BLAW II - Final (Ch. 34-44, 51)
actual notice vs. constructive notice
Notice given to third parties of dissolution of partnership who have dealt with the partnership, or have knowledge of it.
members
Owners of an LLC.
Objecting shareholders to a merger, short-form merger, share exchange, or sale or lease of the property of a corporation have the right
to dissent and receive payment of the fair value of their shares.
Termination-at-will clauses of franchises are held to be
void, as they are unconscionable.
close corporation
Not required to have a board of directors, bylaws, or keep track of minutes of meetings. Only corps with 50 or less shareholders.
security
(1) An interest or instrument that is common. (2) An interest or instrument that is expressly mentioned in securities acts; or (3) An investment contract -no significant effort on part of investor.
In a proxy contest, management must provide either
(1) a list of shareholders to the dissenting group, or (2) mail or make available electronically the proxy solicitation materials of the challenging group to the shareholders.
To obtain appraisal rights, a dissenting shareholder must
(1) deliver written notice of his intent to demand payment for shares before vote is taken and (2) not vote his shares in favor of the proposed action.
A shareholder has a right to have their shareholder resolution included in the corporation's proxy materials if it
(1) relates to the corporation's business (2) concerns a policy issue, and (3) does not concern the payment of dividends.
A sale or lease of assets requires
(1) the recommendation of the board of directors and (2) an affirmative vote of the majority of the shares of the selling or leasing corporation that are entitled to vote.
A merger or share exchange requires
(1) the recommendation of the board of directors of each corporation and (2) an affirmative vote of the majority of shares of each corporation that are entitled to vote. (Articles of incorporation may require supramajority.)
A shareholder may submit a shareholder resolution to be considered by other shareholders if
(1) the shareholder has owned at leasyt $2,000 worth of shares of the companies stock or 1 percent of all shares of the company (2) for at least one year prior to submitting the proposal.
order of distribution of assets in a limited partnership
1) creditors including partner-creditors 2) partners: unpaid distributions, capital contributions, remainder
rule making (of administrative agencies)
1) publish proposed rule 2) give interested parties opportunity to participate in the rule-making process 3)final / informal rule making 4) formal rule making with a trial-like hearing
A corporation''s amendment to the articles of incorporation must show that
1) the board of directors adopted a resolution recommending the amendment 2) the shareholders voted to approve
3 rules of negligence for accountant liability
1. Ultramares - liable only if accountant is aware of specific third party's reliance 2. Section 552 of the Restatement (2nd) of Torts - liable to limited class of intended users w/o specific names 3. foreseeability standard - liable to ANY foreseeable user
order of distribution of assets in a partnership
1. outside creditors 2. creditor-partners 3. capital contributions 4. profits
powers of administrative agency
1.) legislative: substantive rule making, interpretive rule making, statements of policy, licensing 2) judicial: adjudicate cases with proceeding 3) executive: prosecute violations, investigate, subpoenas, administrative searches
FTC franchise notice
A FTC required statement to appear in at least 12-pt boldface type on cover of disclosure statement.
corporate citizenship
A business has responsibility to do good.
issuer
A business or party selling securities to the public.
Proxy contest
A contest in which opposing factions of shareholders and managers solicit proxies from other shareholders; the side that receives the greatest number of votes wins the proxy contest.
S corporation
A corporation meeting certain requirements (like less than 100 shareholders) that elects to be taxed as an S corporation. No federal income tax at corporate level or double taxation.
liability of LLC managers
Not personally liable for debts, obligations, and liabilities of LLC. ○ Liable for injury/death of another due to personal actions
due diligence defense
A defense to a Section 11 action that, if proven, makes the defendant not liable. Defendant must prove that, after reasonable investigation, he or she had reasonable grounds to believe and did believe that, at the time the registration statement became effective, the statements within were true and there was no omission of material facts.
registration statement
A document that an issuer of securities files with the SEC and that contains files with the SEC and that contains required information about the issuer, the securities to be issued, and other relevant information. Form S-1.
certificate of interest
A document that demonstrates evidences of a member's ownership interest in an LLC.
