Corporations: Examples and Explanations

by Palmiter, Alan R.; Solomon, Lewis D.

• ISBN13: 9780735528109
• ISBN10: 0735528101
• Edition: 4th
• Format: Paperback
• Copyright: 2003-02-01
• Publisher: Wolters Kluwer

Summary

Corporate accounting scandals, insider trading, and executive corruption with new examples straight out of today's headlines this best-selling study guide the most of the popular Examples & Explanations format. Each topic is presented with examples and related questions, followed by answers and explanations. One of the most successful titles in the series, Corporations has been the top study guide in this area for nearly fifteen years, helping thousands of students gain a solid grasp of corporate issues. Now under the hand of a single author, this latest edition covers recent changes in the Model Business Corporation Act, new SEC rules on insider trading, The recent Sarbanes-Oxley Act, and much more. One of the leading titles in the popular Examples & Explanations Series, this study guide features: proven content and pedagogical format making this one of the best-selling ancillaries in corporate law for over fifteen years masterful explanations of business topics polished through four editions to help students with no business background grasp the intricacies of corporate law comprehensive course support providing ample material on all areas of corporate law The 2003 Edition features new and updated material, including: the race To The bottom thesis with a new treatment of the relationship between deregulation and price wars recent changes in the Model Business Corporation Act covering new director duties, fundamental corporate changes and appraisal rights, and new charts clarifying variances between the old MBCA, The new MBCA, and Delaware statutes new examples from current events such as the accounting and executive compensation scandals at Enron and other companies that resulted in a wave of new legislation and rules new issues and topics in corporate law including the SEC's latest rules on insider trading, The use of dead-hand poison pills to prevent shareholder control and much more

