BULE Chapter 14, 15 & 16

Laws Governing Franchising

Franchises are governed by contract law, occasionally by agency law, and by federal and state statuary and regulatory laws. Federal Trade Commission has regulations that require disclosure of material facts.

Pass-Through Entity

A business entity that has no tax liability. The entity's income is passed through the owners and the owners pay taxes on the income.

S Corporation

A closed business corporation that has met certain requirements set out in the internal revenue code and thus qualifies for special income tax treatment. It is taxed the same as a partnership, but its owners enjoy the privilege of limited liability. The corporation must: Be a domestic corporation. Not be a member of an affiliated group of corporations. Have only shareholders that are individuals, estates, or certain trusts. Most corporations, partnerships, and non-qualifying trusts cannot normally be shareholders. Have 100 or fewer shareholders. Have only one class of stock, although not all shareholders need have the same voting rights. Not have shareholders who are nonresident aliens.

E-Agent

A computer program that by electronic or other automated means can independently initiate an action or respond to electronic messages or data without review by an individual.

Classification of Corporations

A corporation is referred to as a domestic corporation within its home state (the state in which it incorporates). A corporation is referred to as a foreign corporation by any state that is not its home state. A corporation is referred to as an alien corporation if it originates in another country but does business in the United States.

Corporate Powers

A corporation may act and enter into contracts as any natural person, except as limited by: U.S. Constitution. State constitutions. State statutes. Its own articles of incorporation. Its own corporate bylaws. Resolutions by its own board.

Dividends

A distribution to corporate shareholders of corporate profits or income, disbursed in proportion to the number of shares held. Distribution of corporate profits or income. Only as ordered by the Board. Can be stock, cash, property, stock of other corporations. State laws control the sources of revenues for dividends, which may be paid from retained earnings, net profits and surplus.

Outside Director

A member of the board of directors who does not hold a management position at the corporation.

Inside Director

A member of the board of directors who is also an officer of the corporation.

Limited Partner

A partner who contributes capital to the partnership but has no rights to participate in the management and operation of the business. The partner assumes not liability for partnership debts beyond the capital contributed.

Member

A person who has an ownership interest in a limited liability company.

Disclosed Principal

A principal whose identity is known to a third party at the time the agent makes a contract with the third party.

Partially Disclosed Principal

A principal whose identity is unknown by a third party, but the third party knows that the agent is or may be acting for a principal at the time the agent and the third part form a contract.

Undisclosed Principal

A principal whose identity is unknown by a third person, and the third person has not knowledge that the agent is acting for a principal at the time the agent and the third person form a contract.

Notary Public

A public official authorized to attest to the authenticity of signatures.

Agency

A relationship between two parties in which one party (the agent) agrees to represent or act for the other (the principal).

Information Return

A tax return submitted by a partnership that only reports the income and losses earned by the business. The partnership as an entity does not pay taxes on the income received by the partnership.

Power of Attorney

A witten document, which is usually notarized, authorizing another to act as one's agent; can be special (permitting the agent to do specified acts only) or general (permitting the agent to transact all business for the principal).

Articles of Partnership

A written agreement that sets forth each partner's rights and obligations with respect to the partnership.

Corporate Officers and Executives

Officers serve at the pleasure of the Board of Directors but have fiduciary duties to company as well. Their employment relationships are generally governed by contract law and employment law. Officers may be terminated for cause. Officers and executives are hired by the board of directors. Act as agents for the corporation. Most states same person can be both officer and director. Officers are employees of the corporation and have fiduciary and loyalty duties.

First Organizational Meeting to Adopt Bylaws

After the corporation is "chartered" (created) it can do business. Shareholders should have the first organizational meeting to: approve the bylaws, elect directors, hire officers and adopt pre-incorporation contracts and activities.

Partnership

An agreement by two or more persons to carry on, as co-workers, a business for profit.

General Partner

An agreement by two or more persons to carry on, as co-workers, a business for profit. Created by express or implied agreement of the parties. Partners have right to Share profits and losses, Joint ownership of the business, Equal right to management. Entity vs. Aggregate Theory: not treated as an entity except for limited purposes. Partners have joint and several liability for partnership debts. A partnership does not have to pay taxes.

Agency by Agreement

An agreement that most agency relationships are based on and can be expressed or applied. It can take the form of an express written contract or be created by an oral agreement or an implied by a conduct.