Exon-Florio Foreign Investment Provision
A federal law that mandates the president of the United States to suspend, prohibit, or dismantle the acquisition of US businesses by foreign investors if there is credible evidence that the foreign investor might threaten "national security."
Jumpstart Our Business Startups Act (JOBS Act)
A federal statute designed to make it easier for start-up companies to raise capital through initial public offerings (IPOs). Creates new class of public company called emerging growth company (EGC).
distributional interest (LLC)
A member's ownership interest in an LLC that entitles the member to receive distributions of money and property from the LLC.
Short-form merger
A merger between a parent corporation owning 90% or more of the subsidiary, and the subsidiary, that does not require the approval of the shareholders of either corporation OR the approval of the board of directors of the subsidiary corporation.
Small Company Offering Registration (SCOR)
A method for small companies to sell up to a 12-month period to the public by using a question-and-answer disclosure form called Form U-7.
Uniform Partnership Act (UPA) and Revised Uniform Partnership Act (RUPA)
A model act that codifies partnership law which most states have adopted in whole or in part. A revised act not adopted by many.
Uniform Limited Liability Company
A model act, adopted by many states in part or all, that provides comprehensive and uniform laws for the formation, operation, and dissolution of LLCs.
tortfeasor
A person who intentionally/unintentionally causes injury/death to another person. Someone liable to the injured/heirs.
whistleblower bounty program
A person who provides information that leads to $1 million recovery or more is entitled to 10-30%.
registered agent
A person/corp empowered to accept service of process on behalf of organization.
Section 12 of the Securities Act of 1933
A provision of the Securities Act of 1933 that imposes civil liability on any person who violates the provisions of Section 5 of the act. Remedy is to rescind purchase or sue for damages.
Section 11 of the Securities Act of 1933
A provision of the Securities Act of 1933 that imposes civil liability on persons who intentionally defraud investors by making misrepresentations or omissions of material facts in the registration statement or who a negligent for not discovering the fraud.
Section 24 of the Securities Act of 1933
A provision of the Securities Act of 1933 that imposes criminal liability on any person who willfully violates the 1933 act or the rules or regulations adopted thereunder.
Regulation A
A regulation that permits an issuer to sell $50M of securities pursuant to a simplified registration process.
SEC Rule 10b-5
A rule clarifying the reach of Section 10(b) against deceptive and fraudulant activities in the purchase and sale of securities. Only INTENTIONAL/scienter. Includes insider trading.
Federal Trade Commission (FTC) franchise rule
A rule issued by the FTC that requires franchisors to make full presale disclosures to prospective franchises.
business judgement rule
A rule that protects the decisions of a board of directors that acts on ○ an informed basis, ○ in good faith, and ○ in the honest belief that the action taken was in the best interests of the corporation and shareholders.
share exchange
A situation in which one corporation acquires all the shares of another corporation and both retain their separate legal existence. Parent owns all shares of subsidiary.
Limited Liability Partnership
A special form of partnership in which all partners are limited partners, and there are no general partners. Most states limit use to accountants, lawyers, and doctors.
Uniform Franchise Offering Circular (UFOC)
A uniform disclosure document that requires a franchisor to make specific presale disclosures to prospective franchisees.
straight (noncumulative) versus cumulative voting
A vote for each share vs. each share times the number of candidates.
preliminary prospectus
A written disclosure document that must be submitted to the SEC along with the registration statement and given to the prospective purchasers of the securities.
ultra vires act
Act by corporation that is beyond express or implied powers. Shareholders can sue for injunction, sue the ones responsible, and the attorney general can dissolve the corporation.
