LA245 final exam!!!!
IPO Process:
1. underwriting 2. registration statement 3. prospectus 4. sales effort 5. going effective
hostile work environment (ADEA)
ADEA prohibits a hostile work environment based on age
picketing
BLANK the employer's workplace in support of a strike is generally lawful
Exempt securities
Government securities Bank securities short-term notes nonprofit issues insurance policies and annuity contracts
4 types of private offerings ('33 Act)
Intrastate, Regulation D, Regulation A, and Crowd-funding
Defenses to charges of discrimination
Merit Seniority Bona Fide Occupations Qualifications (BFOQ) Affirmative Action
NLRA and concerted action
NLRA guarantees right of employees to engage in concerted action for mutual aid or protection
violent strikes
NLRA prohibits violent strikes. a union may stage a sit-down strike (in which members stop working but remain at their job posts)
exemption from state regulation
National Securities Markets Improvement Act of 1996 (NSMIA): states may no longer regulate offerings of securities that are 1) traded on a national exchange 2) exempt under Rule 506, or 3) sold to a qualified purchaser
The Patent and Trademark Office
PTO
Norris-LaGuardia Act
Prohibits federal court injuries in nonviolent labor disputes
statutory protection for federal employees
The civil services reform act and the whistleblower protection act prevent retaliation against federal employees who report wrong doing. (this statute was used to prevent the national park service from disciplining two managers who wrote a report expressing concern over development of yellowstone national park)
Bylaws
a document that specifies the organizational rules of a corporation or other organization, such as the date of the annual meeting and the required number of directors bylaws list the housekeeping details for the corporation (ex: dates of annual shareholders' meeting, quorum, indicate how many directors there will be, give titles to officers, establish a fiscal year of the corporation)
annual report
a document that the SEC requires public companies to provide to their shareholder each year it contains financial data
trade secrets
a formula, device, process, method or compilation of information that, when used in business, gives the owner an advantage over competitors
an employee at will could be fired for ...
a good reason, a bad reason, or no reason at all
patents
a grant by the government permitting the inventor exclusive use of an invention for a period (typically 20 years, or 14 years for design patents) a patent is not available solely for an idea, but only for its tangible application patents are not available for laws of nature, scientific principles, mathematical algorithms, mental processes, intellectual concepts or formulas
Seniority
a legitimate seniority system is legal even if it perpetuates past discrimination. a seniority system violates title VII only if it was deigned with the intention to discriminate
novation
a new contract with different parties the promoter will no longer be personally liable, only if the other party agrees to a novation (a new contract with the corporation alone)
general partnership: transfer of ownership
a partner only has the right to transfer the VALUE of her partnership interests, not the interest itself
joint venture
a partnership for a limited purpose
infringement
a patent holder has the exclusive right to use the invention during the term of the patent a holder can prohibit others from using any product that is substantially the same, license the products to others for a fee, and recover damages from anyone who uses the product without permission
the false claims act
a statute that permits lawsuits against anyone who defrauds the government
unfair labor practices strike (ULP)
a union member is entitled to her job back, even if that means the employer must lay off a replacement worker
Section 9 of the NLRA
a validly recognized union is the exclusive representative of the employees
general partnership: liability
each partner is personally liable for the debts of the enterprise, whether or not she caused them a partner is liable for any injury that another partner or an employee causes while on partnership business as well as for any contract signed on behalf of the partnership
general partnership: formation
easy to form... should have a written agreement, but not needed if two or more people doing business together, sharing management, profits and losses, they have a partnership, whether they know it or not, and are subject to all of the rules of partnership law partnership by estoppel
Constitutional protection for government employees
employees of federal, state, and local government have a right to free speech under the US constitution
voluntary actions
employers can voluntarily introduce an affirmative action place to remedy the effects of past practices or to achieve (not to maintain) equitable representation of minorities and women, provided that the plan is not too unfair to majority members
religion
employers cannot discriminate against a worker because of his religious beliefs
defamation
employers may be liable for defamation when they give false and unfavorable references about a former employee more than half of the states recognize a qualified privilege for employers who give references about former employees courts have held that employer do not have a legal obligation to disclose information about former employees. in recent cases, courts have held that, when a former worker is potentially dangerous, employers do have an obligation to disclose this information
Employee Polygraph Protection Act of 1988
employers may not require, or even suggest, that an employee or job candidate submit a polygraph test except in a few exceptions
Under OSHA
employers must comply with specific health and safety standards employers are under a general obligation to keep their workplace 'free from recognized hazards that are causing or are likely to cause death or serious physical harm" to employees employees must keep records or all workplace injuries and accidents OSHA may inspect workplaces to ensure that they are safe (OSHA may assess fines for violations and order employers to correct unsafe conditions)
immigration (employment law)
employers should not ask about an applicant's country of origin, but they are permitted to inquire if the person is authorized to work in the US
Hostile Work Environment
employers violate title VII if they permit a work environment that is so hostile toward people in a protected category that it affects their ability to work
intentional infliction of emotional distress
employers who condone cruel treatment of their workers may face liability
qualified privilege
employers who give references are liable only for false statements that they know to be false or that are primarily motivated by ill will
Genetic Information Nondiscrimination Act (GINA)
employers with 15 or more workers may not require genetic testing or discriminate against workers because of their genetic makeup
Occupational Safety and Health Act (OSHA)
ensure safe working conditions
National Labor Relations Act (NLRA)
ensures the right of workers to form unions and encourages management and unions to bargain collectively and productively
National Labor Relations Board
established by the NLRA, this agency administers and interprets the NLRA and adjudicates labor cases
advantages to registration
even if the mark is only used in 2 states it is valid nationally registration notifies the public that a mark is in use 5 years after registration, a mark become incontestable damages available under the Lanham Act are higher than under common law the holder of a registered trademark generally has the right to use it as an internet domain
Tippees
even without a fiduciary relationship to the company, those who receive tips are liable for trading on inside information, if (1) they know the information is confidential, (2) they know that it came from an insider who was violating his fiduciary duty, and (3) the insider expected some personal gain
commingling of assets
evidence that shareholders have mixed their assets with those of the corporation if shareholders commingle assets, it is genuinely difficult for creditors to determine which assets belong to whom (all assets are deemed to belong to the corporation)
exempt securities v. exempt transactions
exempt SECURITIES: are always exempt, throughout their lives, no matter how many times they are sold. exempt TRANSACTIONS: is exempt only that one time, not necessarily in any subsequent sale
corporations: logistics
expensive to create and operate cost of establishing (legal fees) and annual filings meeting for shareholders and directors (minutes of the meetings)
Courts pierce a corporate veil in 4 circumstances
failure to observe formalities commingling of assets inadequate capitalization fraud
5 basic categories of distinctive marks
fanciful marks: made up words arbitrary marks: use existing words that do not describe the product suggestive marks: indirectly describe the product's function secondary meaning: marks with secondary meaning cannot, by themselves, be trademarked unless they have been used for so long that they are now associated with the product in the publics mind trade dress: the image and overall appearance of a business or product (size, shape, color, texture)
Socially conscious organizations
flexible-purpose organizations, benefit corporations, low-profit limited liability companies, and community interest companies 2/3 of investors must approve B-lab (Benefit corporations)
Independent Directors (NYSE and NASDAQ)
for companies on the NYSE and NASDAQ, it is required that: independent directors comprise a majority of the board meet regularly on their own, without inside directors only independent directors can serve on audit, compensation, or nominating committees audit committees must have at least 3 directors who are financially literate
civil rights act of 1866
for plaintiffs alleging racial discrimination, this offers substantial advantages over title VII: a four-year statute of limitations unlimited compensatory and punitive damages applicability to all employers, not just those with 10+ employees
Consolidated Omnibus Budget Reconciliation Act (COBRA)
former employees must be allowed to continue their health insurance for 18 months after being terminated from their job
Limited partnerships and limited liability limited partnerships: management
general partners have the right to manage a limited partnership limited partners are passive investors
Limited partnerships and limited liability limited partnerships: formation
general partners must file a certificate of limited partnership partnership is not required, but most have
Patents on living organisms
genes could be patented
National Labor Relations Act
gives employee the right ot discuss wages, hours, and working conditions
Affirmative action
goal is to remedy the effects of past discrimination affirmative action is not required by Title VII, and it is not prohibited
Family medical leave act (FMLA)
guarantees both men and women up to 12 weeks of unpaid leave each year for childbirth, adoption, or a serious health condition of their own or in their immediate family
section 7 NLRA
guarantees employees the right to organize and join unions, bargain collectively through representatives of their own choosing, and engage in other concerted activities
LLC: changing forms
hard to change from a corporation to an LLC easier to change from an LLC to corporation
Delaware
has a disproportionate influence on corporate law more than 1/2 the public companies incorporate in Delaware they do not follow the Model Act a business that will be operating primarily in one state would probably select that state to incorporate rather than Delaware
Managers
have a fiduciary duty to act in the best interests of corporation's shareholders manager must maximize shareholder value
rights of shareholders
have neither the right nor the obligation to manage the day-to-day business of the enterprise right to information, right to vote, election and removal of directors, compensation for officers and directors, fundamental corporate changes, right to dissent, right to protection from other shareholders,
determining if it is a trade secret:
how difficult (expensive) was the information to obtain? was it readily available from other sources? Does the information create an important competitive advantage? Did the company make a reasonable effort to protect it?