Franchise

Any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark, trade name, or copyright, under specified conditions or limitations, in the selling of goods and services.

Liability for Torts and Crimes

Any person, including an agent, is liable for his or her own torts or crimes. In some situations, a principal may be held liable not only for the torts of an agent but also for the torts committed by an independent contractor. Principal's Tortious Conduct: an agent may be liable for harm resulting from the principal's own negligence or recklessness. A principal may be liable for giving improper instructions, authorizing the use of improper materials or tools, or establishing improper materials or tools, or establishing improper rules that results in the agent's committing a tort. Principal's Authorization of Agent's Tortious Conduct: A principal who authorizes an agent to commit a tort may be liable to persons or property injured thereby, because the act is considered to be the principal's. Liability for Agent's Misrepresentation: A principal is exposed to tort liability whenever a third person sustains a loss due to the agent's misrepresentation. Liability for Agent's Negligence: An agent is liable for his/her own torts. They can also be liable for harm of a third party (respondeat superior/ vicarious liability).

Fiduciary

As a noun, a person having a duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking. As an adjective, a relationship founded on trust and confidence.

Apparent Authority

Authority that is only apparent, not real. In agency law, a person may be deemed to have had the power to act as an agent for another party if the other party's manifestation to a third party led the third party to believe that an agency existed when, in fact, it did not.

Stock Certificate

Certificate which evidences ownership in a certain number of shares in the corporation given to person of record (regardless of who has certificate) gets notices, dividends & reports. Corporate ownership is intangible personal property. Some states allow uncertificated stock -- no tangible certificate.

Preemptive Rights

Common law concept which is a preference to existing shareholders to purchase a pro-rated share of newly-issued stock within a certain period of time. Provided for in the articles of incorporation. Significant in a close corporation to prevent dilution and loss of control.

Shareholder Voting

Common shareholder entitled to one vote per share.Articles and by-laws can exclude or limit voting rights of certain classes of stock.Quorum must be present -- shareholders representing more than 50% of outstanding shares must be present. Shareholders may vote on resolutions. Need majority present for most resolutions. Need a "super majority" (e.g., 67%) for important matters: sale of assets, etc. Voting lists by corporate secretary contains record of stock ownership. [Cut off date 70 days ahead of action (notice, dividends, etc..)] Cumulative Voting allows minority shareholders to get a board member elected.

Principal's Duties to the Agent

Compensation: When a principal requests certain services from an agent, the agent reasonably expects payment. The principal therefore has a duty to pay the agent for services rendered. Reimbursement and Indemnification: an agent disburses funds to fulfill the request of the principal or pay for necessary expenses in the course of reasonable performance of his or her agency duties, the principal has the duty to reimburse the agent for these payments. They cannot recover for expenses incurred through their own misconduct or negligence. Subject to the terms of the agency agreement, the principal has the duty to compensate, or indemnify, an agent for liabilities incurred because of authorized and lawful acts and transactions. Cooperation: A principal has a duty to cooperate with the agent and to assist the agent in performing her or his duties. It must do nothing to prevent such performance. It's an exclusive agency and cannot compete with the agent or appoint or allow another agent to so compete. Safe working conditions: Under the common law, a principal is required to provide safe working premises, equipment and conditions for all agents and employees.

Ultra Vires Doctrine

Corporate acts are beyond the express or implied powers of the corporation as stated in state statute or the corporation's own articles of incorporations and are considered to be "ultra vires" (beyond the powers). Corporate articles of incorporations now adopt very broad purposes to prevent lawsuits against the corporation. The Following remedies are available for ultra vires acts: Shareholders can bring action for corporation. Corporation can recover damages from its officers and directors. Attorney general of state may bring action to dissolve corporation for ultra vires acts.

The Limited Liability Of Shareholders

Corporate shareholders normally are not personally liable for the debts of the corporation. In certain situations, a court can pierce the corporate veil and impose liability on shareholders for the corporations obligations.

Commingle

Corporation is "alter ego" of majority shareholder and personal and corporate interest are commingled such that the corporation has no separate identity. Loans to the Corporation. Arms-length loans are permissible, officer loans in exchange for stock are carefully scrutinized.