Privacy Act
Act stating federal agencies can only maintain info about an individual that is relevant and necessary for agency purpose.
shareholder voting agreement
Agreement between shareholders of how they will vote.
joint venture
Allows two or more businesses to combine their resources to pursue a single project or transaction.
funding portal
An Internet website that companies may use to issue securities to the public under the crowdfunding provisions of the JOBS Act.
operating agreement (LLC)
An agreement entered into among members that governs the affairs and business of the LLC and the relations among members, managers, and the LLC.
franchise agreement
An agreement that a franchisor and franchisee enter into that sets forth the terms and conditions of a franchise.
Williams Act
An amendment to the Securities Exchange Act of 1934 made in 1968 that specifically regulates tender offers.
limited partnership agreement
Not required by law; sets rights and duties of general and limited partners, terms and conditions, voting rights, etc.
SEC Rule 147: intrastate offering exemption
An exemption from registration that permits local businesses to raise capital from local businesses to raise capital from local investors to be used in the local economy without the need to register with the SEC. (Issuer, all purchasers and all business done in the state.)
nonissuer exemption
An exemption from regristration stating that securities transactions not made by an issuer, an underwriter, or a dealer do not have to be registered with the SEC. (Normal purchases of securites by investors from other investors)
tender offer
An offer that an acquirer makes directly to a target corporation's shareholders in an effort to acquire the target corporation.
exempt transaction
An offering of securites that do not have to be registered with the SEC because the offering meets specified requirements established by the securities laws and the SEC. STILL subject to anti-fraud provisions of federal laws.
Limited Liability Company
An unincorporated business entity that combines the most favorable attributes of general partnerships, and corporations.
Section 16(b) of the Securities Exchange Act of 1934
Any insider making short-swing profits of trades within 6 months, their profits belong to the organization.
Section 32 of the Securities Exchange Act of 1934
Any willful violation of 1934 act is a criminal offense.
How is an LLC taxed?
As a partnership, as a pass-through entity, unless it elects to be taxed as a corporation.
Equal Access to Justice Act
Can sue to recover attorneys' fees and costs when agency's conduct is outrageous. To protect from harassment.
name of limited partnership
Cannot be name of limited partner, or they become liable as a general partner.
reporting companies
Companies that must file periodic reports with the SEC and to their shareholders within 10 days of end of month of material event. ○ annual 10-K ○ quarterly 10-Q ○ monthly 8-K
indenture agreement
Contract between corp and holder that contains terms of debt security.
Tax Reform Act of 1976
Criminal liability on accountants who prepare returns where they understate a client's tax liability, negligently understate liability or aid in preparation of false tax return.
Section 101 of Uniform Securities Act
Criminal offense for accountants and others to willfully falsify financial statements and other reports.
Section 32(a) of the Securities Exchange Act of 1934
Criminal to willfully make false/misleading statement in any SEC document.
Section 16(a) of the Securities Exchange Act of 1934
Defines statuatory insider as a person who is an executive officer, director, or a 10% shareholder of an equity security.
Securities Act of 1933
Designed to require disclosure of information to investors, provide for the regulation of securities issues and trading, and prevent fraud.
inside vs outside director
Director who is also an officer; is not an officer.
limited duty of care by managing members of LLC for ordinary negligence
Do not engage in ○ a known violation of law ○ intentional conduct ○ reckless conduct ○ grossly negligent conduct that injures the LLC
certificate of cancellation
Document files with secretary of state on the dissolution of a limited partnership.
transferee of distributional interest (LLC)
Does not become a member without consent of the other members, or without a provision in the operating agreement.
liability in a joint venture partnership
Each joint venturer is liable for the debts and obligations of the joint venture partnership.
SEC Rule 506: private placement exemption
Exemption from registration that permits issuers to raise capital from an unlimited number of accredited investors without registering with the SEC. Accredited investor defined as: rich dude, non-profits with $5M assets, bank, insiders, a business with accredited investor owners.
SEC Rule 504 (small offering exemption)
Exempts from registration sale of securities not exceeding $1M during a 12-month period.
