Merger and Shareholder Protection
If a minority shareholder sues a director for breach of duty of loyalty, what remedies does a minority shareholder have?
A controlling shareholder who is also a director on both sides of a freeze out merger must show that the merger is for the advancement of a legitimate corporate purpose and is fair based on the totality of the circumstances.
Who owns what in a LP?
Partnership property - property acquired by a partnership is property of the partnership and not the partners individually.
Partner's Separate property- property acquired in the name of the partner and with their assets without an indication of a transfer of title is separate property.
A limited partner may not withdraw from a limited partnership prior to the dissolution or the winding up of the partnership. Unless a partnership agreement says otherwise, a limited partner may not dissociate from a limited partnership prior to the dissolution and winding up of the partnership.
Do members need to sign each provision in an LLC?
No, the court in ELF case stated that since an LLC is a separate entity, the provisions in the operating agreement govern the acts of the agreement irrespective of the approval of the members.
What is LLC's liability to Creditors and what role does agency play here?
Since an LLC is an entity, it can incur debts from the actions and inactions of its managers or its members, thus the managers/members are agents of the LLC and can bind the LLC.
However, members have no liability to LLC creditors unless the member's incurred personal liability from their own tortious conduct.
What is a freeze-out merger?
A freeze-out merger is where majority shareholders of the corporation remove all minority shareholders.
Who decides what a limited partnership will do?
The partnership agreement.
What is the difference between a Limited partnership and a Limited Liability Partnership?
LIMITED PARTNERSHIP
Limited Liability Partnerships
1. All partners are general partners.2. All general partners are protected from liability to creditor of the limited partnership.
Can members bring a derivative suit on behalf of an LLC?
Yes. Delaware courts have said that a member or an assignee of an LLC interest may bring an action in the right of the LLC to recover a judgment in its favor if:
1. The managers/members with authority have refused to bring suit or
2. An effort to make the LLC's managers or members bring the action is unlikely to succeed.
Is a capital-call provision in an LLC operating agreement equivalent to additional capital contribution that is needed to satisfy a judgment?
No. A capital-call provision's purpose in an LLC's operating agreement is to define the capital contribution of each member in order to keep the LLC running. However, when a judgment has been executed against an LLC, there is no liability placed on the members because an LLC is its own entity.
What effect does the sale of assets have on the creditors of the selling corporation?
GR: when a corporation sells or transfers all of its assets to another corporation, the purchaser is not liable for the debts and liabilities of the seller unless: (1) the purchaser agrees; (2) the transaction amounts to a merger; (3) the purchaser is merely a continuation of the seller; or (4) the transaction was entered into fraudulently to avoid debts.
Who is Liable for the debts of the LP?
General partners in a LP have the same liability exposure as partners in a partnership. A limited partnership agreement like a partnership agreement cannot eliminate or limit the rights of third parties.
What is an LLC?
Who decides how an LLC is run?
The owners of an LLC decide the form of management: (1) member-managed or (2) manager-managed company.
Manager (Board of directors)
Members (Partnership)
What is reverse piercing.
Members are shielded from personal liability of a LLC's debts/liabilities/obligations, UNLESS they avail themselves to the factors that would deem them as ONE with the LLC.
Reverse piercing is when the creditor brings an action against an LLC and the sole owner of the LLC is held personally liable because the LLC is the alter ego of the sole member.
What is a limited partnership and how does it work?
What duties do GP owe to the Limited Partnership and the Limited Partners?
GP (of LP) owes duty to the LP and its partners.
An officer/director of a corp that is a GP is a personally liable to the limited partner and the partnership.
What is LLC Law?
LLC law vary from state to state. However courts look at the operation agreement when an issue is brought in court. The operation agreement governs the members, the rights and duties of a manager, and the activities and affairs that the company can engage in, and how the operating agreement can be mended.
Does the implied covenant of good faith + fair dealing allow a court to choose between competing business judgment?
No, because LLC are creatures of K and not the state, the court won't substitute its business judgment over that of the members.
Can a LLC operating agreement create or eliminate fiduciary duties?
Under Delaware law, an LLC's operating agreement can create or eliminate fiduciary duties, unlike articles of incorporation. Also, the court will not use the implied covenant of good faith and fair dealings in claims where the operating agreement is clear and complete on the subject at issue.
How do LP come into existence?
LP come into existence when there has been a public filing usually with the Secretary of State of the state of organization.
Can a Limited/General partner sell their interest in a limited partnership?
How is an LLC formed?
An LLC must file a certificate of formation with the state. The operating doesn't need to be filed because it is not required, but highly recommended.
Can a LLC agreement, expand, restrict, or eliminate the fiduciary duties of its members?
Yes, under Delaware law, an LLC operating agreement can eliminate the members' fiduciary duties.
Can a transferee of an LLC become a member?
Can a member resign from a LLC prior to dissolution and winding up of the company?
How can a LLC dissolve?
No, unless there is an affirmative vote or written consent of all the members. Thus, the assignee does not have managerial rights like seeking a statutory dissolution.
No, unless stated in the operating agreement.
A LLC can dissolve by: (1) vote of the shareholders; (2) occurrence of an event stated in the operating agreement: (3) judicial order.