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148 Cards in this Set

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Advantages of Corporation
1. Limited Liability of Shareholders
2. Centralized management
3. Continuation of Existence
4. Ease of Transferring Ownership
5. Access to capital through sale of shares
Tax Purposes =
Double taxation (corporation & shareholders) unless Subchapter S IRS filing for small businesses
Political Contributions
-State & local allowed subject to limitations
-Federal not allowed
Liability of Corp.
Liable for torts & contracts committed by agents (if intentional &/or gross negligence then may be liable for punitive damage but corp. must have condoned or participated in misconduct)
Articles of Incorporation (MUST INCLUDE)
-corp. name ("co.", "corp." or "Inc.")
-# of shares
-whether shareholders have preemptive rights
-address of registered office
-name of registered agent & written acceptance
-name/address of incorporators
-address of principal office
Articles of Incorporation (MAY INCLUDE)
-# of directors
-par value of stock
-personal liability of shareholders
-initial purposes
-any other provisions
Authorized Shares
Issued vs. Outstanding shares
-Authorized= max # shares a corp. is permitted to sell
-Issued shares: # shares a corp. has actually sold [may be less than # authorized - so corp. can sell more shares w/o amending articles]
Outstanding=have not been reacquired or bought back by corp. [may be less than # issued]
Default Rules for Corp.'s
-Perpetual duration
-same powers as individual
-lawful purpose
If narrow purpose clause
i.e. purpose is "to sell motorcycles"
If corp. sells books, then state or shareholders may seek injunction (officers & directors are liable)
--this would be an ultra vires K == VALID BUT may be enjoined
Incorporator
can be any person or entity
-submits articles to DOS (corp. existence begins when article filed) - conclusive proof of de jure corp.
-holds organizational meeting to elect directors then incorporators or directors can adopt bylaws & elect officers, etc...
-must file annual report
De Jure Corporation Status
-separate entity (legal person)
-limited liability of shareholders (may lose capital investment; not personally liable for debts) better than GP
-Internal Affairs Rule: governed by law of state in which incorporated.
De Facto Corp.
requires state corporation statute; good faith attempt to comply with it & an act on corporation's behalf . . . business is treated as a corp. except in action by state
Corporation by Estoppel
one who deals w/ business as if it were a corp. may be estopped from arguing its not a corporation
Exception to De facto & estoppel
- if shareholders KNOW articles have not been filed, they are liable
By-Laws
-Not required for dejure corp.
-incorporator or board adopts initial by-laws, unless power reserved to shareholders in articles
-amendment: either board or shareholders may amend bylaws unless power reserved
-conflict: if by laws and articles conflict = ARTICLES CONTROL!
Preincorporation K's - by Promoter
Promoter: person acting on behalf of corp. before formation
-corp. not liable on pre inc. K's until it ADOPTS the K as its own, expressly or impliedly
-promoter remains liable at all times on preinc. K unless novation (agreement b/w corp. & 3d party that corp. substituting promoter)
-NO FIDUCIARY DUTY if sole shareholder @ time of transaction
Secret Profit Rule
-Promoter cannot make secret profit
(can make profit is DISCLOSED)
-if property acquired before becoming promoter - corp. can recover (price it paid - FMV)
-if property acquired AFTER becoming promoter - corp. can recover (price it paid - price promoter paid)
Foreign Corp.'s
-if doing business in florida (intrastate transactions on a regular basis) - then MUST BE QUALIFIED TO DO BUSINESS IN FL!
-qualifying = certificate of authority from DOS [info. from articles + good standing in home state]
Penalty for Transacting business if nonqualified foreign corp.
-subject to civil fines & cannot bring suit in FLORIDA, but CAN BE SUED!
Issuance of Stock
-issuance = when corp. sells its own stock
Subscriptions =
signed, written offer to buy stock from corp.
Revocability of Subscription
-depends when subscription executed
-Pre-Inc: irrevocable for 6 months unless provides otherwise or all subscribers consent
-Post-Inc." revocable until board accepts offer
Enforceability of Subscription
-once board accepts it!