Insider Trading Sanctions Act
Federal statute permitting SEC to obtain a civil penalty up to 3x the illegal benefits received from insider trading.
duties of general partners (11/5)
Fiduciary relationship ○ duty of loyalty: no self-dealing, no usurping a partnership opportunity, no competing with the partnership, no making secret profits (bribes), no breach of confidentiality, no misuse of partnership property (personal use). ○ duty of care (no negligence) ○ duty to inform (info relevant to partnership) ○ duty of obedience (adhere to decisions and agreement) ○ right to an accounting (judicial proceeding in lieu of lawsuit)
liability of franchisor and franchisee
Generally neither party is liable for their own contracts and torts.
control rule
IF a limited partner participates in the management of the LP, they are liable as a general partner ONLY to people who reasonably believed them to be a general partner.
piercing the corporate veil (alter ego doctrine)
If a shareholder uses a corporation for improper purposes, they can be liable for corp's debts/obligations. Proven if 1) insufficient capital OR 2) lack of separateness maintained.
Section 11(a) of the Securities Act of 1933
Imposes civil liability on accountants and others for misstatements of material facts in a registration statement or failure to find such misstatements/omissions.
Section 18(a) of the Securities Exchange Act of 1934
Imposes civil liability on any person who makes false/misleading statements in an application/report/document filed with SEC. Defense:acted in good faith, plaintiff had knowledge during purchase.
LP share of profits and losses if not otherwise agreed
In proportion to capital contribution.
domestic vs. foreign LLC
In vs. outside the state in which it was organized.
general-purpose clause
Included in the articles of incorporation that permit the corporation to engage in any activity permitted by law.
limited-purpose clause
Included in the articles of incorporation that stipulates the activities that the corporation can engage in.
defective formation
Incorrect creation of a limited partnership when 1) certificate of limited partnership is not properly filed, 2) there are defects in a certificate that is filed, or 3) some other statutory requirement for the creation of a LP is not met.
statutorily defined securies
Interests or instruments that are expressly mentioned in securities acts. Examples: preorganization subscription agreements, interest in oil, gas, and mineral rights, and deposit receipts for foreign securities as securities.
unregistered securities consequences
Investors can rescind their purchase and recover damages. The US governement can impose criminal penalties on any willful violator of the Securities Act.
Section 10A of the Securities Exchange Act of 1934
Law imposing a duty on auditors to detect and report illegal acts committed by their clients.
administrative law and agencies
Law that governments enact to regulate industries, businesses, and professionals. Agencies created by gov't to enforce regulatory statutes.
derivative lawsuit
Lawsuit brought by shareholders on behalf of corporation if corporation fails to do so.
liability of LLC
Liable for any loss/injury as result of wrongful act/omission by a member, manager, agent, or employee.
Stop Trading on Congressional Knowledge Act (STOCK Act)
Members of congress must disclose publicly any financial transaction of stocks, bonds, commodities and others on their website within 45 days of the transaction, or face civil and criminal penalties.
Model Business Corporation Act (MBCA) and (RMBCA)
Model act providing uniform law on formation, operation, and termination of corporations
LP admission of new partners
New partners require written consent of all partners.
no fiduciary duty owed by nonmanaging members of LLC
Nonmanaging members of an LLC do not owe a duty of loyalty/care to the LLC.
liability of LLC members
Not liable to third parties for debts, obligations, and liabilities beyond their capital contributions. ○ Liable for injury/death of another due to personal actions
limited partners
Not personally liable beyond capital contributions, and do not participate in management.
participating and convertible stock
Participate in profits; can be converted to common stock.
aiders and abettors
Parties who knowingly asist principal actors in the commission of securities fraud. Can be held criminally liable, not civilly.
certificate of registration
Permits a foreign limited partnership to transact business in the state.