Nonprofit Corporations

Corporations formed for purposes other than making a profit. Private hospitals, educational institutions, charities and religious organizations. It is a convenient form of organization that allows various groups to own property and to form contracts without exposing the individual members to personal liability.

Improper Incorporation

De Jure: substantial statutory requirements are met; cannot be attacked by state or 3rd parties. De Facto: statutory requirements not met, but promoters made good faith effort to comply with corporate law;corporate status can only be attacked by state. By Estoppel: if it acts like a corporation, cannot avoid liability by claiming that no corporation exists.

Determining the Scope of Employment

Determines whether a principal may be liable for the torts of agents under the doctrine of respondeat superior. Factors that the courts must consider: 1. whether the employee's act was authorized by the employer. 2. the time, place, and purpose of the act. 3. whether the act was one commonly performed by employees on behalf of their employers. 4. the extent to which the employer's interest was advanced by the act. 5. the extent to which the private interest of the employee were involved. 6. whether the employer furnished the means or instrumentality by which the injury was inflicted. 7. whether the employer had a reason to the the employee would do the act/knew they ever done it before. 8. whether the act involved the commission of a serious crime.

Duties and Liability of Directors and Officers

Directors have general responsibility for all management decisions: All major corporate policies. Appointment and removal of all corporate officers and their compensation. Financial decisions, including dividends and retained earnings.

Rights of Directors

Directors have the right to: Participate in corporate decisions and inspect corporate books and records. Compensation (usually a nominal sum) and indemnification. If a director is sued for acts as director, the corporation should guarantee reimbursement (indemnification) or purchase liability insurance to protect the board from personal liability.

Board of Directors' Meetings

Directors hold meetings pursuant to bylaws with recorded minutes. Special meetings may be called with sufficient notice. Meetings require QUORUM (minimum number of directors to conduct official corporate business, usually majority). Each director generally has one vote.

Duty of Care

Directors/officers are expected to act in good faith and the best interests of the corporation. Failure to exercise due care may subject individual directors or officers personally liable. Make informed and reasonable decisions; Rely on competent consultants and experts; and exercise reasonable supervision. A dissenting director is rarely held liable for mismanagement of corporation. Dissent must be registered with the corporate secretary and posted in the minutes of the meetings.

Types of Franchises

Distribution: A manufacturing concern (franchisor) licenses a dealer (franchisee) to sell its product. A distributorship covers an exclusive territory. Chain-Style Business Operation: A franchises operates under a franchisor's trade name and is identified as a member of a select group of dealers that engage in the franchisor's business. Manufacturing or Processing-Plant Agreement: The franchisor transmits to the franchisee the essential ingredients or formula to make a particular product.

Termination of the Franchise

Duration is determined by parties and contract.Usually termination is "for cause" such as the death or disability of franchisee, insolvency, etc. Wrongful Termination: Generally provisions are more favorable to franchisor because he owns the trademark. But federal and state laws do protect franchisees (good faith and fair dealing).

Defects in formation and corporate status

Errors in incorporation procedures when a 3rd party seeks to bring an action against a corporation that may not have complied perfectly with every incorporation law. Problematic for shareholders who may be personally liable. In addition, entity may not be able to enforce contracts.

Directors and Officers

Every corporation is governed by a board of directors that are elected by the shareholders. Individual directors are not agents of corporation, only the board itself can act as a "super-agent" and bind the corporation. A director can also be a shareholder, especially in closely-held corporations.

Committees of the Board of Directors

Executive Committee. Audit Committee. Nominating Committee. Compensation Committee. Litigation Committee.

Promotional Activities

Historically, there have been "pre-incorporation" contracts and investors by "promoters." Today, that is usually not the case because of the relative speed and ease of creating a corporation. However, remember that promoters are personally liable for all pre-corporate dealings until corporate formally creates a "novation."

Authorized Acts

If an agent acts within the scope of her or his authority, normally the principal is obligated to perform the contract regardless of whether the principal was disclosed, partially disclosed, or undisclosed. Whether the agent may also be held liable under the contract, however, depends on the disclosed, partially disclosed, or undisclosed status of the principal.

Business Judgement Rule

Immunizes a director or officer from liability from consequences of a business decision that turned sour. Court will not require directors or officers to manage "in hindsight." As long as decision was reasonable, informed, made in good faith and in the best interests of the corporation, BJR will apply.