Insider trading
is a crime punishable by fines and imprisonment. insider trading is included as a category of securities fraud under the general provisions of Section 10(b) and Rule 10b-5 courts rules: fiduciary duty, misappropriation, tippers, tippees, takeovers, advanced planning
parody
is a fair use copyrighted material so long as the use of the original is not excessive
Same-sex harassment
is also a violation of Title VII
Piercing the LLC veil
is corporate shareholders do not comply with the technicalities of the law, they may be held personally liable for the debts of the corporations LLC can be held liable under the same circumstances
common stock
is last in line for any corporate payouts, including dividends and liquidation payments
the family entertainment and copyright act
it is a criminal offense to use a camcorder to file a movie in the theater establishes criminal penalties for willful copyright infringement that involves distributing software, music, or film on a computer network
digital millennium copyright act
it is illegal to delete copyright information, such as the name of the author or the title of the article it is illegal to circumvent encryption or scrambling devices that protect copyrighted works it is illegal to distribute tools and technologies used to circumvent encryption devices online service providers (OSPs) are not liable for posting copyrighted material so long as they are unaware that the material is illegal and they remove it promptly after receiving notice that it violates copyright law
The business judgment rule provides 2 shields in 1
it protects both the manager and her decisions
first sale doctrine
permits a person who owns a lawfully made copy of a copyrighted work to sell or otherwise dispose of the copy. does not permit the owner to make a copy and sell it
anti-cybersquatting consumer protection act (ACPA)
permits both trademark owners and famous people to sue anyone who registers their name as a domain in bad faith
the electronic communications privacy act of 1986 (ECPA)
permits employees to monitor workers' telephone calls and email messages if 1) the employee consents, 2) the monitoring occurs in the ordinary course of business, or 3) in the case of email, the employer provides the email system bosses may not disclose any private information revealed by the monitoring
Prioritizing resources and organization for intellectual property act (Pro-IP)
permits law enforcement officials to confiscate any equipment used to steal copyrighted material
fair use
permits limited use of copyrighted material without permission of the author for purposes such as criticism, comment, news reporting, scholarship, or research
death of a corporation
piercing the corporate veil termination death can be voluntary (shareholders elect to terminate) or forced (by court order)
rights of shareholders: election and removal of directors
plurality voting: to be elected, a candidate only needs to receive more votes than his opponent, not a majority of the votes cast majority voting systems independent directors (not an employee of the company): SOX stipulates that all members of a board's audit committee must be independent, and at least one of these members must be a financial expert Shareholder Activists Proxy Access
The Charter (articles of incorporations, articles of organization, certificate of incorporation, certificate of organization)
prepare and file the charter: download the form and mail or fax it to the Secretary of State the corporate charter defines the corporation (everything from the company's name to the number of shares that will be issued) Name, address and registered agent, incorporator, purpose, stock
federal trademark dilution act of 1995
prevents others from using a trademark in a way that (1) dilutes its value, even though consumers are not confused about the origin of the product; or (2) tarnishes it by association with unwholesome goods or services
factor other than sex
prior wages, training, profitability, performance in an interview, and value to the company
public policy rule
prohibits an employer from firing a worker for a reason that violates basic social rights, duties, or responsibilities
Wrongful discharge: violating public polciy
prohibits an employer from firing a worker for certain particularly bad reasons
Civil Rights Act of 1964 Title VII
prohibits certain types of employment discrimination. it is illegal for employers with 15 or more employees to discriminate on the bassi or race, color, religion, sex, or national origin discrimination applies to every aspect of the employment process (job ads to post-employment references)
rehabilitation act of 1973
prohibits discrimination on the basis of disability by the executive branch of the federal government, federal contractors, and entities that receive federal funds
section 8 NLRA
prohibits employers from engaging in specific Unfair Labor Practices (ULPs)
Americans with disabilities act (ADA)
prohibits employers with 15 or more workers from discriminating on the basis of disability
Section 10(b)
prohibits fraud in connection with the purchase and sale of any security, whether or not the security is registered under the '34 Act Rule 10-b5 provides some clarification
Corporate opportunity (duty of loyalty)
prohibits mangers from excluding their company from favorable deals managers are in violation of the corporate opportunity doctrine if they compete against the corporation without consent
takeovers (rule 14e-3)
prohibits trading on inside information during a tender offer if the trader knows the information was obtained from either the bidder or the target company. (the trader or tipper doesn't have to violate a fiduciary duty)
the copy right act
protects literature, music, drama, choreography, pictures, sculpture, movies, recordings, architectural works, and computer databases, and computer programs "to the extent that they incorporate authorship in the programmer's expression of original ideas, as distinguished from the ideas themselves"
design patent
protects the appearance, not the function of an item
professional corporations (PCs)
provide more liability protection than a general partnership (doctors and lawyers)
provisional patent application (PPA)
provides a provable date of filing lasts only 1 year to maintain protection after 1 year, the inventor must file a non-provisional patent application
general provision of the '34 Act
registration requirements, disclosure requirements, proxy requirements, short-swing trading
Securities Exchange Act of 1934 (1934 Act)
regulate companies with publicly traded securities. the purpose of the '34 act is to maintain the integrity of the secondary market
Securities Act of 1933 (1933 Act)
regulate the issuance of new securities
Fair Labor Standards Act (FLSA)
regulates wages and limits child labor nationally
Limited partnerships and limited liability limited partnerships
relatively rare. are generally used only for estate planning purposes (usually to reduce estate taxes) structure, liability, taxes, formation, management, transfer of ownership, duration
Disclosure requirements and Sarbanes-Oxley Act of 2002 (SOX)
requires each CEO and CFO to certify that: 1) the information in the 10-K and 10-Q's are true, 2) the company has effective internal controls, and 3) the officers have informed the company's audit committee and its auditors of any concerns that have about the internal control system.