-corp. may sue subscriber or sell shares to someone else if payment NOT made w/in 20 days
Consideration for issuance of stock
-any tangible or intangible property or benefit to the corp. is sufficient
Amount of Consideration
-only important if shares have "par value"
-PAR VALUE = to protect corp.'s creditors - NO MANDATORY PAR VALUE IN FLORIDA!! but corp. can still elect to have par value
Par Value
MINIMUM ISSUANCE PRICE (NOT FMV)
-stated capital = total par value for issued shares
-capital surplus = surplus profit generated by issuance of shares
Paying for Par Value with Property
-as long as the property is worth the minimum par value
-board must determine that consideration is ADEQUATE - need not assign a dollar value; once consideration received, shares are considered fully paid and non assessable
Watered Stock
-paying less than par value for shares
-can recover water from original purchaser of watered stock and from directors ONLY IF directors knew property was worth less than par value
-SUBSEQUENT BFP NOT LIABLE FOR WATERED STOCK!
Treasury Shares
par value shares reacquired by a corp.
-can cancel or resell them w/o regard to par value since resale is NOT considered issuance
Preemptive Rights
-let an existing shareholder maintain her % of ownership interest by buying stock when new stock is issued
-LIMITED AVAILABILITY - available ONLY IF
1. articles provides preemptive rts
2. issuance is for cash
3. corp. has been in existence for at least 6 months
4. shareholder owns common stock
Directors
-Statutory reqmt's:
1. One or more natural persons 18yo
2. Election: shareholders elect directors @ annual meeting
3. Removal: w/ or w/o cause unless articles say may be removed only for cause - but director elected by particular class of shareholders may be removed only by that class.
4. Vacancies: either directors or shareholders fill vacancy on board
5. Meetings
Board of Directors Meetings
-REQUIRED unless all directors consent in writing
-Notice of regular meeting not required, TWO DAYS NOTICE FOR special meeting
-Quorum
-Voting
Quorum
-MAJORITY OF DIRECTORS ON BOARD unless:
-greater # req'd in articles or bylaws
-lesser # in articles (minimum 1/3)
-ALWAYS CHECK FOR QUORUM WHEN VOTE TAKEN (director can break quorum)
Voting:
-only need majority vote of directors PRESENT to pass resolution unless:
-greater # if bylaws or articles provide
-i.e. 8 of 15 directors present - need 5 for majority vote
Voting By Proxy or Agreement
-directors CANNOT vote by proxy or agreement
Role of Directors (and delegation to committees)
Management: manage business
Delegation: delegate management functions to committee; but committee cannot amend bylaws, fill vacancies or authorize issuance, sale or reacquisition of shares except w/in limits specified by board
Directors' Duty of Care
-ordinarily prudent person under similar circumstances
-Nonfeasance: does nothing - not liable bc hard to show doing nothing caused harm
-Misfeasance: does something causing loss - protected by business rule prob not liable
Directors' Duty of Loyalty
-must act in GOOD FAITH and with reasonable belief that what she does is in CORP.'S BEST INTEREST
Interested Director Transaction
-deal b/w corp. & one of its directors or directors close relative or another business of director
-can be set aside UNLESS director shows:
1. fair to the corp. OR
2. approved after full disclosure of conflict by maj. of all disinterested directors or a maj. of disinterested shares
3. interested director can vote but doesn't count!
Competing Venture
NOT GOOD - unless board permits
Corporate Opportunity
-Director cannot usurp a "corporate opportunity" for himself
-must present opportunity to board and give them chance to turn it down
REMEDY: if director still has property, MUST SELL IT TO CORP. AT HIS COST! If already sold for profit, CORP. GETS PROFIT
Other State Law Bases of Director Liability
1. Ultra Vires - outside scope of purpose (liable for losses caused by director)
2. Loans to directors allowed if board reas. expects corp. to benefit (Treated as Interested Director Transaction)
3. Liability - director who is present is presumed to concur w/board action unless objects to holding meeting or votes against or abstains from action (ABSENT DIRECTORS NOT LIABLE)
4. Defense: directors can rely in good faith
Limit on Director Liability for Breach of Fiduciary Duty *** VERY UNIQUE
MANDATORY IMMUNITY FROM LIABILITY
-available even against 3d parties
-not automatically liable for for damages for breaching duty of care or loyalty
-liable only if also violated criminal law; received improper personal benefit; authorized unlawful dividend; or engaged in reckless or willful misconduct.
Officers
Same duty of care and loyalty as directors
-Corporate Agents
-no particular officers req'd - can hold multiple offices
-Selected and removed by directors
-liable to director for breach of K if remove before K over
Sarbanes-Oxley Act
-"S-OX"
-CEO & CFO must certify reports filed with SEC fairly represent the corp.'s financial position (civil + criminal penalties) imposed for willfully certifying an untrue report
Indemnification of Directors & Officers
-person sued for acting in capacity as officer or director seeks reimbursement from corp. for costs, attorneys fees, a judgment and/or settlement.