Operating Agreement

In a limited liability company, an agreement in which the members set forth the details of how the business will be managed and operated. State statues typically give the members wide latitude in deciding for themselves the rules that will govern their organization. The LLC contain provisions for: Management, Voting, Transfer of membership interests, New or Deceased members, Member-Managed, or Manager-Managed.

Proxy

In corporate law, a written agreement between a stockholder and another party in which the stock holder authorizes the other party to vote the stockholders' shares in a certain manner.

Equal Dignity Rule

In most states, a rule stating that express authority given to an agent must be in writing if the contract to be made on behalf of the principal is required to be in writing.

Shareholders Powers

Includes approving all fundamental changes to the corporation: Amending articles of incorporation or bylaws. Approval of mergers or acquisition. Sale of all corporate assets or dissolution. Shareholders also elect and remove the board of directors.

Detour and a Frolic

Insight into the "scope of employment" from the case Joel v. Morison. In the case, an english court held that if a servant merely took a detour from his master's business, the master will be responsible. If the servant was on a frolic of his own and not in anyway on his masters business, the master will not be liable. Employee Travel Time: An employee going to and from work is considered outside the scope of employment but if they have a position like a traveling sales man and traveling is apart of the job, then it is within the scope of employment. Notice of Dangerous Conditions: The employer is charged with knowledge of any dangerous conditions discovered by an employee and pertinent to the employment situation.

Respondeat Superior

Latin for "let the master respond". A doctrine under which a principal or employer is held liable for the wrongful acts committed by agents or employees while acting within the course and scope of their agency or employment.

Vicarious Liability

Legal responsibility placed on one person for the acts of another; indirect liability imposed on a supervisory party (such as an employer) for the actions of a subordinate (such as an employee) because of the relationship between the two parties.

Agency by Ratification

On occasion, a person who is in fact not an agent (or who is an agent acting outside the scope of her or his authority) may make a contract on behalf of another (a principal). If the principal affirms that contract by word or by action, an agency relationship is created by ratification. Ratification involves a question of intent and intent can be expressed by either words or conduct.

Dissociation of LLC

Like in partnerships, occurs when a member ceases to be associated in the continuation of the business. An LLC member has the power, but perhaps not the right, to dissociate at any time. Under ULLCA, trigger events are similar to partnerships under UPA. Effects of Dissociation. Dissolution: Remaining members can opt to dissolve or continue the LLC.

Limited Partnerships

Must be formed in compliance with statutory requirements. A limited partnership consists of one or more general partners, who have unlimited liability for partnership losses, and one or more limited partners, who are liable only to the extent of their contributions. Only general partners can participate in management.

Shareholders Meetings

Notice and time of meetings must be sent in writing to each shareholder within a reasonable time ahead of the meeting. Notice must state reason for meeting and only deal with this matter.

Piercing the Corporate Veil

Occurs when a court, in the interest of justice or fairness," holds shareholders personally liable for corporate acts. Court concludes that shareholders used corporation as a "shield" from illegal activity. Factors a court considers: 3rd party tricked into dealing with a corporation rather than the individual. Corporation is set up never to make a profit or remain insolvent or is under capitalized. Statutory formalities are not followed.

Franchisor

One licensing another to used the owners trademark, trade name, or copyright in the selling of goods or services.

Franchisee

One receiving a license to use another's trademark, trademark, trade name, or copyright in the sale of goods and services.

Entrepreneur

One who initiates and assumes the financial risk of a new business enterprise and undertakes to provide or control its management.

Independent Contractor

One who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer. They are not an employee but may be an agent.

Franchising Contract

Ordinarily requires the franchisee (purchaser) to pay a price for the franchise license.Specifies the territory to be served by the franchisee's firm. May require the franchisee to purchase certain supplies from the franchisor at an established price. May require the franchisee to abide by certain standards of quality relating to the product or service offered but cannot set retail resale prices. Usually provides for the date and/or conditions of termination of the franchise arrangement. But federal and state statutes attempt to protect certain franchisees from franchisors who unfairly or arbitrarily terminate franchisees.

Shareholders

Ownership of shares grants an equitable ownership interest in a corporation. Shareholders generally have no right to manage the daily affairs of the corporation, but do so indirectly by electing directors. Shareholders are generally protected from personally liability by the corporate veil of limited liability.

