued shall be shares having a par value, in which case the amount of the part of such consideration so determined to be capital need be only equal to the aggregate par value of such shares. In each such case the board of directors shall specify in dollars the part of such consideration which shall be capital. If the board of directors shall not have determined (1) at the time of issue of any shares of the capital stock of the corporation issued for cash or (2) within 60 days after the issue of any shares of the capital stock of the corporation issued for consideration other than cash what part of the consideration for such shares shall be capital, the capital of the corporation in respect of such shares shall be an amount equal to the aggregate par value of such shares having a par value, plus the amount of the consideration for such shares without par value. The amount of the consideration so determined to be capital in respect of any shares without par value shall be the stated capital of such shares. The capital of the corporation may be increased from time to time by resolution of the board of directors directing that a portion of the net assets of the corporation in excess of the amount so determined to be capital be transferred to the capital account. The board of directors may direct that the portion of such net assets so transferred shall be treated as capital in respect of any shares of the corporation of any designated class or classes. The excess, if any, at any given time, of the net assets of the corporation over the amount so determined to be capital shall be surplus. Net assets means the amount by which total assets exceed total liabilities. Capital and surplus are not liabilities for this purpose.

Front 69

What is the weakness of the legal capital regime

Back 69

We can set par value for whatever value we want and we can set it for $0.01.

Front 70

General restrictions of debtors

Back 70

Sales of assets
Transactions with affiliates.

Front 71

When does insolvency occur?

Back 71

liabilities > assets

Front 72

Credit Lyonnaise bank v. Pathe

Back 72

split responsibility
facts

Front 73

under DGCL § 131 what must every Delaware corporation have?

Back 73

§ 131. Registered office in State; principal office or place of business in State.

(a) Every corporation shall have and maintain in this State a registered office which may, but need not be, the same as its place of business.

(b) Whenever the term "corporation's principal office or place of business in this State" or "principal office or place of business of the corporation in this State," or other term of like import, is or has been used in a corporation's certificate of incorporation, or in any other document, or in any statute, it shall be deemed to mean and refer to, unless the context indicates otherwise, the corporation's registered office required by this section; and it shall not be necessary for any corporation to amend its certificate of incorporation or any other document to comply with this section.

Front 74

internal affairs doctrine

Back 74

if we incorporate in Delaware we care about Delaware law for internal matters. (run to the law of the jurisdiction of organization for internal matter, for external not so much).

Front 75

What does DGCL 102(a) require regarding naming?

Back 75

§ 102. Contents of certificate of incorporation.

(a) The certificate of incorporation shall set forth:

(1) The name of the corporation, which (i) shall contain 1 of the words "association," "company," "corporation," "club," "foundation," "fund," "incorporated," "institute," "society," "union," "syndicate," or "limited," (or abbreviations thereof, with or without punctuation), or words (or abbreviations thereof, with or without punctuation) of like import of foreign countries or jurisdictions (provided they are written in roman characters or letters);

Front 76

What is required by 102(a)(2)?

Back 76

(2) The address (which shall include the street, number, city and county) of the corporation's registered office in this State, and the name of its registered agent at such address;

Front 77

What does Ultra vires mean?

Back 77

It means something is beyond the chartered purposes of the corporation. (this is a dwindling doctrine and defined by DGCL 124- not on exam)

Front 78

What is required by Delaware Code regarding Authorized shares of Preferred stock?

Back 78

Number and par value in the corporate charter.