Table of Contents

Preface	p. xxv
Acknowledgments	p. xxvii
Special Notice	p. xxix
Introduction to Corporate Law
The Corporation--An Overview	p. 3
Corporation Basics	p. 4
Sources of Corporate Law	p. 7
Corporation as a Constitutional Person	p. 10
Choice of Organizational Form	p. 19
Business Organization Choices	p. 19
Choosing between Unincorporated and Incorporated Firm	p. 21
Taxation--Critical Element in the Choice	p. 25
Formation of the Corporation
Incorporation--How, Where, and What	p. 35
Process of Incorporation	p. 35
Choosing Where to Incorporate	p. 39
Corporate Powers and the Ultra Vires Doctrine	p. 45
Financial Rights in Corporation	p. 53
Financial Rights of Equity Shares	p. 54
Issuance of Equity Securities	p. 62
Debt Financing	p. 68
Choosing a Debt-Equity Mix	p. 71
Federal Regulation of Securities Offerings	p. 75
Securities Act Disclosure Mandates	p. 76
Exemptions--Tempering the Breadth of [section] 5	p. 78
Civil Liability under Securities Act	p. 89
Definition of Security	p. 94
Shareholder Voting Rights
Shareholders' Role in Corporate Governance	p. 101
Purposes of Shareholder Voting	p. 102
Shareholder Voting in Public Corporations	p. 103
Shareholder Voting in Close Corporations	p. 107
Voting Structure	p. 109
Shareholders' Governance Role	p. 109
Mechanics of Shareholders' Meetings	p. 114
Election of Directors	p. 118
Judicial Protection of Voting Rights	p. 131
Rules against Shareholder Opportunism	p. 131
Judicial Review of Management Entrenchment	p. 134
Federal Regulation of Proxy Voting	p. 145
Federal Proxy Regulation--An Overview	p. 145
Reach of the SEC Proxy Rules	p. 146
Formal Requirements of SEC Proxy Rules	p. 150
Shareholder Initiatives	p. 157
Proxy Fraud	p. 169
Private Actions	p. 169
Federal Action for Proxy Fraud	p. 171
State Action for Proxy Fraud	p. 176
Corporate Fiduciary Duties
Fiduciary Duties--An Introduction	p. 185
The Corporate Fiduciary--A Unique Relationship	p. 186
Fiduciary Duties of Care and Loyalty	p. 189
Fiduciary Duties--Fitting Corporate and Market Realities	p. 191
Enforcing Fiduciary Duties	p. 193
Duty of Care and the Business Judgment Rule	p. 195
Standards of Care--General, but Misleading, Guidance	p. 195
Business Judgment Rule	p. 197
Overcoming Business Judgment Presumption	p. 199
Remedies for Breaching the Duty of Care	p. 208
Exculpation of Directors' Care Failures	p. 209
Duty of Loyalty--Self-Dealing Transactions	p. 223
Nature of Self-Dealing	p. 223
Judicial Suspicion of Self-Dealing Transactions	p. 224
"Fairness" Tests	p. 226
Statutory "Safe Harbors"	p. 231
Remedies for Self-Dealing	p. 233
Executive Compensation	p. 241
Forms of Executive Compensation	p. 241
Judicial Review	p. 242
Directors' Compensation	p. 246
Regulatory and Market Pressure	p. 247
Indemnification and Insurance	p. 251
Indemnification--Corporate Reimbursement	p. 251
Insurance	p. 256
Corporate Opportunities and Unfair Competition	p. 265
Corporate Opportunity Doctrine	p. 265
Definition of "Corporate Opportunity"	p. 266
Corporate Rejection and Incapacity	p. 270
Competition with the Corporation	p. 272
Duties of Controlling Shareholders	p. 279
Who Are Controlling Shareholders?	p. 279
Parent-Subsidiary Dealings	p. 280
Squeeze-Out Transactions--Eliminating Minority Interests	p. 284
Shareholder Litigation	p. 297
Nature of Derivative Litigation	p. 297
Distinguishing between Derivative, Direct, and Class Action Suits	p. 301
Procedural Restrictions on Derivative Litigation	p. 307
Derivative Litigation in Federal Courts	p. 313
Dismissal of Derivative Litigation--Finding a Corporate Voice	p. 318
Shareholder Liquidity Rights
Share Transferability--An Introduction	p. 333
Statutory Liquidity Rights	p. 334
Public Trading of Corporate Securities	p. 334
Limitations on Control Sales	p. 341
Sale of Office	p. 341
Limitations on Sale of Controlling Shares	p. 341
Disclosure in Securities Trading Markets	p. 351
State Disclosure Duties	p. 351
Federal Disclosure Requirements	p. 353
Securities Fraud--Rule 10b-5	p. 357
Rule 10b-5 Overview	p. 357
Scope of Private 10b-5 Action	p. 360
Fraud Elements of Private 10b-5 Action	p. 364
Defenses in Private 10b-5 Action	p. 372
Comparison to State Law Remedies	p. 374
Insider Trading	p. 381
Insider Trading--A Primer	p. 381
State Law on Insider Trading	p. 383
Application of Rule 10b-5 to Insider Trading	p. 390
Section 16(b)--Disgorgement of Short-Swing Profits	p. 411
Coverage of [section] 16	p. 411
Reports	p. 412
Disgorging Short-Swing Profits--Mechanical Test	p. 412
Closely Held Corporation
Control Dilemma in Close Corporation	p. 427
Special Problems in Close Corporation	p. 427
Planning in Close Corporation	p. 428
Control Devices in Close Corporation	p. 433
Minority Control Rights	p. 434
Self-enforcing Control Structures	p. 440
Transfer Restrictions and Contractual Liquidity Rights	p. 447
Restraints on Directors' Discretion	p. 453
Close Corporation Statutes	p. 456
Dispute Resolution in Close Corporations	p. 463
Close Corporation Disputes	p. 463
Judicial Protection of Minority Shareholders	p. 466
Deadlocks	p. 472
Protection of Corporate Creditors
Rule of Limited Liability	p. 481
General Rule of Limited Liability	p. 481
History of U.S. Limited Liability	p. 484
Liability During Incorporation Process	p. 487
Preincorporation Contracts	p. 487
Liability for Defective Incorporation	p. 494
Promoter's Extra-Contractual Liability	p. 501
Corporate Liability--Authority to Bind the Corporation	p. 505
Board Decision-making	p. 505
Corporate Authority	p. 508
Respondeat Superior--Corporate Liability for Employee Torts	p. 512
Limitations on Corporate Distributions	p. 519
Distributions--Transferring Assets to Shareholders	p. 519
Limitations on Distributions	p. 521
Contractual Limitations on Distributions	p. 528
Liability of Directors for Authorizing Illegal Distributions	p. 529
Piercing the Corporate Veil	p. 539
Traditional Piercing Factors	p. 539
Distilling a Principle--Solving the Piercing Conundrum	p. 551
Statutory Recognition of Corporate Form	p. 557
Statutory Recognition of Corporation	p. 557
Equitable Subordination Doctrine	p. 560
Fundamental Corporate Changes
Takeovers--An Introduction	p. 567
Hostile Choices--Proxy Contest or Tender Offer	p. 568
Garden-Variety Takeover Drama	p. 569
Epilogue--Is the Takeover Phenomenon Healthy?	p. 577
Internal Fundamental Changes	p. 581
Charter Amendments	p. 581
Dissolution	p. 584
Corporate Combinations	p. 589
Combination Choices--Some Basics	p. 590
Mergers	p. 590
Sales of Assets	p. 596
De Facto Merger and Successor Liability Doctrines	p. 600
Appraisal Remedy	p. 609
Appraisal Rights	p. 609
Appraisal Proceeding	p. 613
Exclusivity of Appraisal	p. 616
Federal Regulation of Tender Offers	p. 623
Disclosure of Foothold Position	p. 623
Federal Tender Offer Rules	p. 624
Williams Act Enforcement	p. 628
Williams Act's Effect on Takeovers	p. 629
Takeover Defenses	p. 637
Dilemma of Takeover Defenses	p. 637
State Fiduciary Law's Response to Takeover Dilemma	p. 639
Board's Power to Adopt Takeover Defenses	p. 649
State Antitakeover Statutes	p. 653
Table of Cases	p. 661
Index	p. 667
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