-INDEMNIFICATION PROHIBITED IF: director held liable to corp. or received improper benefit or violated crim. law
Mandatory Indemnification
If director wholly unsuccessful on the merits or otherwise
Permissive Indemnification
1. Corp. permitted to indemnify director for anything else (i.e. settlement)
2. Director must show acted in good faith + reas. belief that actions were in company's best interests
3. Disinterested directors, shareholders, committee or independent legal counsel determine eligibility
Judicial Discretion
-court can order indemnification if it feels its equitable to do so.
Shareholder Liability
-not liable for debts
-PCV (pierce corporate veil) to hold personally liable to avoid "FRAUD OR IMPROPER CONDUCT"
Alter Ego Liability
-If shareholder commingles personal & private funds
-fact driven analysis
Gross Undercapitalization
1) gross undercapitalization when corp. formed;
2) no insurance though business is extremely dangerous
(i.e. haul nuclear waste and no insurance)
Deep Rock Doctrine
EQUITABLE SUBORDINATION
-inside/outside creditors are treated on par
-court can subordinate shareholder claims against corp. if corp. is too thinly capitalized
-PAY OFF CREDITORS, then shareholders with any $$ left that they loaned corp.
Shareholder management
-can eliminate board & run corp. via unanimous shareholder agreement if 100 or fewer shareholders (& shares not publicly traded)
-managing shareholders have SAME FIDUCIARY DUTIES AS DIRECTORS
Shareholder Derivative Suits=
shareholder sues to enforce rights of the corp. . . if corp. could have brought suit its probably a derivative suit
Recovery in shareholder derivative suit
goes to corporation; however successful P receives attorneys fees & expenses
Requirements for Shareholders Derivative Suit
1. Contemporaneous Ownership: shareholder must have owned stock when claim AROSE or acquired it by operation of law (divorce or inheritance) from someone who did, AND continue to own throughout lawsuit
2. Demand: always make demand on board that corp. bring suit
3. Dismissal
4. Expenses
Dismissal of Shareholders Derivative Suit
-disinterested directors or disinterested committee can move to dismiss derivative suit if find after REASONABLE INVESTIGATION it is not in corp.'s best interests
-CORP. has BURDEN OF SHOWING independence & good faith
Expenses of Derivative Suits
-Judge may require P to pay for D's reasonable expenses if it finds suit commenced w/o reasonable cause
Joinder in derivative suit
-corp. joined & becomes nominal D
Alter Ego Liability
-If shareholder commingles personal & private funds
-fact driven analysis
Gross Undercapitalization
1) gross undercapitalization when corp. formed;
2) no insurance though business is extremely dangerous
(i.e. haul nuclear waste and no insurance)
Deep Rock Doctrine
EQUITABLE SUBORDINATION
-inside/outside creditors are treated on par
-court can subordinate shareholder claims against corp. if corp. is too thinly capitalized
-PAY OFF CREDITORS, then shareholders with any $$ left that they loaned corp.
Shareholder management
-can eliminate board & run corp. via unanimous shareholder agreement if 100 or fewer shareholders (& shares not publicly traded)
-managing shareholders have SAME FIDUCIARY DUTIES AS DIRECTORS
Shareholder Derivative Suits=
shareholder sues to enforce rights of the corp. . . if corp. could have brought suit its probably a derivative suit
Recovery in shareholder derivative suit
goes to corporation; however successful P receives attorneys fees & expenses
Requirements for Shareholders Derivative Suit
1. Contemporaneous Ownership: shareholder must have owned stock when claim AROSE or acquired it by operation of law (divorce or inheritance) from someone who did, AND continue to own throughout lawsuit
2. Demand: always make demand on board that corp. bring suit
3. Dismissal
4. Expenses
Dismissal of Shareholders Derivative Suit
-disinterested directors or disinterested committee can move to dismiss derivative suit if find after REASONABLE INVESTIGATION it is not in corp.'s best interests
-CORP. has BURDEN OF SHOWING independence & good faith
Expenses of Derivative Suits
-Judge may require P to pay for D's reasonable expenses if it finds suit commenced w/o reasonable cause
Joinder in derivative suit
-corp. joined & becomes nominal D
Alter Ego Liability
-If shareholder commingles personal & private funds
-fact driven analysis
Gross Undercapitalization
1) gross undercapitalization when corp. formed;
2) no insurance though business is extremely dangerous
(i.e. haul nuclear waste and no insurance)
Deep Rock Doctrine
EQUITABLE SUBORDINATION
-inside/outside creditors are treated on par
-court can subordinate shareholder claims against corp. if corp. is too thinly capitalized
-PAY OFF CREDITORS, then shareholders with any $$ left that they loaned corp.