Hint 78

4) If the corporation is to be authorized to issue only 1 class of stock, the total number of shares of stock which the corporation shall have authority to issue and the par value of each of such shares, or a statement that all such shares are to be without par value. If the corporation is to be authorized to issue more than 1 class of stock, the certificate of incorporation shall set forth the total number of shares of all classes of stock which the corporation shall have authority to issue and the number of shares of each class and shall specify each class the shares of which are to be without par value and each class the shares of which are to have par value and the par value of the shares of each such class. The certificate of incorporation shall also set forth a statement of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, which are permitted by § 151 of this title in respect of any class or classes of stock or any series of any class of stock of the corporation and the fixing of which by the certificate of incorporation is desired, and an express grant of such authority as it may then be desired to grant to the board of directors to fix by resolution or resolutions any thereof that may be desired but which shall not be fixed by the certificate of incorporation. The foregoing provisions of this paragraph shall not apply to corporations which are not to have authority to issue capital stock. In the case of such corporations, the fact that they are not to have authority to issue capital stock shall be stated in the certificate of incorporation. The conditions of membership of such corporations shall likewise be stated in the certificate of incorporation or the certificate may provide that the conditions of membership shall be stated in the bylaws;

Front 79

Thompson v. Greene Machinery

Back 79

facts: two partners not aware the corporation was invalid.
rule: 1) TN had a law that one who acts w/o corporate authority is jointly and severally liable.
2) C/L one that deals with entity as if validly organized cannot subsequently attack the validity of its organization.

Holding: TN law wins over C/L

Front 80

Can want of incorporation be used as a defense to by a defendant?

Back 80

§ 329. Defective organization of corporation as defense.

(a) No corporation of this State and no person sued by any such corporation shall be permitted to assert the want of legal organization as a defense to any claim.

(b) This section shall not be construed to prevent judicial inquiry into the regularity or validity of the organization of a corporation, or its lawful possession of any corporate power it may assert in any other suit or proceeding where its corporate existence or the power to exercise the corporate rights it asserts is challenged, and evidence tending to sustain the challenge shall be admissible in any such suit or proceeding.

Front 81

Sulphur Export Co. v. Carribean Clipper Lines Inc.

Back 81

rule ‐Dissenting directors, as recorded in minutes or written upon learning of action, are not jointly and severally liable.‐Delaware
‐DGCL 329(a): no corp. or anyone sued by corp. can assert want of legal organization as defense to any claim.‐Could argue statute displaces CL estoppel rule

Front 82

Piercing the corporate veil?

Back 82

Contat v. tolt
observe formalities
domination contronl/ active in management
fraud/crime/wrong
siphon
comingling
inadequate capitalization
subject of pierce

Front 83

Perpetual Real Estate Services, Inc. v. Michaelson Properties Inc.

Back 83

‐Must look at nature of claim. (Easier to pierce veil with tort claims than with contract claims)‐To pierce the corp. veil, the plaintiff must prove that there was domination and control of the corp.n by some person. Further, the defendant must have used the corp. to disguise some legal wrong (siphoning, co‐mingling, fraud, crime).

Front 84

Walkovsky v. Carlton

Back 84

facts: Cab hits someone and does not have enough insurance to cover the medical judgment.

Complaint containing allegations that an individual defendant organized, managed, dominated and controlled a fragmented corporate entity and that fleet ownership of taxicabs had been deliberately split among many corporations was insufficient to state a cause of action in tort against individual defendant as a stockholder in such corporations, where there was no allegation that individual defendant was conducting business in his individual capacity.

Front 85

Fletcher v. Atex

Back 85

To prevail on alter ego claim under Delaware law, plaintiff must show
(1) that parent and subsidiary operated as single economic entity, and
(2) that overall element of injustice or unfairness is present.

Hint 85

(1) under New York law, New York state court's previous determination that issues of fact existed as to whether manufacturer was dominated by its parent corporation did not preclude relitigation of alter ego issue under doctrine of collateral estoppel; (2) under Delaware law, manufacturer was not alter ego of its parent corporation; (3) under New York law, manufacturer did not have actual or apparent authority to act as parent corporation's agent; (4) under New York law, parent corporation was not liable as apparent manufacturer of keyboards; and (5) under New York law, parent corporation was not liable on theory of concerted tortious action with manufacturer.