Section 303 of RULPA
Permits limited partners to participate in the management of a limited partnership without losing their limited liability shield.
licensing
Permits one business to use another's trademarks, service marks, trade names, or other intellectual property in selling goods or services.
promoter
Person who organizes and starts a corporation, finds investors, negotiates and enters into contracts.
winding up
Process of liquidating a partnership's assets and distributing the proceeds to satisfy claims against the partnership.
Section 14(e) of the Williams Act
Prohibits fraudulent, deceptive and manipulative practices in connection with a tender offer.
SEC Rule 10b5-1 (misappropriation theory)
Prohibits outsiders from trading of security on the basis of material nonpublic information.
Section 10(b) of the Securities Exchange Act of 1934
Prohibits the use of manipulative and deceptive devices in the purchase or sale of securities in contravention of the rules and regulations prescribed by the SEC. Only INTENTIONAL/Scienter. Includes insider trading.
Securities Exchange Act of 1934
Regulates subsequent trading.
certificate of authority
Required to file to perform business in another state.
Section 13(d) of the Securities Exchange Act of 1934
Requires any party that acquires 5% or more of a company registered with SEC must report the acquisition.
supramajority voting requirement
Requires greater than the majority of shares to constitute a quorum of the vote. Requires the same number to add this requirement.
Section 406 of the Sarbanes-Oxley Act
Requires public companies to disclose if it has adopted a code of ethics for its officers.
Section 5 of the Securities Act of 1933
Requires securities offered to the public through the use of the mails or any facility of interstate commerce to be registered with the SEC by means of a registration statement and an accompanying prospectus.
buy-and-sell agreement
Requires shareholders to sell to other shareholders/corp at specified price.
Freedom of Information Act vs. Gov't in the Sunshine Act
Right to access documents in possession of federal administrative agencies. Opens federal administrative agency meetings to the public.
preemptive rights
Right to purchase new issued shares first to keep current ownership proportion.
exempt securities
Securities that are exempt from registration with the SEC. Include: ○issued by Gov't ○ ST notes & drafts less than 9 months ○ nonprofits ○ financial institutions ○insurance and annuity contracts ○stock dividends and stock splits ○exchanged securities
mutual funds
Sell shares to public, make investments in stocks and bonds for the long term, and are restricted from investing in risky investments. Must be registered with SEC.
right of first refusal
Shareholders offer their shares to other parties in the agreement before selling them to anyone else.
voting trust
Shareholders transfer stock certificates to trustee who uses them all to vote.
"blue sky" laws
State laws regulating issuance/trading of securities.
antitakeover statutes
Statutes enacted by state legislature that protect against the hostile takeover of corporations incorporated in or doing business in the state.
redeemable preferred stock
Stock a corporation is permitted to by back preferred stock at some future date.
articles of termination
The documents filed with the secretary of state to terminate an LLC as of the date of filing or on a later specified date.
EDGAR
The electronic data and record system of the Securities and Exchange Commission (SEC).
liability in a joint venture corporation
The joint venturers are only liable up to their capital contributions to the joint venture corporation.
quorum to hold a meeting of the shareholders
The majority or required number of shares that must be represented to hold a shareholders' meeting.
surviving versus merged corporation
The surviving corporation in a merger is the one that continues to exist and inherits all rights, privileges, powers, duties, obligations, and liabilities of the merged corporation without formality or deeds; the merged ceases to exist.
stakeholder interest
Theory of social responsibility stating that a corporation must consider the effects its actions will have on other stakeholders.
moral minimum
Theory of social responsibility stating that a corporation's duty is to make a profit while avoiding causing harm to others.
liability of general partner(s) in LP
Unlimited, or if sole only up to capital contribution.
Howey test
Used to determine whether an arrangement is an investment contract and therefore a security. ○ must be an investment of money by an investor in a common enterprise ○ investor expects to make profits based on the sole/substantial efforts of the promoter or others
franchise
When the franchisor/licensor liscenses a franchisee/licensee to use the franchisor's trade name.