registration requirements ('34 act)
requires issuers with publicly traded stock to continue to make information available to the public so that current - and potential - shareholders can evaluate the company. under the '34 act an issuer must register with the SEC if (1) it completes a public offering under '33 act, or (2) its securities are traded on a national exchange, or (3) it has at least 2,000 shareholders AND total assets over $10 million
Disclosure requirements - section 13 ('34 act)
requires ongoing, regular disclosure for any company was a class of stock that is publicly traded. section 13 requires reporting companies file: An initial, detailed information statement when the company first registers. Annual 10-K (audited financials, detailed analysis of company performance and information about officers and directors). Quarterly's 10-Q (unaudited financials) Form 8-K to report significant developments (bankruptcy, change in control, purchase or sale of significant assets, resignation of officers, change in auditing firms)
restricted stock
securities purchased strictly for investment purposes
operating agreement
sets out the rights and obligations of the owners (members)
direct lawsuits
shareholders are permitted to sue the corporations directly only if their own rights have been harmed
voting rights
shareholders are usually entitled to elect directors and vote on charter amendments, among other issues, but there rights can vary among different series and classes of stock
S corporations (S corps)
shareholders of S corps have both the limited liability of a corporation and the tax status of a partnership (not a taxable entity ... all profits and losses pass through the shareholders....avoids double taxation)
Charter
short, contains basic information (name and address) filed with the secretary of state
categories that CANNOT be trademarked
similar to an existing mark generic trademarks: once a name is generic, the owner loses the trademark because the name can no longer be used to distinguish one product from another (zipper) descriptive marks: words cannot be trademarked if they simply describe the product names: will not grant a trademark in a surname Deceptive marks: will not register a mark that is deceptive scandalous or immoral trademarks: refuses to trademark scandal and immoral images
patent trolls
someone who buys a portfolio of patents for the purpose of making patent infringement claims
sophisticated investor
someone who is able to assess the risk of an offering
promoter
someone who organizes a corporation they are personally liable on any contract he signs before the corporation if formed
disabled person
someone with a physical or mental impairment that substantially limits a major life activity, or someone who is regarded as having such an impairment ADA applied to recovered drug addicts but not to the current use of drugs, sexual disorders, pyromania, exhibitionism, or compulsive gambling
the rehabilitation act of 1973
statute is enforced by EEOC, department of labor and the department of justice
workers compensation
statutes ensure that employees receive payments for injuries incurred at work
Blue Sky Laws
statutes that regulate the sale of securities
Classes and series
stock can be divided into categories (classes) and these classes can be divided into subcategories (series) dividend rights, voting rights, liquidation rights
control security
stock held by any shareholder who own more that 10% of a class of stock or by any officer or director of the company
restricted security
stock purchased in a private offering
social security
system pays benefits to workers who are retired, disabled, or temporarily unemployed and to the spouses and children of disabled or deceased workers
Concerted action
tactics taken by union members to gain bargaining advantage
equal work
tasks that require equal skill, effort, and responsibility under similar working conditions
'33 Act
the 1933 act requires that before offering or selling securities, the issuer must register the securities with the SEC unless the securities qualify for an exemption when an issuer registers securities, the SEC does not investigate the quality of the offering
intentional copyright treaties
the Berne Convention requires member countries to provide automatic copyright protection to any works created in another member country
family responsibility discrimination
the EEOC has issued guidelines indicating that stereotypes are not a legitimate basis for personnel decisions and may violate title VII
gender identity
the EEOC ruled that discriminating against someone for being transgender is a violation of title VII
right to strikes
the NLRA guarantees employees the right to strike, but with limitations
Organizing: Actions
the NLRA guarantees employees the right to talk among themselves about forming a union, to hand out literature, and ultimately to join a union The employer may vigorously present anti-union views to its employees buy may not use either threats or promises of benefits to defeat a union drive
dividend rights
the charter establishes whether the shareholder is entitled to dividends and, if os, in what amount
Stock
the charter must provide three items of information about the company's stock: par value, number of shares, classes and series
liquidation rights
the charter specifies the order in which classes of stockholders will be paid upon dissolution of the company
Employer Liability for Sexual Harassment
the company is liable if it knew of should have known about the conduct and failed to stop it even if the company was unaware of the misbehavior, it is nonetheless liable if the victimized employee suffered a "tangible employment action" such as firing, demotion, or reassignment if the company was unaware of the behavior and the victimized employee did not suffer a tangible employment action, the company is still liable unless it can prove that (1) it used reasonable care to prevent and correct sexually harassing behavior, and (2) the employee unreasonably failed to take advantage of the complaint procedure or other preventive opportunities provided by the company
Purpose
the corporation is required to give its purpose for existence (typically broad)
The Business Judgement Rule (BJR)
the courts allow mangers leeway in carrying their fiduciary duty Common law concept and it is a fundamental principle of corporate law to be protected by the business judgment rule, managers must act in good faith: Duty of Loyalty Duty of Care
a self-dealing transaction is valid in these situations:
the disinterested members of the board of directors approve the transaction (disinterested directors are those who do not themselves benefit from the transaction) the disinterested shareholders approve it (the transaction is valid if the shareholders who do not benefit from it are willing to approve it) the transaction was entirely fair to the corporation (fairness determined by price and impact of the transaction)
Equal Employment Opportunity Commission
the federal agency charged with enforcing federal employment laws, prohibits, testing for prescription drugs unless a worker seems impaired
priority between two inventors
the first person to file a patent application has priority
ownership and registration
the first person to use a mark in trade owns it, registration with the federal government is not necessary
copyright infringement
to prove a violation, the plaintiff must present evidence that the work was original and that either: the infringer actually copied the work, or the infringer had access to the original and the two works are substantially similar
requirements for a patent
to receive a patent, an invention must be: novel, non-obvious, and useful
infringement trademarks
to win an infringement suit, the trademark owner must show that the defendant's trademark is likely to deceive customers about who had made the foods or provided the services the rightful owner is entitled to (1) an injunction prohibiting further violations, (2) destruction of the infringing material, (3) up to three times actual damages, (4) any profits the infringer earned on the product, and (5) attorney's fees
disparate impact (ADA)
to win, the plaintiff must show that a policy looks neutral falls more harshly on a protected group and cannot be justified by business necessity
types of marks
trademarks, service marks, certification marks, collective marks
mental disabilities
under EEOC rules, physical and mental disabilities are to be treated the same
all franchisors must comply with the Federal Trade Commission's (FTC) Franchise Rule
under FTC rules, a franchisor must deliver to a potential purchaser a so-called Franchise Disclosure Document (FCC) at least 14 calendar days before any contract is signed or money is paid
Intrastate Offering Exemption
under SEC rule 147, an issuer is not required to register securities that are offered and sold only to residents of the state in which the issuer is incorporated and does business
Rule 504: Seed capital rule (Reg D)
under rule 504 a company may either: 1) sell up to $1 million in restricted stock privately to anyone during each 12 month period, or 2) sell up to $1 million in non-restricted stock with public advertising if the transaction is registered under a state law with appropriate disclosure requirements, or 3) sell up to $1 million in non-restricted stock with public advertising if the transaction is exempted under a state law and sales are limited to accredited investors
