Corporations
What do we call the owners of a corporation?
Shareholders
Is a director an agent of a corporation?
No.
Does a merger require approval from both the Board of Directors and the shareholders?
Yes.
A partnership can end through dissolution or dissociation. What is the difference?
What do we call the owners of an LLC?
Members
Who appoints the officers of a corporation?
Directors (Board of Directors)
Is a majority shareholder an agent of a corporation?
No.
What is a minority discount?
A minority discount is a reduction in the value of the stock owned by minority shareholders, based on the theory that non-controlling shares of stock are not worth their proportionate share of the company's value because they lack voting power to control corporate actions.
After formation of the partnership, Todos acquires new tables and chairs. Are these partnership property?
Yes. The hypo says “Todos acquired” them. All property acquired by a partnership becomes partnership property.
What is the name of the document that needs to be filed with the State to create an LLC in DE and in other states?
articles of organization or certificate of formation (DE)
Which ones have fiduciary duties: directors, officers, or shareholders (or multiple of these)?
Directors and Officers
P, the owner of two retail stores, employs C to serve as credit manager. P has orally given C the authority to review and approve requests from customers for the extension of credit. C reviews the application of Y and approves him for the extension of credit. Did C have authority and if so, what kind?
Yes; actual express authority
What is a marketability discount?
The reduction in a company's value because a vigorous market for the firm's shares is not available (lack of liquidity). Many shareholders value having an easy means to sell their shares, and they are willing to pay for it. Accordingly, if a private corporation goes public, so that a public market for corporation's stock now exists, the value of the corporation's stock often increases approximately 20% simply because of this.
Your client, First Bank, is making a loan to the Emory Family Practice Partnership. Is there any reason to require partners, Doctors Freer and Shepherd, to sign personal guarantees?
Yes, it makes the partners liable if the partnership were not able to pay the loan back; A judgment creditor of a partner may not levy execution against the assets of the partner to satisfy a judgement based on a claim against the partnership unless the partner is PERSONALLY LIABLE and: … (3) the partner has agreed that the creditor need not exhaust partnership assets, (4) a court grants permission based on equitable concerns (e.g. partnership assets are clearly insufficient, exhaustion of partnership assets is excessively burdensome or….(5) liability is imposed on the partner by law or contract independent of the existence of the partnership (307(d) RUPA)
LLCS offer protection that mirror two other business formations: what are those protections along with their business forms?
LLCS were developed to provide both the protection of limited liability of a corporation and the protection from double taxation of a partnership
What are the three main characteristics of a close corporation?
1. it has few shareholders
2. its stock is not publicly traded
3. the shareholders often participate in managing the corporation
P directs A to sell goods by auction at a time and place at which, as P and A know, a statute forbids anyone but a licensed auctioneer to conduct sales by auction. A employs a licensed auctioneer. Did A have authority and if so, what kind?
Is it possible to have a merger between 3 different business entities: for example, a corporation, an LLC and a partnership?
Acme, Baker and Carr form a law firm, Acme & Baker LLP. Parker, who is Carr’s client, sues Carr for malpractice and wins a $500,000. Can Parker collect that judgment from Carr? From Acme & Baker, LLP? From Acme?
Yes, could take from Carr because he is a tortfeasor – can always take from him;
No from the LLP;
No from Acme because Acme is not liable for torts of his partner (exactly why we invented LLP)
Your client C is about to contract with a business structured as a limited liability company. How does C know whether the company is member-managed or manager-managed? Does C need to know? Does DE require that such information be provided in the certificate of formation?
C would only know by asking. In some states, but not DE, information about how the firm is managed must be set out in the formation documents which are publicly filed.
How many directors can serve on the board? Where is the number of directors set?
The law doesn’t state a minimum; but under MBCA and DE, the board consists of more than one director; set in the bylaws
The president/CEO of a XYZ Corporation, in that capacity, signs a contract that obligates XYZ Corporation to buy ordinary office supplies from TP LLC. Does the CEO have authority and if so, what kind?
Yes; Apparent authority by title/position
Does a merger require approval by the shareholders of both the surviving entity (buyer) and the disappearing entity (seller)?
Not always. Seller's approval is always required, though. Buyer's approval is not always required.
In MAS Associates LLC v. Korotki, three companies wanted to merge into one but they never signed an official merger agreement. Instead ,they followed one de facto.
One man tried to retire and uphold the retirement part of the agreement, but the other companies refused to uphold it because an official merger was never signed so they were not officially partners.
The Court found they WERE partners so had to uphold giving the third retiring man his portion of the partnership when he retired. What test did the Court use (specifically, what two factors does the Court look for when deciding if there is a partnership?)
Test: the existence of a partnership will not be presumed. “Even where there exists no written agreement, this Court could still find an intention to create a partnership, if there is profit sharing and community of interest in the business.”
What are the three requirements/formalities needed to start a business as an LLC?
1. Name of the LLC (must include "LLC" or "limited liability company" in the name)
2. name and address of registered agent (must be located in DE)
3. name and signature of the authorized person to file for the LLC