Agent's Duties to the Principal

Performance: An implied condition in every agency contract is the agents agreement to use reasonable diligence and skill in performing the work. When an agent fails entirely to perform her or his duties, liability for breach of contract normally will result. Notification: An agent is required to notify the principal of all matters that come to her or his attention concerning the subject matter of the agency. This is the duty of notification or the duty to inform. The law assumes that the principal knows of any info acquired by the agent that is relevant to the agency-regardless of whether the agent actually passes on the ifo to the principal. Loyalty: The most fundamental duties in a fiduciary relationship. The agent has the duty to act solely for the benefit of his or her principal and not in the interest of the agent or third party. Obedience: When acting on behalf of the principal, and agent has a duty to follow all lawful and clearly stated instructions of the principal. Any deviation from such instructions is a violation of this duty. Accounting: Unless an agent and a principal agree otherwise, the agent has the duty to keep and make available to the principal an account of all property and funds received and paid out on behalf of the principal. This includes gifts from a third party in connection with the agency.

Agency by Estopel

Principal causes a third person to believe that another person is the principal's agent, and the third person deals with the supposed agent.

Public and Private Corporations

Public: One formed by the government to meet some political or government purpose. ex: U.S. postal service Private: created either wholly or in part for private benefits. Most corporations are private but may serve a public purpose, as a public electric or gas utility does, they are owned by private persons rather than by the government.

Incorporation Procedures

Securing Corporate Name: with secretary of state of incorporation. Internal Organization: usually included in the bylaws. Registered Office and Agent: specific person that will receive any legal notice and documents from state and/or 3rd parties. Incorporators (usually the promoter): at least one with name and address.

Duties and Liabilities of Shareholders

Shareholders are generally not liable for the contracts or torts of the corporation. If the corporation fails, shareholders cannot lose more than their investment, except when: A shareholder hasn't paid for stock pursuant to the subscription agreement. Shareholder buys "watered stock" which is below the stock's par value. Stock subscriptions are written irrevocable contracts to purchase capital stock of a corporation prior to incorporation. Failure to sell or buy shares is a breach of contract. Par-value shares: corporation must have a value equal to the total value of the shares. Watered stock: worth less than FMV of stock. Shareholder is personally liable for difference. Majority shareholders own enough shares to exercise de facto (actual) control over the corporation. Majority shareholders owe a fiduciary duty to corporation and the minority shareholders and creditors when they sell their shares because of the possibility of transfer of control.

Inspection Rights

Shareholders can inspect books for a proper purpose. But corporation can protect trade secrets, other confidential information. Shareholder must have held a minimum number of shares for a minimum amount of time. All shareholders can see list of other shareholders of record.

Shareholder's Derivative Suit

Shareholders can sue a 3rd party on behalf of the corporation if the Directors fail or refuse to correct the wrong or injury. Directors may refuse to take action because they might personally be liable. Any damages recovered go to corporation's treasury.

Rights of Dissolution

Shareholders have right to pro-rata share of assets upon liquidation. Shareholder may petition the court for dissolution of the corporation for following reasons: Board mishandling corporate assets. Board deadlocked and irreparable injury will result. Acts of directors are illegal, oppressive, or fraudulent. Shareholders are deadlocked for two meetings and can't elect directors.

Illegal Dividends

Shareholders must return this only if they knew that the dividends were illegal when the payment was received. The board of directors can be held liable for the amount of payment.

Transfer of Shares

Shares are freely transferable unless restricted by articles and noted on the stock certificate. Closely held corporations may have "right of first refusal" or preemptive rights. Transfer accomplished by delivery or endorsement to corporate secretary. New shareholder must be recorded on corporate books.

Limited Liability Partnerships

Similar to an LLC, but LLP's are designed for professionals. Major advantage of an LLP: pass-through tax entity but limits personal liability of partners. LLP's are creatures of state statute. Advantages of the LLP. Family Limited Liability Partnerships

Election of Directors

Subject to statutory limitations, the number of directors is set forth in the articles of incorporation: Directors appointed at the first organizational meeting. In closely held companies, directors are generally the incorporators and/or the shareholders. Term of office is generally for one year. Director can be removed for cause (for failing to perform a required duty). Compensation of Directors. Inside vs. Outside director.