rights of shareholders : right to information
under the model act, shareholders acting in good faith and with a proper purpose have the right to inspect and copy the corporation's minute book, accounting records, and shareholder list
Limited partnerships and limited liability limited partnerships: duration
unless the partnership agreements states otherwise, limited partnerships enjoy perpetual existence
collective marks
used to identify members of an organization
types of patents
utility patents, design patents, and plant patents
CBA: mandatory subjects"
wages, hours, and other terms and conditions of employment Both the union and the employer must bargain in good faith. However, they are not obligated to reach an agreement
dissociation
when a partner quits
general partnership: termination
when a partner quits, it is called dissociation. at dissociation there are two options: the partnership can either buy out the departing partner(s) and continue in business or wind up the business and terminate the partnership
derivative lawsuit
when managers of a corporation violate their duty to the organization shareholders are allowed to being a derivative lawsuit in the name of the corporation against the managers
utility patents
when people use the work 'patent' by itself, they mean utility patent this type of patent is available to those who invent (or significantly improve ) mechanical invention, electrical invention, chemical invention, process, machine, or composition of matter
privacy in the workplace
workers are entitled under the common law to a reasonable expectation of privacy .... but employers do have the right to fire workers for off-duty conduct
pregnancy discrimination act
an employer may not fire, refuse to hire, or fail to promote a woman because she is pregnant an employer also violates this statute if the work environment is so hostile towards a pregnant woman that is affects her ability to do her job an employer must treat pregnancy and childbirth as any other temporary disability an employer cannot fire a woman for having an abortion
age discrimination in employment act (ADEA)
an employer with 20 or more employees may not fire, refuse to hire, fail to promote, or otherwise reduce a person's employment opportunities because he is 40 or older not may an employer require employees to retire at a certain age (exception: police and top level executives)
government contracts
an executive order prohibits discrimination by federal contractors
Advanced planning (rule 10b5-1)
an insider can avoid insider trading charges is she commits in advance to a plan to sell securities
novel
an invention is NOT patentable if it has already been (1) patented, (2) described in a printed publication, (3) in public use, (4) on sale, or (5) otherwise available to the public anywhere in the world
non-obvious
an invention is not patentable if it is obvious to a person with ordinary skill in that particular idea
Prior sale
an inventor must apply for a patent within one year of selling the product commercially anywhere in the world
partnerships
an unincorporated association of tow or more co-owners who operate a business for profit
sole proprietorships
an unincorporated business owned by one person flow-through tax entity personal liability limited financing options business lives and dies through the owner all businesses start as a sole proprietorship
Trademark
any combination of words and symbols that a business uses to identify its products or services and distinguish them form others are affixed to goods in interstate commerce
Fiduciary Duty
any corporate insider who trades while in possession of nonpublic material information in violation of his fiduciary duty to his company is liable under Rule 10b-5
secondary offering
any public sale of securities by a company after the initial public offering
state regualtion
any securities offerings not covered by NSMI must comply with state securities laws states take one of the following approaches to securities offerings: Registration by notification Registration by coordination Registration by Qualification
serious health condition in FMLA
any that issue that requires hospitalization. a condition that requires more than one visit to a health care provider-the visits may be spread out over as long as a year. a condition that requires only one visit to a health care provider, but which also requires a course of treatment such as a physical therapy or prescription medication
Security
any transaction in which the buyer (1) invests money in a common enterprise and (2) expects to earn a profit predominantly form the efforts of others
Misappropriation
anyone (1) with material, non-public information, (2) who breaches a fiduciary duty to the source or the information (3) by revealing or trading on it, is liable for insider trading (if you trade on material, secret information that you have obtained from your workplace, you have violated Rule 10b-5)
plant patent
anyone who creates a new type of plant can patent it, provided that the inventor is able to reproduce it asexually - through grafting, for instance, rather than by planting its seeds
America Invents Act (AIA)
anyone who has been charged with infringement of certain financial service business method patents has the right to challenge the validity of that patents
stakeholder
anyone who is affected by the activities of a corporation, such as a shareholder, employee, customer, creditor, supplier, or neighbor
section 18
anyone who makes a false or misleading statement in a filing under the '34 Act is liable to buyers or sellers who (1) acted on reliance on the statement and (2) can prove that the price at which they bought or sole was affected by the false filing section 18 applies to all filing under '34 **only filings
Uniform Trade Secrets Act (UTSA)
anyone who misappropriates a trade secret is liable to the owner for (1) actual damages (2) unjust enrichment, or (3) a reasonable royalty
rights of shareholders: right to protection from other shareholders
anyone who owns enough stock to control a corporation has a fiduciary duty to minority shareholders
the Dodd-Frank wall street reform and consumer protection act
anyone who provides information to the government about violations of securities or commodities laws is entitled to a payout of 10-30% of whatever award the government receives
Tippers
anyone who reveals material nonpublic information in violation of his fiduciary duty is liable if (1) he knows the information was confidential AND (2) he expected some personal gain (including a gift)
Disparate Impact
applies if the employer has a rule that, on its face, is not discriminatory, but in practice excludes too many people in a protected category plaintiff does not have to prove intentional discrimination
Insider Trading and Sarbanes-Oxley Act (SOX)
applies to all US companies reporting under '34 and all foreign companies listed on a U.S. stock exchange. requires companies to disclose if they have an ethics code imposes fines and imprisonment on anyone who interferes with a federal investigation into fraud permits whistleblowers on securities law violation to sue the company if it retaliates against the employee (also makes it a crime to retaliate against whistleblowers on any federal offense) establishes a new Public Company Accounting Oversight Board
franchises
are not a separate form of organization most franchisors and franchisees are corporations
service marks
are used to identify services, not products
certification marks
are words or symbols used by a person or organization to attest that products and services produced by others meet certain standards
Disparate Impact (ADEA)
arise when an employer's actions do not explicitly discriminate, but nonetheless have an adverse impact on people aged over 40 STEP 1: the plaintiffs must present a prima facie case that the employment practice in question excludes a disproportionate number of people 40 and older STEP 2: the employer wins if it can show that the discriminatory decision was based on a 'reasonable factor other than age'
wrongful discharge: refusing to violate the law
as a general rule, employees may not be discharged for refusing to break the law
wrongful discharge: exercising a legal right
as general rule, an employer may not discharge a worker for exercising a legal right if that right supports public policy
Equal Employment Opportunity Commission defines a disparate impact
as one in which the pass rate for a protected category is less that 80%
issuing debt
authorizing debt is one of the first steps a new company takes bonds: long-term debt secured by company assets debentures: long-term unsecured debt notes: short-term debt, typically payable within five years (secured or unsecured)
LLC: limited liability
members are not personally liable for the debts of the company (risk only their investment)
LLC: Formation
must have a charter and an operating agreement
sexual orientation
neither title VII nor any other federal statute protects against discrimination based on sexual orientation
partnership by estoppel
non-partners are treated as if they were actually partners and are forced to share liability
LLC: duration
now to permit an LLC to continue in operations even after a member withdraws
quid pro quo harassment
occurs if any aspect of a job is made contingent upon sexual activity
Why is insider-trading is illegal?