Shareholder management
-can eliminate board & run corp. via unanimous shareholder agreement if 100 or fewer shareholders (& shares not publicly traded)
-managing shareholders have SAME FIDUCIARY DUTIES AS DIRECTORS
Shareholder Derivative Suits=
shareholder sues to enforce rights of the corp. . . if corp. could have brought suit its probably a derivative suit
Recovery in shareholder derivative suit
goes to corporation; however successful P receives attorneys fees & expenses
Requirements for Shareholders Derivative Suit
1. Contemporaneous Ownership: shareholder must have owned stock when claim AROSE or acquired it by operation of law (divorce or inheritance) from someone who did, AND continue to own throughout lawsuit
2. Demand: always make demand on board that corp. bring suit
3. Dismissal
4. Expenses
Dismissal of Shareholders Derivative Suit
-disinterested directors or disinterested committee can move to dismiss derivative suit if find after REASONABLE INVESTIGATION it is not in corp.'s best interests
-CORP. has BURDEN OF SHOWING independence & good faith
Expenses of Derivative Suits
-Judge may require P to pay for D's reasonable expenses if it finds suit commenced w/o reasonable cause
Joinder in derivative suit
-corp. joined & becomes nominal D
Alter Ego Liability
-If shareholder commingles personal & private funds
-fact driven analysis
Gross Undercapitalization
1) gross undercapitalization when corp. formed;
2) no insurance though business is extremely dangerous
(i.e. haul nuclear waste and no insurance)
Deep Rock Doctrine
EQUITABLE SUBORDINATION
-inside/outside creditors are treated on par
-court can subordinate shareholder claims against corp. if corp. is too thinly capitalized
-PAY OFF CREDITORS, then shareholders with any $$ left that they loaned corp.
Shareholder management
-can eliminate board & run corp. via unanimous shareholder agreement if 100 or fewer shareholders (& shares not publicly traded)
-managing shareholders have SAME FIDUCIARY DUTIES AS DIRECTORS
Shareholder Derivative Suits=
shareholder sues to enforce rights of the corp. . . if corp. could have brought suit its probably a derivative suit
Recovery in shareholder derivative suit
goes to corporation; however successful P receives attorneys fees & expenses
Requirements for Shareholders Derivative Suit
1. Contemporaneous Ownership: shareholder must have owned stock when claim AROSE or acquired it by operation of law (divorce or inheritance) from someone who did, AND continue to own throughout lawsuit
2. Demand: always make demand on board that corp. bring suit
3. Dismissal
4. Expenses
Dismissal of Shareholders Derivative Suit
-disinterested directors or disinterested committee can move to dismiss derivative suit if find after REASONABLE INVESTIGATION it is not in corp.'s best interests
-CORP. has BURDEN OF SHOWING independence & good faith
Expenses of Derivative Suits
-Judge may require P to pay for D's reasonable expenses if it finds suit commenced w/o reasonable cause
Joinder in derivative suit
-corp. joined & becomes nominal D
Alter Ego Liability
-If shareholder commingles personal & private funds
-fact driven analysis
Gross Undercapitalization
1) gross undercapitalization when corp. formed;
2) no insurance though business is extremely dangerous
(i.e. haul nuclear waste and no insurance)
Deep Rock Doctrine
EQUITABLE SUBORDINATION
-inside/outside creditors are treated on par
-court can subordinate shareholder claims against corp. if corp. is too thinly capitalized
-PAY OFF CREDITORS, then shareholders with any $$ left that they loaned corp.