When is withdrawal of a member from an LLC wrongful?
When the member withdraws from a term LLC before the expiration, the member is liable to the LLC and other members for any damages.
In a member-managed LLC, members
have equal rights in the management of the business, regardless of capital contribution.
In a merger, the apporval of surviving shareholders is not required if the merger/share exchange
increases the number of voting shares of surviving corporation by 205 or less.
Joint venturers owe each other the fiduciary duties of
loyalty and care.
In a manager-managed LLC, members
no longer have the right to manage (unless otherwise stated in operating agreement).
If a franchisor violates FTC disclosure rules
subject to an injunction against further franchise sales, civil fines, and an FTC civil action on behalf of injured franchisees to recover damages from the franchisor.
Shareholders injured by material misrepresentation or omission in proxy materials can
sue the wrongdoer and recover damages. A new election can be ordered by the court.
When a member withdraws from an at-will LLC,
the LLC must pay the fair market price.
The copy of, the proxy statement, and all other solicitation materials must be filed
with the SEC at least 10 days before materials are sent to the shareholders.
Companies classified as reporting companies according to JOBS Act of 2012?
○ company whose shares are traded on a national securities exchange ○ issuers wwho have made registered offering ○ companies with assets of at least $10M and who have at least 500 "unaccredited" shareholders or 2000 total shareholders
Incumbent directors
○ current directors of a corporation.
corporate debt instruments
○ debenture -LT unsecured based on corp's credit ○ bond - LT secured by collateral ○ note - ST (5yrs or less) both secured ans unsecured
when limited partners are individually liable
○ defective formation ○ participation in management ○ personal guarantee
Section 14(a) of the Securities Exchange Act of 1934
○ A provision of the Securities Exchange Act of 1934 that gives the SEC the authority to regulate the solicitation of proxies. ○ An anti-fraud provision that prohibits material misrepresentations or omissions of a material fact--reasons, opinions, or beliefs also--in the proxy materials.
How can a term LLC be continued as an at-will LLC?
○ By voting before expiration, unanimously, for an additional term, or ○ can be continued as an at-will LLC by a majority vote.
general partnership agreement
○ IF existing for 1+ years or dealing in real estate, must be in writing. ○ if failing to address term/contingency, UPA applies
Who has power to bind LLC to contracts?
○ In member-managed, all members. ○ In manager-managed, only managers.
Tender offers are governed by the following rules
○ Offer cannot be closed before 20 business days after the commencement of the tender offer. ○ Offer must be extended for 10 days after the commencement of the tender offer. ○ The fair price rule says any increase in price paid for shares tendered must be offered to all shareholders, even those who have previously tendered their shares. ○ The pro-rata rule holds that the shares must be purchased on a pro rata basis if too many shares are tendered.
ethical fundamentalism vs. utilitarianism vs. Kantian ethics vs. Rawl's social justice theory vs. ethical relativism
○ Uses an outside source for ethical rules ○ for the Greatest good to society ○ consistent, reversible and universal rules ○ fairness, everyone must obey ○ based on own feelings
proxy
○ a written document that is completed and signed by a shareholder and sent to the corporation ○ authorizes another person to vote the shares at a shareholders' meeting as directed by the shareholder ○ can be submitted electronically
responsibilities of the SEC
○ adopting rules that further federal securities statutes ○ investigating alleges violations and bringing enforcement actions against suspected violators ○ bringing civil action to recover monetary damages from violators of securities laws ○ regulating the activities of brokers and advisors, includes registering and taking action against
Actions of an LLC that must be voted on by all members and cannot be delegated to managers
○ amending the articles of organization ○ amending the operating agreement] ○ admitting new members ○ consenting to dissolve the LLC ○ consenting to merge the LLC ○ selling/leasing/disposing of property
If franchisor makes sales/earnings projections based on hypothetical examples, franchisor MUST disclose
○ assumptions underlying the estimates ○ number and percentage of actual franchises that have obtained such results ○ a cautionary state ment in at least 12-point boldface type that reads "Caution: these figures are only estimates of what we think you may earn. There is no assurance you'll do as well. If you rely upon our figures, you must accept the risk of not doing so well."