offends our fundamental sense of fairness investors will lose confidence in the market everyone who buys and sells stock will pay a slightly higher price because insider-trading skims off some of the profits
hostile work environment sexual harassment
offensive jokes, intrusive comments about clothes or body parts, and public displays of pornographic pictures can create a hostile environment
limited liability companies (LLC)
offers the limited liability of a corporation and the tax status of a partnership
insiders
officers, directors, and shareholders who own more than 10% of the company
LLC: going public
once an LLC is public it is subject to double taxation private companies that begin as LLC usually change to corporations when they become public
accommodating the disabled worker
once it is established that a worker is disabled, employers may not discriminate on the basis of disability so long as the worker can, with reasonable accommodation, perform the essential functions of the job. an accommodation is not reasonable if it would create undue hardship for the employer
facilitating state regulation
options that ease the process of complying with state securities requirements: Coordinated Equity Review (CER) for overing over $5 million that are registered with the SEC Small Company Offering Registration (SCOR) for use in offerings up to $1 million in a 12-month period United Limited Offering Exemption
truth in hiring
oral promises made during the hiring process can be enforceable, even if not approved by the company's top executive
Par value
par value protects investors...usually some random number like $.01
international trademarks
paris convention: if someone registers a trademark in one country, then he has 6 months to file in any other country using the same original filing date madrid agreement: any trademark registered with the international registry is valid in all signatory countries Trademark law treaty: simplifies and harmonizes the process of applying for trademarks around the world
partnership by estoppel exists if:
participants tell other people that they are partners, or they allow other people to say, without contradiction, that they are partners a third party relies on this assertion; and the third party suffers from harm
General Partnerships: management duties
partners are liable to the partnership for gross negligence or intentional misconduct partners cannot compete with the partnership a partner may not take an opportunity away from the partnership unless the other partners consent if a partner engages in a conflict of interest, he must turn over to the partnership any profits he earned form the activity
General partnerships
partnerships ... each go-owner is a general partner
general partnerships: taxes
partnerships are not a taxable entity, profits flow through to the owners
duration of a patent
patents are valid for 20 years from the date of filing the application (14 years from the date of issuance for design patents)
wrongful discharge
an employer may not fire a worker for a reason that violates basic social rights, duties or responsibilities
business method patents (utility patent)
patents involve a particular way of doing business (ex: data processing or mathematical calculations)
constitutional claims
people brining a claim under the constitution must file suit on their own
patent application and issuance
to obtain a patent, must file and application with the PTO
Prima Facie
"from its first appearance." Something that appears to be true upon a first look
Sex
"gender must be irrelevant to employment decisions" Title VII forbid sex stereotyping
quid pro quo
"one thing in return for another"
'33 act exempts securities because they are:
'33 act exempts securities because they are: 1) inherently low-risk 2) are regulated by other statutes, or 3) are not really investments
SEC creates law in 3 ways:
1) Rules 2) Releases: SEC issues a release to announce a proposed change in the rules, it also asks for comments on the proposal 3) No-action Letters: anyone who is in doubt about whether a transaction complies with the securities laws can ask the SEC directly, the response is called a 'no-action letter' because it states that 'staff will recommend that the commission take no action' if the transaction is don in a specified manner
Name (under The Model Act)
1) all corporations must use one of the follow words in their name: corporation, incorporate, company, or limited (Delaware also accepts: association or institute) 2) a new corporate name must be different from that of any corporation, limited liability company, or limited partnership that already exists in that state
privacy in the workplace statues:
1) general lifestyle statutes 2) laws that protect specific behavior
section 16 two-pronged approach:
1) insiders must report (to the SEC and company) their trades within two business days. 2) insiders must turn over to the corporation any profits they make from the purchase and sale or sale and purchase of company securities in a 6-month period. Strict liability provision, it applies even if the insider did not actually use insider infomation
3 goals of the Business Judgment Rule:
1) it permits directors to do their job: if directors were afraid they would be liable for every decision they would never take risks 2) it keeps judges out of corporate management: without the BJR judges would second-guess managers' decisions 3) it encourages directors to serve: no one would serve as director if every decision was subject to legal consequences
two categories of sexual harassment
1) quid pro quo and 2) hostile work environment
S corp restrictions
1) there can be only one class of stock 2) there can be no more than 100 shareholders 3) shareholders must be individuals, estates, charities, pension funds, or trusts, not partnerships or corporations 4) shareholders must be citizens or residents of the US 5) all shareholders must agree that the company should be an S corp
(BJR) Duty of Loyalty
1) without a conflict of interest. the obligation of a manger to act without a conflict of interest prohibits managers from making a decision that benefits them at the expense of the corporation (self-dealing and corporate opportunity)
1933 act registers securities
1934 act registers companies
registration statement
2 purposes of the registration statement: 1) to notify the SEC that a sale of securities is pending and 2) to disclose information to prospective purchasers registration statements include detailed information about the issuer and business, description of the stock, proposed use of the offerings proceeds, 2 years of audited balance sheet and income statement
(BJR) Duty of Care
2) with the care that an ordinarily prudent person would take in a similar situation and 3) in a manner they reasonably believe to be in the best interest of the corporation the requirement that a manager act with care and in the best interest of the corporation. requires officers and directors to act in the best interest of the corporation and to use the same care than an ordinarily prudent person would take in a similar situation (rational business purpose, legality, informed decision)
('34 act) Rule 10b-5
A misstatement or omission of a material fact: anyone who fails to disclose material information, or make incomplete or inaccurate disclosure, is liable. Material: important enough to affect an investor's decision. Scienter (willfully, knowingly, or recklessly): the defendant must have (1) known that the statement was inaccurate, AND (2) intended for the plaintiff to rely on the statement. ***negligence is not enough*** Purchase or sale: Rule 10b-5 covers both buyers and sellers. Reliance: a plaintiff must show that she relied on the misstatement or omission. Economic Loss: plaintiff must suffer a loss in the value of their investment. Loss Causation: the economic loss must have been caused by the misstatement of a material fact
Organizing Union: Stages
Campaign, Authorization Cards, Petition, Election, The 'card-check' debate
Advantages of a DPO
Can be faster and cheaper than a regular public offering. Can be an effective marketing tool, The internet provides an easy and inexpensive mechanism for reaching potential investors.