Front 86

Bartle v. Home Owners Cooperative

Back 86

Trustee of bankrupt subsidiary corporation could not maintain action to compel parent corporation to meet obligations of such subsidiary, where there had been neither fraud, misrepresentation nor illegality involved in incorporation of such subsidiary or its subsequent operation.

Front 87

When is a successor/Purchaser of assets liable for obligations of the predecessor.

Back 87

1)Fraud
2)Express/Implied Assumption
3)Defacto Merger
4)Continuation of Seller

Front 88

What is a defacto merger

Back 88

a merger that does not conform to all aspects of 251.

Front 89

In cases of alleged "continuation of seller," what are some factors courts look at

Back 89

JF anderson Lumber v. Myers

Location
Product
Same Business
More Assets
Employees
Name of Corporation
Time Frame

Front 90

Sherwood & Roberts-Oregon, Inc. v. Alexander

Back 90

Corporate entities conclusively begins with the issuance of the certificate or incorporation. There is no 'defacto corporation' doctrine after MCBA 146.

Front 91

Accoarding to Sherwood, who is liable before a corporation is incorporated?

Back 91

One who acts on behalf of a Corp w/o authority is liable for obligations flowing therefrom UNLESS the plaintiff waives it.

Hint 91

Who might incur liability in forming a corporation?

Front 92

Howe and Associates v. Boss

Back 92

facts: hotel promotor signs "Agent for corporation to be formed who will be obligor"
issue: is he relieved of liability?
rule: when the K calls for performance, at least in part, before the corp is organized, this indicates that the promoter is intended to be personally liable on the K.
Rule2: Adoption of the K by the corporation is not sufficient to relieve the promoter of his liability.

Front 93

How could a promotor be relieved of liability ?

Back 93

Novation of K (Howe v. Boss)

Front 94

Stewart Realty v. Keller

Back 94

facts: no corporation, and the defendant refused to agree to personal liability.

Rule: no agreement to personal liability means no liability.

Front 95

why don't shareholder's always vote?

Back 95

It is hard to cast a wise ballot.

What is the likelihood that a marginal vote will make a difference. (when it is otherwise a tie)

Front 96

what is a proxy contest

Back 96

a contest of people soliciting shareholders with a packet of info encouraging them to allow someone to vote in their stead at the shareholder's meeting to change control of the company through an alternate board of directors.

Front 97

What is a plurality under 8 Del C. 216?

Back 97

10 outstanding shares, 6 come to the meeting. The most any board gets is 3 votes. 3 is a plurality.

Front 98

When should a vote be required?

Back 98

Votes are costly, so they should not be frequent.

Once a year
On fundamental changes.
Some say Shareholder initiated?[more say NO - Brady bunch pet decision - 3 votes no pets]

Front 99

Hilton Hotels v. ITT (First)

Back 99

facts: ITT is delaying the "annual" shareholders meeting to hold off a hostile takeover from Hilton.

Rule: Shareholders get to vote for directors (sacred cow)
this is not like Shoen, where a meeting was accelerated

Front 100

Hilton Hotels (second case)

Back 100

ITT reorganizes company and create tiered system for

Front 101

What is the unilocal test?

Back 101

to uphold defensive BOD must establish
1) reasonable investigation & reasonably perceived threat.
2) Proportionality b/w Threat and Defensive action.

Front 102

In Hilton II what did we learn about defensive action by the board?

Back 102

The board cannot save the shareholders from their ignorance if the only objection by the board is the price.

Front 103

Lacos land Co. vs. Arden Group

Back 103

facts: new shares issued (Class B shares) More votes and less dividends and restricted transferability. Any shareholder may switch class A for Class B.

This plan gives a 20% shareholder 75% control of the BOD. (instead of 20%)

‐Vote buying‐Illegal per se as a matter of public policy and of fraud.‐Voidable, but when not intended to defraud or disenfranchise SHHs, the SHH may cure by approving with full disclosure of facts. (Schreiber)

Front 104

Screilber v. Carney

Back 104

facts: Jet Capital 35% shareholder is blocking the transaction. Texas international wants to merge Texas Air. Jet capital will not allow the transaction unless they get more money.

