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Items
Details
Author
Title
Corporation law / by Franklin A. Gevurtz.
Published
St. Paul, MN : West, [2010]
Copyright
©2010
Call Number
KF1414 .G48 2010
Edition
Second edition.
ISBN
9780314159793
0314159797
0314159797
Description
xx, 838 pages ; 26 cm.
System Control No.
(OCoLC)663470027
Bibliography, etc. Note
Includes bibliographical references and index.
Supplement Note
Kept up to date by pocket parts.
Series
Record Appears in
Table of Contents
Preface to the First Edition
v
Preface to the Second Edition
vii
Westlaw Overview
ix
ch. I
Formation
1
[§] 11.1
Why Corporations Exist
1
1.1.1.
Private Perspective [I]: Available Choices of Business Form
1
a.
Sole proprietorship
2
b.
Partnership
2
c.
Limited partnership
3
d.
Corporation
3
e.
Limited liability company and limited liability partnership
4
1.1.2.
Private Perspective [II]: Factors in Selecting Between Business Forms
5
a.
Limited liability
5
b.
Exit rules
8
c.
Governance
11
d.
Cost, acceptance and coherence
13
e.
Taxes
16
1.1.3.
Public Perspective [I]: Historical Development of Corporate Law
19
a.
From special chartering to general incorporation laws
19
b.
The decline of size, duration and purpose limits
20
c.
The growth of management and majority prerogatives
22
d.
Limited liability
25
1.1.4.
Public Perspective [II]: The Policy Behind Limited Liability
27
[§] 1.2
State of Incorporation and Governing Law
34
1.2.1.
The Internal Affairs Doctrine
34
1.2.2.
Private Perspective: Selecting the State of Incorporation
38
1.2.3.
Public Perspective: The "Race to the Bottom" Thesis
40
[§] 1.3
Promoters' Contracts
42
1.3.1.
Rights and Obligations of the Corporation
43
1.3.2.
Liability of the promoter to the Third Party
46
1.3.3.
Obligations of the Promoters to the Corporation and to Each Other
51
[§] 1.4
Incorporation
53
1.4.1.
How to Incorporate
53
1.4.2.
Consequences of Defective Incorporation
57
1.4.3.
De facto Corporations, Estoppel and Other Defenses
61
a.
De facto corporations
61
b.
Estoppel
63
c.
Two defenses or one?
64
d.
The Impact of the Model Act
65
1.4.4.
Post-incorporation Filing and Franchise Tax Requirements
68
[§] 1.5
Piercing the Corporate Veil
69
1.5.1.
Sources of Confusion
69
1.5.2.
Tort Claimants versus Contract Creditors
72
1.5.3.
Control or Domination
75
1.5.4.
Disregard of Corporate Formalities
78
1.5.5.
Defendant's Wrongful Dealings With the Creditor
81
1.5.6.
Defendant's Wrongful Dealings With the Corporation's Assets
85
1.5.7.
Inadequate Capitalization
90
a.
Should it be grounds to pierce?
90
b.
What is inadequate capitalization?
95
1.5.8.
Multiple Corporations
102
1.5.9.
Whose Law and Who Decides?
108
1.5.10.
Piercing in Other Contexts
109
ch. II
Financial Structure
112
[§] 2.1
Issuing Stock
112
2.1.1.
Specifying the Rights of Shares
112
a.
The utility of creating classes of stock with different rights
112
b.
Drafting articles to define the rights of classes of stock
116
2.1.2.
Consideration for Shares
122
a.
Permissible consideration
123
b.
Consequences of issuing stock for improper consideration
129
2.1.3.
Preemptive Rights and Other Protections for Existing Shareholders
133
2.1.4.
Formalities
138
[§] 2.2
Debt as Part of the Corporate Capital Structure
139
2.2.1.
Why Have Debt?
139
2.2.2.
Corporate Bonds
143
2.2.3.
Subordination of Shareholder Loans
147
[§] 2.3
Distributions to Stockholders
153
2.3.1.
The Directors' Discretion Over Dividends
153
2.3.2.
Statutory Limits on Dividends
157
a.
Traditional balance sheet statutes
157
b.
The earned surplus approach
161
c.
Modern approaches
162
d.
Accounting questions
164
e.
Remedies for improper declaration of dividends
166
2.3.3.
Repurchases of Stock
168
a.
Stockholder concerns
168
b.
Creditor concerns
173
2.3.4.
Stock Dividends and Stock Splits
177
ch. III
Governance
179
[§] 3.1
The Division of Power Under State Law
179
3.1.1.