Crowd-funding
Jumpstart Our Business Startups Act (JOBS), permits privately held companies to sell up to $1 million in securities in any 12-month period, provided that they: 1) make a filing with the SEC and provide appropriate disclosure to the purchaser at the time or purchase, and then annually; 2) limit investments to (a) investors with income or net worth that is less than $100,000 can invest no more than the maximum of $2,000 or 5% of their income or net worth, or (b) investors with income or net worth that is equal to or greater than $100,000 can invest no more than the maximum of $100,000 or 10% of their income or net worth 3) sell the securities through an approved intermediary 4) do not advertise the offering 5) do not offer investment advice or pay anyone to sell their securities 6) take steps to reduce the risk of fraud 7) do not resell the stock for one year (exception: accredited investors or family members)
Delaware advantages
Laws that favor management: only majority of shareholders need to agree to take a meeting in writing rather than hold a meeting (other states need unanimous vote). Delaware legislature rites to keep-up-to-date by changing its code to reflect new developments in corporate law An efficient court system: "Chancery Court" that hears nothing but business cases and has judges who are experts in corporate law An established body of precedent: because so many businesses incorporate in Delaware they create a large body of precedent, which allows lawyers to more easily predict the outcome of a case in Delaware than in a state where few corporate disputes have been tried
Disadvantages of a DPO
Limits to how much a company can raise. Company officers do not have as much expertise about the securities markets. Investors must receive written information about the company. Although shareholders are warned that they should view their shares as a long term investment, some want to sell (setting up a system to permit trades is tricky/time consuming)
Sale of Restricted Securities
Rule 144 limits the resale of two types of securities issued by public companies: control securities and restricted securities
Courts recognize 3 situations in which employers may consider customer preference (BFOQ)
SAFETY: maximum security men's prison could refuse to hire women PRIVACY: an employer may refuse to hire women to work in a men's bathroom, and vice versa AUTHENTICITY: an employer may refuse to hire a man for a woman's role in a movie
Steps in a Disparate Treatment Case:
STEP 1: (Prima facie case) plaintiff presents evidence that... she belongs to a protected category under title VII. she was treated differently from other similar people who are not protected under title VII. ***only needs to create a presumption of discrimination, proof not required STEP 2: defendant must present evidence that its decision was based on legitimate, nondiscriminatory reasons STEP 3: to win, the plaintiff must now prove that the employer intentionally discriminated...show that (1) the reasons offered were simply pretext, or (2) that a discriminatory intent is more likely than not ***plaintiff must prove intentional discrimination
Under ADEA, a disparate treatment case:
STEP 1: plaintiff must show that he is 40 or older he suffered an adverse employment action he was qualified for the job for which he was fired or not hired he was replaced by a younger person STEP 2: the employer must present evidence that its decision was based on legitimate nondiscriminatory reason STEP 3: the plaintiff must now show that the employer's reasons are pretext and, in fact the employer intentionally discriminated *** standard of proof in age discrimination is is tougher than in title VII litigation: under the ADEA, the plaintiff must prove that BUT FOR his age, the employer would not have taken the action it did
disparate treatment (ADA)
STEP 1: the plaintiff must offer prima facie evidence that the employer discriminated because of his disability STEP 2: the employer must then offer a legitimate, nondiscriminatory reason for its action STEP 3: to win, the plaintiff must now prove that the employer intentionally discriminated. She may do so either by showing that (1) the reason offered were simply a pretext, or (2) that a discriminatory intent it more likely than not
Steps in a Disparate Impact Case:
STEP 1: the plaintiff must present a prima facie case STEP 2: The defendant must offer some evidence that the employment practice was a job-related business necessity STEP 3: to win, the plaintiff must now prove either that the employer's reason is a pretext or that other, less discriminatory, rules would achieve the same result
Liability under the '34 Act
Section 18 Section 10(b) the private securities litigation reform act of 1995
Exempt transactions
Section 4(2) of the '33 Act exempts from registration 'transactions by an issue not involving any public offering' an issuer is not required to register securities that are sold in a private offering
private employers: alcohol and drug use
THESE employers are permitted to test job applicants and workers for alcohol and illegal drugs
medical exams
WITH APPLICANTS: an employer generally may not require a medical exam or ask about disabilities May ask whether an applicant can perform the work, the applicant to demonstrate how he would perform, and (if disability is obvious) what accommodation the applicant may need WITH ENTERING EMPLOYEES: the company may require a medical test and make it a condition of employment, but the test must be required for all employes (disabled or not), and treated as a confidential medical record WITH EXISTING EMPLOYEES: an employer may require medical exams or discuss any suspected disability, but only to determine if a worker is still able to perform the existing functions of his job
incorporation process
Where to Incorporate? and The Charter a company can incorporate only under state law
No-strike clause
a clause in a CBA that prohibits the union from striking while the CBA is in force
Rule 506 (Reg D)
a company may sell and unlimited amount of stock, subject to these restrictions: 1) it may sell to an unlimited number of accredited investors, but only 35 un accredited investors 2) if it sells to unaccredited investors, it may not advertise the stock publicly. But if sales are limited to accredited investors, it may advertise publicly 3) it need not provide information to accredited investors but must make disclosure to unaccredited investors, including a certified balance sheet 4) stock purchased under this rule is restricted 5) if an unaccredited purchaser is unsophisticated, he must have a purchaser representative to help him evaluate the investment
Rule 505 (Reg D)
a company may sell up to $5 million of stock during a 12-month period, subject to the follow restrictions: 1) it may sell to an unlimited number of accredited investors, but to only 35 unaccredited investors 2) it may not advertise the stock publicly 3) it need not provide information to accredited investors but must make disclosure to unaccredited investors, including a certified balance sheet 4) stock purchased under this rule is restricted
Address and Registered Agent
a company must have an official address in the state in which it is incorporated so that the Secretary of State knows where to contact it and so that anyone who wants to sue the corporation can serve the complain in-state corporations hire a registered agent to serve as their official presence in the state
reporting companies
a company registered under '34 act
Issuer
a company that sells its own stock
Close corporations (closely held corporations)
a company whose stock is not publicly traded. protection of minority shareholders transfer restrictions (shareholder must first offer shares to the other owners before selling them to an outsider) flexibility (don't need a board of directors) dispute resolution
Initial Public Offering (IPO)
a company's first public sale of securities
Collective bargaining agreement (CBA)
a contract between a union and management
copyright term
a copyright is valid until 70 years after the death of the work's only or last living author, or, in the case of works owned by a corporation, the copy right lasts 95 years from publication or 120 years from creation which ever is shorter
foreign corporation
a corporation formed in another state
domestic corporation
a corporation is a domestic corporation in the state in which it was formed
rights of shareholders: right to vote
a corporation must have at least one class of stock with voting rights shareholder meetings: annual shareholder meetings are the norm for publicly traded companies everyone who owns stock on the record date must be sent notice of a meeting Proxies: shareholders who don't want to attend the meeting may appoint a proxy shareholder proposals: under SE rules, any shareholder ho has continuously owned for one year at least 1% of the company or $2,000 of stock can require that one proposal be placed in the company's proxy statement to be voted on at the shareholder meeting (most proposals non-binding)
rights of shareholders: fundamental corporate changes
a corporation must seek shareholder approval before undergoing fundamental changes (merger, a sale of major assets, dissolution of the corporation, an amendment to the charter)
Corporations: limited liability
a corporation protects managers and investors from personal liability for the debts of the corporation and the actions of others, but not against liability for their own negligence (or other torts and crimes) limited liability does not protect against all debts individuals are always responsible for their own acts
Pierce the corporate veil
a court holds shareholders personally liable for the debts of the corporation
if managers comply with the business judgement rule...
a court will not hold them personally liable for any harm their decisions cause the company, not will the court rescind their decisions.