Steps for disenfranchisement analysis:
‐Was threat by majority SHH?(Not determinative)
‐Who made the threat?‐Majority SHH
‐SHH who is director/officer‐Majority extract benefit not enjoyed by minority?
‐Dilution of majority SHH voting power?
‐Who received control premiums?
‐SHH approval?

Front 105

Delaware 102(b)(4)

Back 105

4) Provisions requiring for any corporate action, the vote of a larger portion of the stock or of any class or series thereof, or of any other securities having voting power, or a larger number of the directors, than is required by this chapter;

Front 106

What is the original public policy argument against "vote buying."

Back 106

Originally: shareholder loyalty to other shareholders -this is outmoded b/c shareholders can vote for whatever self interest they had ( dolphin safe tuna/but I hate dolphin).

Front 107

What is the current arg against "vote buying"

Back 107

Now: look to the previous example, the 20% stake holder gets control over the company and now can vote to buy a corporate jet to fly himself around.

Front 108

Delaware 213

Back 108

No less than 10 days notice and no more than 60 days notice for shareholders meetings.

Front 109

Beneficial Shareholder

Back 109

has the right to the benefits of shareholdership but is not the shareholder of record

Front 110

Delaware 141(k)

Back 110

(k) Any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except as follows:

(1) Unless the certificate of incorporation otherwise provides, in the case of a corporation whose board is classified as provided in subsection (d) of this section, shareholders may effect such removal only for cause; or

(2) In the case of a corporation having cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against such director's removal would be sufficient to elect such director if then cumulatively voted at an election of the entire board of directors, or, if there be classes of directors, at an election of the class of directors of which such director is a part.

Front 111

What is the default rule for removing a board of directors?

Back 111

Holders of share may remove sitting directors with or without cause.

Front 112

What limitations does Delaware 141 place upon removal of directors.

Back 112

If the votes against removal would have been sufficient to elect that director, you cannot remove the director in quesiton.

Front 113

Who pays for the cost of a proxy contest.

Back 113

§ 113. Proxy expense reimbursement.

(a) The bylaws may provide for the reimbursement by the corporation of expenses incurred by a stockholder in soliciting proxies in connection with an election of directors, subject to such procedures or conditions as the bylaws may prescribe, including:

(1) Conditioning eligibility for reimbursement upon the number or proportion of persons nominated by the stockholder seeking reimbursement or whether such stockholder previously sought reimbursement for similar expenses;

(2) Limitations on the amount of reimbursement based upon the proportion of votes cast in favor of one or more of the persons nominated by the stockholder seeking reimbursement, or upon the amount spent by the corporation in soliciting proxies in connection with the election;

(3) Limitations concerning elections of directors by cumulative voting pursuant to § 214 of this title; or

(4) Any other lawful condition.

(b) No bylaw so adopted shall apply to elections for which any record date precedes its adoption.

Front 114

Shnell vs. Chris Craft

Back 114

facts: Directors amend bylaws to move the meeting up 5 weeks.
issue: can the board move the meeting up?
rule: they can if there is not an ulterior motive that is inconsistent with the board's fiduciary duties.

Front 115

Delaware 109

Back 115

Shareholders always have the power to amend the bylaw.

Board of directors has the authority to amend bylaws if the corporate charter says they can.and the shareholders are OK with it.

Front 116

MM vs. Liquid Audio

Back 116

facts MM trying to acquire MM. They have 7% of Liquid's common stock. LA createst new board positions to dilute MM's two board members.

Front 117

What is the Blasius test.

Back 117

When BOD act w/ primary purpose to impede effective franchise by shareholders, ct will step in unless BOD establishes a COMPELLING JUSTIFICATION.