permissible activities of limited partners without losing limited liability
○ being an agent/employee/contractor of the LP ○ being a consultant/advisor to a general partner ○ acting as surety for LP ○approving/disapproving amendments ○voting on: dissolution/winding up, sale/transfer/exchange/lease/mortgage of LP assets, change in nature of business, removal of general partner
division of an LLC's profits/losses
○ by default, equal shares among members ○ if specified in operating agreement, may be proportional to capital contribution, etc. ○ profits/losses do not need to be equal proportions
prima facie evidence of a general partnership
○ sharing of profits ○ sharing of management responsibility
Information the UFOC requires disclosed
○ description of business ○ balance sheets and income statements for preceding three years ○ material terms of franchise agreement ○ any restrictions on franchisee's territory ○ reasons permitted for the termination of the franchise ○ other relevant information
types of franchises
○ distributorship franchise for manufactoring a product and licensing a retail dealer to distribute ○ processing plant franchise for providing a secret formula to the franchisee, who manufactures and sells it ○ chain-style franchise for licensing a franchisee to make and sell its products/services to the public from a retail outlet in an exclusive geographic location ○ area franchise for authorizing the franchisee to negotiate and sell franchises on behalf of the franchisor
duty of loyalty by managing party of LLC
○ do not usurp opportunities, ○ do not make secret profits ○ do not secretly deal with LLC ○ do not secretly compete with LLC ○ do not represent adverse interests of LLC
negligence of a director or officer's involves
○ failure to make a reasonable investigation of a corporate matter ○ failure to attend board meetings regularly ○ failure to properly supervise subordinate
characteristics of a corporation
○ free transferability of shares ○ perpetual existence ○ centralized management
promoter's liability
○ if no corporation, joint personal liability ○ remains liable until parties enter into a novation -3 party contract where corporation assumes liability of promoter
SEC Actions: Securities Act of 1933
○ issue a consent decree whereby the defendant agrees not to violate securities laws in the future but does not admit to having violated securities laws in the past ○ bring action in the US district court to obtain an injunction to stop challenged conduct ○ request the court to grant ancillary relief
well-known seasoned investor (WKSI) requirements
○ issued $1 billion of securities in the previous three years ○ or, at least $700 million of outstanding equity securities owned by non-affiliate investors
liabilities of general partnership
○ joint and several liability for torts and breaches of trust of other partners and employees ○ joint liability for contracts and debts (All partners or none) ○ new partners liable for existing debts only to extent of capital contribution ○ outgoing partners liable for debts at time of dissolution
An LLC's name must include the words
○ limited liability company, or ○ limited company, or ○ L.L.C, LLC, L.C, or Ltd. Co.
compensation and reimbursement of LLC
○ members not entitled to remuneration of services (except winding up) ○ managers paid compensation/benefits ○ members/managers reimbursed for payments made for LLC ○members/managers indemnified for liabilities occurred in ordinary course of business
requirements of a SCOR form
○ must be a domestic business ○ offering price of common stock must not be less than $5/share ○ offering must be registered with the state
certificate of limited partnership information
○ name ○character of business ○ addresses ○ name & addresses of partners ○ amount of assets contributed by ea. partner
name of a general partnership
○ name(s) or partner(s) ○ ficticious ○ cannot contain Inc.