Shareholder management
-can eliminate board & run corp. via unanimous shareholder agreement if 100 or fewer shareholders (& shares not publicly traded)
-managing shareholders have SAME FIDUCIARY DUTIES AS DIRECTORS
Shareholder Derivative Suits=
shareholder sues to enforce rights of the corp. . . if corp. could have brought suit its probably a derivative suit
Recovery in shareholder derivative suit
goes to corporation; however successful P receives attorneys fees & expenses
Requirements for Shareholders Derivative Suit
1. Contemporaneous Ownership: shareholder must have owned stock when claim AROSE or acquired it by operation of law (divorce or inheritance) from someone who did, AND continue to own throughout lawsuit
2. Demand: always make demand on board that corp. bring suit
3. Dismissal
4. Expenses
Dismissal of Shareholders Derivative Suit
-disinterested directors or disinterested committee can move to dismiss derivative suit if find after REASONABLE INVESTIGATION it is not in corp.'s best interests
-CORP. has BURDEN OF SHOWING independence & good faith
Expenses of Derivative Suits
-Judge may require P to pay for D's reasonable expenses if it finds suit commenced w/o reasonable cause
Joinder in derivative suit
-corp. joined & becomes nominal D
Who is entitled to vote?
whoever owns stock at the record date
-cannot be more than 70 days before a meeting; if not set, it is close of business on day before 1st notice of meeting is delivered to s/h
Can s/h vote by proxy?
Yes
-must send corp.'s secretary a signed writing authorizing the other person to vote the shares
How long is a proxy good for?
11 months unless stated otherwise
Are proxies revocable?
Yes; unless proxy holder has hi own interest in the corp.
What are the reqs for a voting trust?
1. written agreement controlling how shares will be voted;
2. must file copy with the corp.
3. must transfer legal title of shares to the voting trustee - has irrevocable rt to vote shares
4. s/h exchange their shares for trust certificates but retain all s/h rts - except rt to vote
What are reqs for voting agreement?
All you need is a signed written agreement
How many s/h needed to pass a plan w/o a meeting?
written consent from minimum # of shares needed to take action at a meeting where all shares entitled to vote on it are present & voting
how much notice is needed for s/h meeting?
written notice to every s/h entitled to vote no fewer than 10 days no more than 60 days before meeting date
-action taken at meeting called w/o proper notice is void UNLESS waived in signed writing or by attending meeting w/o objection
what is quorum for s/h meeting?
A majority of outstanding shares represented @ the meeting - taken at start of meeting; not each time vote is taken (can't be broken)
How many votes needed to pass resolution (NOT electing directors)?
Votes cast FOR it more than votes cast against it (unless articles require a greater # of aff. votes)
A director is elected by a plurality? true or false
True - top vote getters are elected whether they got a majority or not
How does s/h cumulate votes?
# of shares he owns x # of directors to be elected
How many shares needed to elect director w/ cumulative voting?
1 director must have > S/(D+1) shares
S = # of shares voting
D = # of directors to be elected at that meeting
Is there a rt to cumulate voting?
No - no rt unless provided for in the articles
When will stock transfer restriction be upheld? (i.e. right of first refusal, prohibition on selling to particular party, right of corp. to approve sale, etc.)
Action Against Seller? -[look at validity of restriction] reasonable under circumstances which means not an undue restraint on alienation
Action Against Buyer? -[look @ buyer's knowledge or notice] only if restriction was CONSPICUOUSLY NOTED or the transferee actually knew
Who can demand access to corp. books & records?
Any S/H
What must s/h do to inspect the books?
-written demand at least 5 days in advance stating proper purpose - can be hostile to management but CANT use it for personal reasons
Inspecting books - when is proper purpose not needed?
1. articles
2. bylaws
3. board resolutions creating classes of shares
4. minutes of s/h meetings
5. written comm. to s/h for last 3 yrs
6. list of current directors
7. most recent annual report
What is a distribution?
Payment to s/h in respect of shares (DISCRETIONARY - determined by board)
court won't compel unless abuse of discretion
Which s/h get dividends?
1. preferred paid first, (doesn't mean paid more)
2. common s/h divide outstanding stock
3. participating preferred = paid first AND again
4. cumulative part.preferred - pay them for years outstanding (carried forward if not paid)
Tests for Distribution eligibility:
-protect creditors against excessive distributions to s/h
-INSOLVENCY TEST: corp will be able to pay its debts as they become due
-BALANCE SHEET TEST: assets will be = to or > than total liabilities + dissolution preferences
If corp. gives its s/h more of its own stock is this distribution?
NO - not subject to insolvency or balance sheet tests
Who is liable for unlawful distributions?
Directors + s/h who knew distribution was unlawful when they received it
-remember defense of good faith reliance for Directors
Non profit cannot distribute income or profit to its members, directors or officers
TRUE - may not pay dividends; may pay out reas. salaries, rent, etc.