Front 118

What is the Unocal test

Back 118

When BOD takes defensive action, court is skeptical unless BOD establishes 1) reasonable investigation & perceived threat to benefit enjoyed by corporation or shareholders 2) Proportionality

Front 119

Under Blasius what must the Board prove if the court determines they have impeded shareholder franchise?

Back 119

Compelling Justification

Front 120

how do we analyze a move by the board to disenfranchise shareholders?

Back 120

First use blasius to get the Compelling Justification, then use unocal to analyze the defensive action in light of the justification.

Front 121

What are the closed corporation law in the Delaware Code

Back 121

Subchapter XIV (14)
Section 341 - 365

Front 122

If the provisions of Closed corporation subchapter conflict with other Delaware codes which wins out.

Back 122

The other Delaware codes.

Front 123

Can a closed corporation have an IPO?

Back 123

No, a closed corporation may NOT make any public offering.

Front 124

What are the 5 restrictions of DGCL 202(c)?

Back 124

(c) A restriction on the transfer or registration of transfer of securities of a corporation or on the amount of such securities that may be owned by any person or group of persons is permitted by this section if it:

(1)[Corporation gets buyback option] Obligates the holder of the restricted securities to offer to the corporation or to any other holders of securities of the corporation or to any other person or to any combination of the foregoing, a prior opportunity, to be exercised within a reasonable time, to acquire the restricted securities; or

(2) Obligates the corporation or any holder of securities of the corporation or any other person or any combination of the foregoing, to purchase the securities which are the subject of an agreement respecting the purchase and sale of the restricted securities; or

(3) Requires the corporation or the holders of any class or series of securities of the corporation to consent to any proposed transfer of the restricted securities or to approve the proposed transferee of the restricted securities, or to approve the amount of securities of the corporation that may be owned by any person or group of persons; or

(4) Obligates the holder of the restricted securities to sell or transfer an amount of restricted securities to the corporation or to any other holders of securities of the corporation or to any other person or to any combination of the foregoing, or causes or results in the automatic sale or transfer of an amount of restricted securities to the corporation or to any other holders of securities of the corporation or to any other person or to any combination of the foregoing; or

(5) Prohibits or restricts the transfer of the restricted securities to, or the ownership of restricted securities by, designated persons or classes of persons or groups of persons, and such designation is not manifestly unreasonable.

Front 125

Does 202(c)(1) require a reasonable price?

Back 125

No it does not.

Front 126

DGCL § 349. Corporate option where a restriction on transfer of a security is held invalid.

Back 126

If a restriction on transfer of a security of a close corporation is held not to be authorized by § 202 of this title, the corporation shall nevertheless have an option, for a period of 30 days after the judgment setting aside the restriction becomes final, to acquire the restricted security at a price which is agreed upon by the parties, or if no agreement is reached as to price, then at the fair value as determined by the Court of Chancery. In order to determine fair value, the Court may appoint an appraiser to receive evidence and report to the Court such appraiser's findings and recommendation as to fair value.

Front 127

Allocating Authority
We might not like the default rules of DGCL 214

What can we do?

Back 127

DGCL151 we can issue different classes of stock.
DGCL 102(b)(4) require greater number of shareholders than the majority
DGCL 216 quorum requires minimum 1/3 of voting shares.

DGCL 242 when the charter requires greater than the majority of outstanding shares that provision can't be amended by less the afformentioned supermajority.

Front 128

Ringling

Back 128

‐Specific performance normally only if all shareholders are party to the agreement. Otherwise, void the breaching party's votes and leave vacancy until next election.

Front 129

Abercrombie v. Davies
(is it a voting trust?)

Back 129

‐Voting trust must separate voting rights from other attributes of ownership‐Factors:
‐Are voting rights divorced from beneficial owners? Yes = trust.
‐Were voting rights transferred to fiduciary? Yes = trust.
‐Were voting rights transferred through irrevocable proxies? Yes = trust.
‐Were all voting rights pooled in the agents as a group? Yes = trust.
‐Was the agreement for the principal objection of obtaining voting control of the corp.? Yes = trust.
‐Courts look at substance, not form to determine whether voting trust or not. If SHH cannot vote, effective

Hint 129

If it looks like a trust it has to be treated like a trust.