Officers
179
a.
Who are the corporation's officers?
179
b.
What authority do the officers possess?
181
3.1.2.
Directors
186
a.
Composition of the board
186
b.
Exercise of the board's authority
190
3.1.3.
Shareholders
195
a.
The Shareholders' role in governance
195
b.
The mechanics of shareholder action
200
c.
Shareholder information rights
212
3.1.4.
The Ultra Vires Doctrine
221
a.
Powers and purposes
222
b.
Gratuitous activites
224
c.
The impact of being ultra vires
228
3.1.5.
Problems With the Basic Governance Model
231
a.
Descriptive failings
231
b.
Normative implications
235
[§] 3.2
Federal Proxy Rules
244
3.2.1.
Overview
245
a.
The statute
245
b.
The rules
248
c.
Dissemination of annual reports and information without a proxy solicitation
253
3.2.2.
False and Misleading Solicitations
253
a.
False or misleading statement of fact or omission
254
b.
Materiality
257
c.
Fault
259
d.
Private cause of action
260
e.
Causation
262
3.2.3.
Shareholder Proposals
267
ch. IV
Duties of Directors and Officers
278
[§] 4.1
Duty of Care
278
4.1.1.
Inattention
279
4.1.2.
Business Decisions and the "Business Judgment Rule"
286
a.
The business judgment rule as a tautological statement
287
b.
The business judgment rule as consistent with the norm of liability for ordinary negligence
288
c.
The business judgment rule as protecting directors from liability so long as they act in good faith
289
d.
The business judgment rule as establishing a gross negligence standard
292
e.
The business judgment rule as creating a distinction between the review of process versus substance
293
4.1.3.
Why a Special Rule for Decisions by Directors?
297
a.
Difficulties with after-the-fact review of business decisions
298
b.
Nature of the damages
301
c.
Nature of the plaintiff
302
d.
Utility of compensation or deterrence
303
e.
Testing the justifications in specific situations
305
f.
Reconciling the business judgment rule with statutory duty of care standards
308
g.
What about corporate officers?
310
4.1.4.
Causation and Damages
311
4.1.5.
To Whom Do Directors Owe a Duty?
314
a.
Do directors have a legally enforceable duty to other constituencies?
315
b.
To what extent can directors take the interests of other constituencies into account?
320
4.1.6.
Illegal Actions
326
4.1.7.
Exoneration by Statute and Charter Provision
328
4.1.8.
Good Faith Revisited
333
[§] 4.2
Duty of Loyalty
340
4.2.1.
Conflict-of-Interest Transactions: The Basic Approach
341
4.2.2.
The Fairness Test
345
4.2.3.
Disinterested Director Approval
351
a.
Who is a disinterested director?
351
b.
How many disinterested votes are needed?
352
c.
When must the vote occur?
353
d.
What are the obligations of the interested directors in obtaining disinterested director approval?
354
e.
What is the impact of the vote?
356
4.2.4.
Shareholders and Conflicts of Interest
361
a.
Shareholder approval of director conflicts
361
b.
Dealings with majority or controlling shareholders
366
4.2.5.
What Is a Conflict-of-Interest?
371
4.2.6.
Executive Compensation
377
4.2.7.
Corporate Opportunities
382
a.
The judicial tests
383
b.
Triangulating corporate opportunities
387
4.2.8.
Justifications for Taking a Corporate Opportunity
395
a.
Corporate rejection
396
b.
Financial inability
398
c.
Third party unwillingness to do business with the corporation
402
d.
Ultra vires or other legal incapacity
402
4.2.9.
Taking Corporate Property and Competing With the Corporation
403
a.
Taking corporate property
403
b.
Competing with the corporation
405
4.2.10.
Remedies for Duty of Loyalty Violations
407
[§] 4.3
Derivative Suits
407
4.3.1.
The Nature of a Derivative Suit
408
a.
Derivative versus direct suits
408
b.
Implications of seeking corporate recovery
413
4.3.2.
Who Has Standing to Bring a Derivative Suit?
417
4.3.3.
Demand on Directors
422
a.
The traditional rule
422
b.
The universal demand rule
431
4.3.4.
Special Litigation Committees
433
4.3.5.
Demand on Shareholders
441
4.3.6.
Security for Expenses
443
4.3.7.
Settlement and Plaintiffs' Attorneys' Fees
445
4.3.8.
The Fundamental Question: Who Should Represent the Corporation?
447
[§] 4.4
Indemnity and Insurance
459
4.4.1.
Indemnity
460
4.4.2.