Articles of a non profit corp. must also set forth its purpose
True - can be organized for any purpose except pecuniary gain
How many directors does non profit need?
At least 3
How is non profit dissolved? How are its assets distributed?
By majority vote of the board + members
-assets must be transferred to another org. doing substantially the same work
What are fundamental corporate changes that require board resolution + s/h approval?
1. dissolution
2. merger + share exchanges
3. sale of all or substantially all corp.'s assets outside ordinary course of business
4. amendment of articles
What are appraisal rts? What situations trigger them?
A dissenting s/h may have right to force corp. to buy shares back at their fair value.
1. merger or share exchange
2. transfer of substantially ALL the corp.'s assets other than in the usual course of business -- first two are very limited
3. amending articles to adversely affect s/h (before 10.1.03)
Limitations on Appraisal Rts?
Not available if stock is publicly traded or has a market value of at least $10 million + 2,000 or more s/h
-a market = no need for appraisal
How does shareholder perfect rt of appraisal?
-filing notice of objection + intent to demand payment AND
-abstaining or voting against the proposed change AND
-depositing shares + executing an appraisal form after the vote
-court can appoint appraiser if corp. & s/h can't agree to a fair value of s/h shares
When amending the articles, what are reqs and how do appraisal rts work?
Reqs: 1. board approval AND 2. s/h approval;
-appraisal rights - for s/h whose voting and/or distribution rts adversely affected (but only for shares prescribed in articles before 10.1.03)
Reqs for a Merger?
1. board approval from both corporations
2. s/h approval from both corporations - ABSOLUTE majority of all shares entitled to vote
EXCEPTION: no s/h approval reqd for short form merger (if 80% or more owned subsidiary merged into parent or another sub)
Appraisal Rts for a Merger?
-available but for short form merger, only s/h of subsidiary have appraisal rts.
Successor Liability after Merger
-surviving company succeeds to all rights & liability of constituent corp.'s
Reqs for Sale of all Assets?
-fundamental corp. change for selling corp. only
1. approval by board
2. approval by selling corp.'s s/h - ABSOLUTE MAJORITY
-appraisal rts for s/h of selling corp.
How does corp. voluntarily dissolve?
1. board resolution recommending dissolution & shareholder approval by absolute majority OR
2. written consent of absolute majority of shares
How is corp. involuntarily dissolved?
by court order [completely discretionary]
1. s/h can petition ct to dissolve IF:
-director deadlock
-s/h deadlock
-waste of corporate assets <35 s/h
-fraud or illegal conduct by directors <35 s/h
2. creditor can petition if co. is insolvent + either she has an unsatisfied judgment against it or corp. acknowledges debt
Winding Up
1. convert all assets to cash,
2. pay off creditors,
3. distribute rest to s/h pro-rata by share unless there's a dissolution preference
How does corp. resolve unknown claims when dissolving?
File notice of dissolution with DOS or publish notice once a week for 2 weeks in newspaper where principal office is located or where it owns real or personal property
-creditor must file w/in 4 years or barred - if the $ is gone, can collect from $$ distributed to s/h's
Federal Securities Law:
What is rule 10b-5
Targets deceitful behavior
-in interstate commerce (phone, mail, national exchange)
Types of Transactions covered by 10b-5
1. misrepresentation of material info.
2. non-disclosure of material inside info. when duty to disclose exists
3. tipping -passing along material inside info. for wrongful purpose
Possible P's
-SEC
-Private action for damages by buyer or seller of securities ** must buy or sell stock not just hold on to it
Possible D's (anyone!!)
-corp. that issues misleading press release
-buyer or seller of securities who misrepresents info.
-buyer or seller who fails to disclose where duty to disclose
-tipper OR tippee BOTH!!
Scienter in 10b-5 action
D must have intent to deceive, misrepresent, manipulate, defraud [recklessness enough - but negligence NOT!!]
What is 16b
-covers speculation by directors, officers & 10% s/h's
-lets corp. recover "short swing profits" gained by certain insiders from buying & selling its stock w/in a 6 month period (bad for market confidence0
To what corp.'s does 16b apply?
1. listed on nat'l exchange
OR
2. at least 500 record s/h + more than $10 million in assets
Who is potential Defendant? for what transaction?
1. officers, directors, or 10% s/h (either when bought or sold.
2. transaction = buying & selling stock w/in single 6 month period (order doesn't atter)
Note: neither fraud nor inside info. is required.