Front 130

DGCL 218 Voting Trusts

Back 130

§ 218. Voting trusts and other voting agreements.

(a) One or more SH may transfer their voting rights to a proxy.
(b) Any amendment to a voting trust agreement shall be made by a written agreement, a copy of which shall be filed in the registered office of the corporation in this State.

(c) An agreement between 2 or more stockholders, if in writing and signed by the parties thereto, may provide that in exercising any voting rights, the shares held by them shall be voted as provided by the agreement, or as the parties may agree, or as determined in accordance with a procedure agreed upon by them.

(d) This section shall not be deemed to invalidate any voting or other agreement among stockholders or any irrevocable proxy which is not otherwise illegal.

Hint 130

§ 218. Voting trusts and other voting agreements.

(a) One stockholder or 2 or more stockholders may by agreement in writing deposit capital stock of an original issue with or transfer capital stock to any person or persons, or entity or entities authorized to act as trustee, for the purpose of vesting in such person or persons, entity or entities, who may be designated voting trustee, or voting trustees, the right to vote thereon for any period of time determined by such agreement, upon the terms and conditions stated in such agreement. The agreement may contain any other lawful provisions not inconsistent with such purpose. After the filing of a copy of the agreement in the registered office of the corporation in this State, which copy shall be open to the inspection of any stockholder of the corporation or any beneficiary of the trust under the agreement daily during business hours, certificates of stock or uncertificated stock shall be issued to the voting trustee or trustees to represent any stock of an original issue so deposited with such voting trustee or trustees, and any certificates of stock or uncertificated stock so transferred to the voting trustee or trustees shall be surrendered and cancelled and new certificates or uncertificated stock shall be issued therefore to the voting trustee or trustees. In the certificate so issued, if any, it shall be stated that it is issued pursuant to such agreement, and that fact shall also be stated in the stock ledger of the corporation. The voting trustee or trustees may vote the stock so issued or transferred during the period specified in the agreement. Stock standing in the name of the voting trustee or trustees may be voted either in person or by proxy, and in voting the stock, the voting trustee or trustees shall incur no responsibility as stockholder, trustee or otherwise, except for their own individual malfeasance. In any case where 2 or more persons or entities are designated as voting trustees, and the right and method of voting any stock standing in their names at any meeting of the corporation are not fixed by the agreement appointing the trustees, the right to vote the stock and the manner of voting it at the meeting shall be determined by a majority of the trustees, or if they be equally divided as to the right and manner of voting the stock in any particular case, the vote of the stock in such case shall be divided equally among the trustees.

(b) Any amendment to a voting trust agreement shall be made by a written agreement, a copy of which shall be filed in the registered office of the corporation in this State.

(c) An agreement between 2 or more stockholders, if in writing and signed by the parties thereto, may provide that in exercising any voting rights, the shares held by them shall be voted as provided by the agreement, or as the parties may agree, or as determined in accordance with a procedure agreed upon by them.

(d) This section shall not be deemed to invalidate any voting or other agreement among stockholders or any irrevocable proxy which is not otherwise illegal.

Front 131

DGCL 157

Back 131

§ 157. Rights and options respecting stock.

(a) Subject to any provisions in the certificate of incorporation, every corporation may create and issue, whether or not in connection with the issue and sale of any shares of stock or other securities of the corporation, rights or options entitling the holders thereof to acquire from the corporation any shares of its capital stock of any class or classes, such rights or options to be evidenced by or in such instrument or instruments as shall be approved by the board of directors.