Merit
a defendant is not liable if he shows that the person he favored was the most qualified
Bona Fide Occupational Qualification (BFOQ)
an employer is permitted to establish discriminatory job requirements if they are essential to the position in question Only sex, religion and national origin can be a BFOQ (NEVER race or color)
LLC: legal uncertainty
accordance to state law and operating agreement
going effective
after review of the preliminary registration statement is complete, the SEC sends the issuer a comment letter, listing changes that must be made to the registration statement. Companies typically amend their statement After SEC approves the final registration statement, the issues and underwriter agree on a price for the stock and the date to Go Effective (to being the sale)
economic strike
after, an employer may not discriminate against a striker, but the employer is not obligated to lay off a replacement worker to give a striker his job back
BFOQ (ADEA)
age is rarely a BFOQ. to set a maximum age, the employer must show that: the age limit is reasonably necessary to the essence of the business; and either virtually everyone that age is unqualified for the job; or age is the only way an employer can determine who is qualified
adopt
agree to be bound by the terms of a contract. after formation, the corporation can adopt the contract, in which case, both it and the promoter are liable
state laws (whistleblowers)
all 50 states have laws that protect whistleblowers
The Model Act definition of the Directors' Role:
all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed by or under the direction of, its board of directors
Track One System
allowed under the AIA, the PTO can permit inventors to buy their way to the head of the line by paying an addition fee track one applications are supposed to be decided within one year
employee handbook
an employee handbook creates a contract
hostile work environment (ADA)
an employee may bring a claim under the ADA if she is subjected to a hostile work environment because of her disability
equal pay act of 1963
an employee may not be paid at a lesser rate than employees of the opposite sex for equal work if the employee proves that she is not being paid equally, the employer will be found liable unless the pay difference is based on merit, productivity, seniority, or some factor other than sex
Only time employers may require a polygraph test:
an employee who is part of an 'ongoing investigation' into crimes that have already occurred an applicant applying for a government job an applicant for a job in public transport or banking, or at pharmaceutical firms that deal with controlled substances
relationship with a disabled person
an employer may not discriminate against someone because of his relationship with a disabled person
proxy statement
before its annual meeting, a public company provides a document to shareholders that contains information about the corporation
General exemption
before offering securities for sale, the issue must determine whether they are exempt from registration under '33 exemptions are based on two factors: 1) the type of security and 2) the type of transaction
Number of shared
before stock can be sold it must be authorized in the charter the more share, the higher the filing fee authorized and unissued: sock that have been authorized, but not yet sold authorized and issued (outstanding): sock that has been authorized and sold treasury stock: stock that a company has sold but later bought back
sales effort
before the final registration statement and prospectus are completed, the investment bank begins its sales effort (it cannot actually make sales during this period, but it can solicit offers) **cannot hype the stock
corporate insiders
board members, major shareholders, employees, temporary insiders (lawyers and investment bankers who are doing deals with the company)
derivative lawsuits
brought by shareholders to remedy a wrong that has been committed against the corporation. suit is brought in the name of the company and all benefits go to the company. (demand board to bring suit... usually rejected) shareholders have the right to file suit on behalf of the corporation without seeking approval from the board if demand would be futile. demand is futile if the directors violated the duty of care or the duty of loyalty that are required by the business judgement rule
Prospectus
buyers never see the reregistration statement, they are given the prospectus. prospectus includes the important disclosures about the company all investors must receive a copy of the prospectus before purchasing the stock
Regulation A
called a private offering, but it is really a small public offering. Reg A permits an issuer to sell up to $50 million of securities publicly in any 12-month period
LLC: flexibility
can have members that are corporations, partnerships, or nonresident aliens can have different types of stock not required to hold annual meetings
SEC power to enforce laws
cease and desist order against those who violate the securities laws, and it can also levy fines or confiscate profits from illegal transactions SEC does not have the authority to bring a criminal action; it refers criminal cases to the justice department
where to incorporate?
companies generally incorporate either in the state where they do most of their business or in Delaware (domestic corporation and foreign corporation) no matter where a company actually does business, it may incorporate in any state many states use the Model Business Corporation Act (the Model Act) but Delaware does not
underwriting
companies hire an investment bank to serve as an underwriter. in a Firm Commitment Underwriting, the underwriter buys the stock form the issuer and resells it to the public (underwriter bears the risk if the stock price drops) in a Best Efforts Underwriting, the underwriter does not buy the stock from the issuer buy instead acts as the issuer's agent in selling it (the company bears the risk if the stock price drops)
enforcement
constitutional claims, the civil rights act of 1866, rehabilitation act of 1973, other statutory claims
Strikes
cooling off period, statutory prohibition, violent strikes, partial strikes
corporations: taxes
corporations are taxable entities, they must pay taxes and file returns are taxable entities and pay income tax on their profits (double taxation)
corporations: duration
corporations have perpetual existence: they can continue without their founders
corporations: transferability of interests
corporations provide flexibility for enterprises corporate stocks can be bought and sold easily (partnership interests are not transferable without permission of the other partners)
copyright infringement consequences:
court may (1) prohibit the infringer from committing further violations, (2) order destruction of the infringing material, and (3) require the infringer to pay damages, profits earned, and attorney's fees
legality (duty of care)
courts are unsympathetic to managers who engage in illegal behavior, even if their goal is to help the company
wrongful discharge: performing a legal duty
courts have consistently held that an employee may not be fired for serving on a jury
litigation
courts have the power under Title VII to order affirmative action to remedy the effects of past discirmination
informed decisions (duty of care)
courts will protect managers who make an informed decision (carefully investigating the facts), even if the decision ultimately harms the company managers will not be liable for uninformed decisions that are fair to the shareholders
domain names
cybersquatting ICANN Theft of Domain Name Trademarking a Domain name
LLC: transferability of interests
default option: the members of the LLC must obtain unanimous person of the remaining members before transferring their ownership rights cannot issue stock options
enforcing shareholder rights
derivative lawsuits and direct lawsuits
short-swing trading - section 16 ('34 act)
designed to prevent corporate insiders from taking unfair advantage of privileged information to manipulate the market. section 16 has two-prongs
recording industry association of america (RIAA)
developed a strategy of aggressively suing those who download music illegally
rational business purpose (duty of care)
directors and officers are liable for decisions that have no rational business purpose
after incorporation
directors and officers, bylaws, issuing debt
the role of corporate management
directors set policy and then appoint officers to implement corporate goals
a plaintiff in an age discrimination case can show discrimination in 3 ways:
disparate treatment disparate impact hostile work environment
Prohibited activities under Title VII of the Civil Rights Act of 1964
disparate treatment, disparate impact, hostile work environment, and retaliation
Internet Corporation for Assigned Names and Numbers (ICANN)
disputes over domain name can be decided under ICANN's Uniform Domain Name Dispute Resolution Policy (UDRP) To bring a UDRP case, the complainant (plaintiff) must allege that: the domain name creates confusion because it is similar to a registered trademark the respondent (defendant) has no legitimate reason to use the domain name the respondent registered the name in bad faith
corporations
dominant form of organizations well developed law regulates them limited liability, transferability of interests, duration, logistics, taxes
Proxy Requirement - section 14 ('34 act)
if a company solicits proxies, it is required to supply shareholders with a proxy statement that is intended to give them enough information to make informed decisions about the company
liability for registration statement ('33 act)
if a final registration statement contains a material misstatement or omission, the purchaser of the security can recover from everyone who signed the registration statement damages: the plaintiff need only prove that there was a material misstatement or omission and that she lost money <<does not have to prove that she relied on the registration statement>> due diligence: an investigation of the registration statement by someone who signs it
Rule 147 is a safe harbor (intrastate offering exemption)
if an issuer totally complies with rule 147, the offering definitely qualifies as intrastate; but even if the issue does not comply absolutely with the rule, the SEC or courts may still consider the offering to be intrastate. The issuer cannot be sure in advance how the decision will come out safe harbor: a set of requirements that, if met, indicate automatic compliance with the law
failure to observe formalities
if an organization does not act like a corporation, it will not be treated like one. corporations must holder required shareholder' and directors' meetings, keep minute books, make required state filings, and officers must sign all corporate documents with a corporate title