Duty of Loyalty

Subordination of personal interests to the welfare of the corporation. No competition with Corporation. No "corporate opportunity." No conflict of interests. No insider trading. No transaction that is detrimental to minority shareholders.

Agency by Operation of Law

The absence of a formal agreement. This can occur with family members, such as a spouse taking a credit card and charges their spouse account. The courts will often rule that a spouse is liable to pay for the necessaries, either because of a social policy of promoting the general welfare of the spouse or because of a legal duty to supply necessaries to family members. This can be used in emergency situations, such as a railroad engineer may contact on behalf of her or his employer for medical care for an injured motorist hit by the train.

Buyout Price

The amount payable to a partner on his or her dissociation from a partnership, based on the amount distributable to that partner if the firm were wound up that date, and offset by any damages for wrongful dissociation.

Certification of Limited Partnership

The basic document filed with a designated state official by which a limited partnership is formed.

Corporate Formation

The corporation is a legal entity distinct from its owners. Formal statutory requirements, which vary somewhat from state to state, must be followed in forming a corporation. The corporation can have perpetual existence or be chartered for a specific period of time.

Torts and Criminal Acts

The corporation is liable for the torts committed by its agents or officers within the course and scope of their employment (under the doctrine of respondeat superior). In certain situations, corporate officers may be held personally liable for corporate crimes. In some circumstances, a corporation can be held liable (and be fined) for the criminal acts of its agents and employees.

Articles of Organization

The document filed with a designated state official by which a limited liability company is formed.

Articles of Incorporation

The document filed with the appropriate governmental agency, usually the secretary of state, when a business is incorporated. State statues usually prescribe what kind of information must be contained. The must include the name of the corporation, the number of shares the corporation is authorized issue, the name and address of the corporation's initial registered agent and the name and address of each incorporator.

Dissolution

The formal disbanding of a partnership or a corporation.

Quorum

The number of members of a decision-making body that must be present before business may be transacted.

Retained Earnings

The portion of a corporation's profits that has not been paid out as dividends to shareholders.

Winding Up

The second of two stages in the termination of a partnership or corporation. Once the firm is dissolved, it continues to exist legally until the process of winding up all business affairs is complete.

Personnel

The shareholder-owners elect directors, who set policy and hire officers to run the day-to-day business of the corporation.

Sole Proprietorship

The simplest form of business; used by anyone who does business without creating an organization. The owner is the business. The owner pays personal income taxes on all profits and is personally liable for all business debts.

Shareholders

To vote. To have a stock certificate. To purchase newly issued stock. To dividends, when declared by board. To inspect corporate records. To transfer shares, with some exceptions. To a proportionate share of corporate assets on dissolution. To file suit on behalf of corporation.

Stock Warrant

Transferable options to purchase newly-issued stock at a stated price. Warrants are publicly traded. Called "rights" when option is for a short period of time.

Management of LLC

Two Options of Member managed (equal rights) or Manager-managed (typical "President"). Unless operating agreement says otherwise, member-management is presumed. Members can designate voting powers and rights in operating agreement.

Closed Corporation

Typically a small corporation whose shares are held by family or relatively few persons. No trading market for shareholders. In practice, operated like a partnership. Substantial flexibility. Shareholders are generally officers and board members.

Directors' failure to declare a dividend

When directors fail to declare a dividend, shareholders can sue. Directors do not have to declare if they have a rational basis for withholding a dividend (a bona fide purpose). Often, profits are retained for expansion, research or upgrades.

Limited Liability Company

a hybrid form of business organization that offers the limited liability feature of corporations but the tax benefits of partnerships. Unlike limited partners, LLC members participate in management via the operating agreement. are formed under state law by filing Articles of Organization. Some states require at least 2 owners.

Bylaw

a set of governing rules adopted by a corporation or other association.

Corporation

formed in compliance with statutory requirements, is a legal entity separate and distinct from its owners, and can have perpetual existence. It is a legal "person" under state and federal law. Corporation has right to: Due process, Equal protection, Speech, Access to Courts, Freedom from unreasonable search and seizure. Does not have 5th amendment right to remain silent.

Disclosure of Potential conflicts of Interests

full disclosure of any potential conflicts of interest and abstain from voting on any transaction that may benefit the director/officer personally. However, if transaction was fair and reasonable, it will not be voidable if approved by majority of disinterested directors.