(b) The terms upon which, including the time or times which may be limited or unlimited in duration, at or within which, and the consideration (including a formula by which such consideration may be determined) for which any such shares may be acquired from the corporation upon the exercise of any such right or option, shall be such as shall be stated in the certificate of incorporation, or in a resolution adopted by the board of directors providing for the creation and issue of such rights or options, and, in every case, shall be set forth or incorporated by reference in the instrument or instruments evidencing such rights or options. In the absence of actual fraud in the transaction, the judgment of the directors as to the consideration for the issuance of such rights or options and the sufficiency thereof shall be conslusive.

(c) The board of directors may, by a resolution adopted by the board, authorize 1 or more officers of the corporation to do 1 or both of the following: (i) designate officers and employees of the corporation or of any of its subsidiaries to be recipients of such rights or options created by the corporation, and (ii) determine the number of such rights or options to be received by such officers and employees; provided, however, that the resolution so authorizing such officer or officers shall specify the total number of rights or options such officer or officers may so award. The board of directors may not authorize an officer to designate himself or herself as a recipient of any such rights or options.

(d) In case the shares of stock of the corporation to be issued upon the exercise of such rights or options shall be shares having a par value, the consideration so to be received therefor shall have a value not less than the par value thereof. In case the shares of stock so to be issued shall be shares of stock without par value, the consideration therefor shall be determined in the manner provided in § 153 of this title. (8 Del. C. 1953, § 157; 56 Del. Laws, c. 50; 73 Del. Laws, c. 82, §§ 4-7; 74 Del. Laws, c. 326, §§ 5-7.)

Front 132

DGCL § 142 Provides for the appointment of?

Back 132

why is this question so far back?

§ 142. Officers; titles, duties, selection, term; failure to elect; vacancies.

(a) Every corporation organized under this chapter shall have such officers with such titles and duties as shall be stated in the bylaws or in a resolution of the board of directors

(b) Officers shall be chosen in such manner and shall hold their offices for such terms as are prescribed by the bylaws or determined by the board of directors or other governing body.

(c) The corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise.

(d) A failure to elect officers shall not dissolve or otherwise affect the corporation.

(e) Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise, shall be filled as the bylaws provide.

Front 133

Statutes:

Back 133

-By law may provide for mgmt not contrary to stat/charter
-K of employment okay for O if not inconsistent w/ charter/bylaws
-removal of officers deos not prejudice Contract rights.

Front 134

Pioneer specialties

Back 134

facts: Bylaws provide for 1 year president, guy gets two year contract and is terminated after less than 1 year.

Rule: Bylaw prohibits his employment for 1 year.
K of employment are OK as long as not inconsistent w the bylaws.

holding: he can have his pay for the 1 year.

Front 135

State the business judgment rule as in Van Gorkham

Back 135

Absent fraud, illegality, self‐interest, courts defer to decisions of the board so long as board is informed & so long as board has good faith and believes that such (in)action is in the best interest of the corp. and SHH.

Front 136

Unocal (Cleaveland's framework)

Back 136

When Target BOD dfends it bears burden . . .
1) reasonable investigation and Good faith reasonably perceived threat to corporation or significant corporate policy, or to Shareholders
2) Def response is proportional to threat, within the range of reasonableness
3) not preclusive

Front 137

Time Warner

Back 137

Facts: time looking for a video pipeline. Paramount is making a tender offer at a controll premium that the SHH like. The board wanted to acquire warner so they could enforce Time's policies protecting journalistic integrity and keep their officers in place. Board does not let SHHs vote on the tender offer.

issue: is this preclusive?

analysis:Paramount can make a tender offer to the SHHs of Time. Paramount argues that if the warner buyout goes through, it will have to buy a larger company.

(analyze with Unocal above)

Front 138

Time Warner (Delaware Supreme)

Back 138

Rule: Once the first two prongs of Unocal are met, it is BJR

Front 139

Conn

Back 139

facts:

Front 140

fair dealing and fair price

Back 140

fair dealing: how is the transaction tied to