four most common exempt transactions
○ nonissuer exemption ○ intrastate offering exemption ○ private placement exemption ○ small offering exemption
emerging growth company (EGC) requirements
○ not gone public in past 5 years ○ less than $1 billion annual revenues ○ issued no more than $1 billion in debt ○ less than $700 million in stock outstanding after an IPO
If a franchisor makes sales/earnings projections for a potential franchise location that are based on the actual sales income/profit figures of an existing franchise, they MUST disclose
○ number and percentage of its actual franchises that have obtained such results ○ a cautionary state ment in at least 12-point boldface type that reads "Caution: some outlets have sold (or earned) this amount. There is no assurance you'll do as well. If you rely upon our figures, you must accept the risk of not doing so well."
duties of directors and officers
○ obedience ○ care - act in good faith, care of an ordinary person, in the best interests of corp. ○loyalty -usurping opportunity, self-dealing, competing with the corporation, making a secret profit
An LLC has the power to
○ own/transfer property ○ sell/lease/mortgage real property ○ issue notes/bonds ○ sue/ be sued
Management may fight a tender offer by
○ persuading shareholders ○ delaying lawsuits ○ selling a crown jewel (profitable assets) ○adopting a poison pill (defensive strategies built into articles of incorporation, bylaws, or contracts) that make the corporation more expensive ○ white knight merger (leaves target corporation in tact) ○ reverse tender offer (offer to purchase tender offeror) ○ issuing additional stock ○ creating employee stock ownership plan ○ flip-over and flip-in plans (target shareholders' shares become a greater number of acquiring shares) ○ greenmail and standstill agreements (buy back the tender offeror's stock)
Insurgent directors
○ proposed slate of directors to replace incumbent directors.
rights of general partners
○ right to participate in equal management (regardless of proportional size of capital) ○ right to equal share in profits ○ losses are automatically shared in same proportion as profits ○ no right for remuneration/salary for services and salary earned elsewhere is the partnerships' ○ right to indemnification/reimbursement for business expenses ○ right to receive payment of loans (after other creditors) ○ right to return of capital contributions upon termination of partnership ○ right to information on partners and partnership
registration statement must contain
○ securities being offered for sale ○ the registrant's business ○ the management of the registrant, including compensation, stock options, and benefits ○ pending litigation ○ how proceeds will be used ○ government regulation ○ degree of competition in the industry ○ any special risk factors
If a franchise agreement is ○ breached ○ wrongfully terminated
○ the aggrieved party can sue for rescission of agreement, restitution, and damages. ○ the franchisee can sue to recover damages and recover the franchise.
A proxy statement must fully describe
○ the matter for which the proxy is being solicited ○ who is soliciting the proxy, and ○ any other pertinent information
Under the ULLCA, the articles of organization of an LLC must set forth
○ the name of the LLC ○ the address of the LLC's initial office ○ the name and address of the initial agent for services of process ○ the name and address of each organizer ○ whether the LLC is a term LLC, and the term specified ○ whether manager-managed and name/address of each manager ○ whether one or more members are personally liable for debts and obligations
A disassociated member can still bind the LLC to contracts for two years, unless
○ the parties know of the dissassociation, or ○ are given notice of disassociation.
methods for dissolution of corp
○ voluntary - on reccomendation of board of directors ○ administrative - failure to comply with law ○ judicial - by a court proceeding of the state
Shareholders have the right to
○ vote on election of directors ○ vote on mergers ○ vote on charter amendments
types of common securites
○common stock ○ preferred stock ○ bonds ○ debentures ○ warrants
causes of dissolution of a LP
○end of set time period ○ written consent of all partners ○ withdrawal of general partner (by death/retirement/ bankrupcy/ insanity) (unless agreement allows or all lps choose to continue) ○ decree of judicial dissolution
name of corporation must
○include corporation, company, incorporated, limited, or an abbreviation, ○not be federally trademarked, ○not taken on the internet
franchise issues in agreement
○licensing of intellectual property ○ lease fees ○ cost of supplies ○ consulting fees ○ initial license fee ○ royalty fees ○ assessment fee ○ territory ○ quality-control standards ○ training requirements ○ covenant not to compete ○ arbitration clause ○ duration ○ other terms/conditions ○ total investment