Fraud
if fraud is committed in the name of a corporation, victims can make a claim against the personal assets of the shareholders who profited from the fraud
inadequate capitalization
if the founders of a corporation do not raise enough capital to give the business a change to pay its debts, courts amy require shareholders to pay corporate obligations
material
important enough to affect an investors decision
liability for selling unregistered securities ('33 act)
imposes liability on anyone who sells a security that is neither registered nor exempt (purchaser can demand rescission or damages)
covenant of good faith and fair dealing
in almost all states, courts will imply a covenant of good faith and fair dealing in an at-will employment relationship
LLC: tax status
income flows through the company to the individual members, avoids double taxation
directors and officers
incorporators elect the first set of directors, thereafter, shareholders elect directors the Model Act: a corporation is required to have at lease one director, unless (1) all the shareholders sign an agreement that eliminates the board, or (2) the corporation has fewer than 50 shareholders
Time trademarks
initially valid for 10 years, but the owner can renew it for an unlimited number fo 10 year terms as long as the mark is still in use
accredited investors
institutions (banks or insurance companies) or wealthy individuals. to qualify, individuals must have a net worth (excluding home) or more than $1 million or an annual income of more than $200,000
no electronic theft act
intended to deter the downloading of copyrighted material. it provides criminal penalties for the reproduction or distribution of copyrighted material that has a retail value greater than $1,000, even if the offender has no profit motive
the private securities litigation reform act of 1995
intended to discourage fraud suits by shareholders. companies are liable to shareholder for forward-looking statements ONLY if (1) the company fails to include a warning that the predictions may not come to pass, AND (2) the shareholders can show that company executive knew the predictions were false
prohibited Unfair Labor Practices (ULPs) Section 8 NLRA
interfering with union organizing efforts, dominating or interfering with any union, discriminating against a union or member, or refusing to bargain collectively with a union
sexual harassment
involves unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature which are so severe and pervasive that they interfere with an employee's ability to work
Lifestyle laws
laws that protect the right of employees to engage in any lawful activity or use any lawful product when off duty
Liability under '33 Act
liability for selling unregistered securities fraud criminal liability liability for registration statement
Limited partnerships and limited liability limited partnerships: Liability
limited partners are not personally liable, but general partners are Uniform Limited Partnership Act (ULPA) in a limited liability limited partnership, the general partner is not personally liable for the debts of the partnership
Limited partnerships and limited liability limited partnerships: transfer of ownership
limited partners have the right to transfer the VALUE of their partnership interests, but they can sell or give away the interest itself ONLY if the partnership agreement permits
Limited partnerships and limited liability limited partnerships: taxes
limited partnerships are not taxable entities
Limited partnerships and limited liability limited partnerships: Structure
limited partnerships must have at least one limited partner and one general partner
affirmative action program sources:
litigation, voluntary action, and government contracts
reasonable accommodation
make facilities accessible permit part time schedules acquire or modify equipment and assign a disabled person to an open position that he can perform
Economic Espionage Act of 1996
makes it a criminal offense to steal (or attempt to steal) trade secrets for the benefit of someone other than the owner, including for the benefit of any foreign government
Replacement workers
management has the right to hire replacement workers during a strike
Lockouts
management prohibits workers from entering the premises and earning their paychecks Yes, are legal
general partnership: management
management rights: unless the partnership agrees otherwise, partners share both profits and losses equally, and each partner has an equal right to manage the business (managing partners or members of the executive committee) management duties: partners have a fiduciary duty to the partnerships
Self-dealing (duty of loyalty)
means that a manager makes a decision benefiting either himself or another company with which he has a relationship once a manager engages in a self-dealing, the business judgment rule no longer applies
retaliation
means that the employer has done something that would deter a reasonable worker from complaining about discrimination title VII prohibits employers from retaliating against workers who oppose discrimination, bring a claim under the statute, or take part in an investigation or hearing
Franchise Disclosure Document (FDD) must provide:
the history of the franchisor and its key executives litigations with franchisees bankruptcy filings by the company and its officers and directors costs to buy and operate a franchise restrictions on suppliers, products, and customers territory - any limitations on where franchisee can sell or any restrictions on other franchisees selling in the same territory business continuity - circumstances that a franchisor can fire a franchisee; and the franchisee's rights to renew or sell franchisor's training program required advertising expenses a list of current franchisees and those that have left in the prior three years a report on prior owners of stores that the franchisor reacquired earnings information is not required audited financials for the franchisor a sample set of the contracts that a franchisee is expected to sign
Copy rights
the holder of a copyright owns the particular tangible expression of an idea, but not the underlying idea or method of operation work is copyrighted automatically once it is in tangible form
incorporator
the incorporator signs the charter and delivers it to the Secretary of State
Direct Public Offering (DPO)
the issuer typically sells shares to its stakeholders: customers, employees, suppliers, or the community. The issuer makes a DPO under Rule 147, Reg D, or Reg A
criminal liability ('33 act)
the justice department can prosecute anyone who willfully violates the act
Regulation D (Reg D)
the most popular for private offerings three different regulations under Reg D can be made (Rule 504, 505, and 506).
minute book
the official record of a corporation written consents and any records of actual meetings are held in the minute book
Lanham Act
the owner of a mark may register it on the Lanham Act Principal Register
preferred stock
the owners of preferred stock have preference on dividends and also, typically, in liquidation cumulative preferred stock non-cumulative preferred stock participative preferred stock
limited liability partnerships (LLP)
the partners are not liable for the debts of the partnership
quorum
the percentage of stock that must be represented for a meeting to count
proxy
the person whom a shareholder appoints to vote for her at a meeting of the corporation also, the document a shareholder signs appointing the substitute voter
Disparate treatment
the plaintiff must show that she was TREATED less favorably than others because of her sex, race, color, religion or nation origin. Burden of proof is on the PLAINTIFF: she must prove that the employer INTENTIONALLY discriminated
disparate treatment (age discrimination case)
the plaintiff must show that the employer intentionally discriminated against him because of his act, or enacted a policy that intentionally treated employees differently because of age
rights of shareholders: compensation of officers and directors
the problem: stock options termination, retirement plans, and death benefits lavish perks directors, not shareholders, set executive compensation shareholders bear the risk benchmarking games CEO gets all the credit the busier the directors, the higher the executive pay most executives are above average compensation consultants often have conflicts of interest a solution: proxy rules SOX Dodd-Frank emerging growth companies
Securities and Exchange Commission 1934 (SEC)
the regulatory agency that oversees the securities industry
fraud ('33 act)
the seller of a security is liable for making any material misstatements or omission, either oral or written, in connection with the offer or sale of security
whistleblowing
they are employees who disclose illegal behavior on the part of their employer
Employee Retirement Income Security Act (ERISA)
this act protects workers covered by private pension plans
Employment and Sarbanes-Oxley Act of 2002 (SOX)
this protects employees of publicly traded companies who provide evidence of fraud to investigators
Termination
three step process: vote, filing, winding up vote: the directors recommend to the shareholder that the corporation be dissolved and a majority of shareholders agree filing: the corporation files 'Articles of Dissolution' with the Secretary of State Winding up: the officers of the corporation pay its debts and distribute the remaining property to shareholders. When winding up is completed, the corporation ceases to exist
hostile environment based on race, color, and origin
title VII prohibits discrimination based on both race and color ... and origin
useful
to be patented, an invention must be useful.
valid trademarks
to be valid, a trademark must be distinctive
written consent
to elect directors, the shareholders may hold a meeting, or, in small companies, they elect directors by written consent
international patent treaties
world intellectual property organization of the UN (WIPO) Paris convention for the protection of industrial property (paris convention) requires each member country to grant to citizens of other member countries the same rights under patent law as its own citizens enjoy The patent law treaty requires that countries use the same standards for the form and content of patent applications Patent Cooperation Treaty (PCT) is a step toward providing more coordinated patent review across countries Patent Prosecution Highway: once a patent is approved by one country, it goes to the head of the line for patent examination in the other country countries in the WTO must agree to trade related aspects of intellectual property rights (TRIPS)