Insurance
470
ch. V
Special Problems of Closely Held Corporations
471
[§] 5.1
Judicial and Statutory Remedies for Shareholder Dissension
471
5.1.1.
Fiduciary Duty Claims
472
5.1.2.
Dissolution and Other Statutory Remedies for Deadlock and Oppression
485
a.
Why be afraid of dissolution?
485
b.
Deadlock
488
c.
Oppression and the like
492
d.
Alternate remedies
497
[§] 5.2
Special Governance Arrangements for Closely Held Corporations
502
5.2.1.
Ensuring Positions on the Board of Directors for Minority Shareholders
503
a.
Cumulative voting
503
b.
Shareholder voting agreements
508
c.
Voting trusts
513
d.
Classified shares
517
5.2.2.
Controlling Specific Management Decisions
519
a.
Shareholder agreements controlling board decisions
520
b.
Statutes which validate shareholder agreements controlling board decisions and which establish special treatment for electing close corporations
524
c.
Arbitration agreements
533
d.
Supermajority requirements
535
e.
Employment contracts and shareholder election of officers
539
[§] 5.3
Share Transfer Restrictions
540
5.3.1.
Validity
542
5.3.2.
Drafting
546
ch. VI
Securities Fraud and Regulation
551
[§] 6.1
Common Law
551
6.1.1.
False or Misleading Statements
552
6.1.2.
Trading on Inside Information
555
a.
Trading on inside information as fraud
555
b.
Trading on inside information as a breach of duty to the corporation
557
[§] 6.2
Securities Laws
559
6.2.1.
State Securities (or "Blue Sky") Laws
559
6.2.2.
The 1933 Securities Act
561
a.
The scope of the registration requirement
563
b.
What registration entails
568
6.2.3.
The 1934 Securities Exchange Act and Related Statutes
570
[§] 6.3
Rule 10b-5
574
6.3.1.
Liability for Misrepresentations
576
a.
False or misleading statement of fact
576
b.
Materiality
578
c.
Fault
582
d.
Private cause of action
590
e.
Reliance and causation
593
f.
Remedies
599
g.
Standing
602
h.
Aiding and abetting and multiple defendants
606
i.
Procedural issues
611
6.3.2.
Trading on Inside Information and Non-Disclosure
612
a.
When does trading on undisclosed information violate Rule 10b-5?
613
b.
Why is there anything wrong with trading on inside information?
631
c.
Sanctions for trading on inside information in violation of Rule 10b-5
637
d.
Disclosure duties of those who do not trade
642
6.3.3.
Breaches of Fiduciary Duty as Fraud: The Attempt to Use Rule 10b-5 to Federalize Corporate Law
645
[§] 6.4
Other Federal Laws Dealing with Trading on Inside Information
650
6.4.1.
Section 16
650
6.4.2.
Rule 14e-3(a) and the Mail and Wire Fraud Statutes
659
ch. VII
Mergers and Acquisitions
661
[§] 7.1
Sale of Control
661
7.1.1.
The Traditional Rules
662
a.
Sale to looters
662
b.
Sale of directorships
666
c.
Side contracts with the buyer
667
d.
Usurping an opportunity
668
7.1.2.
Proposals to Require Equal Treatment
670
[§] 7.2
Mechanics of Corporate Mergers and Acquisitions
675
7.2.1.
Statutory Merger
676
a.
Shareholder protections
677
b.
Succession to assets and liabilities
686
c.
Triangular and upside-down mergers
689
7.2.2.
Sale of Assets and Dissolution
692
a.
Corporate mechanics for a sale of substantially all assets
692
b.
Corporate mechanics for dissolution and liquidation
695
c.
Creditors' rights
695
d.
The de facto merger doctrine and related efforts at equivalence
699
7.2.3.
Purchase of Stock
701
[§] 7.3
Tender Offers
703
7.3.1.
Takeover Defenses and the Board of Directors' Fiduciary Duties
704
a.
The arsenal
704
b.
The legal standard for reviewing defenses
710
c.
Permissible goals for takeover defenses
718
d.
Issues raised by specific defenses
725
e.
Fiduciary claims against the party making a tender offer or against the board for failing to oppose an offer
733
7.3.2.
Federal Regulation of Tender Offers Under the Williams Act
736
a.
Disclosure requirements
737
b.
Substantive regulation
742
c.
What transactions fall within the tender offer rules?
746
d.
Private litigation under the Williams Act
749
7.3.3.
State Takeover Legislation
750
7.3.4.
A Postscript Re Policy
755
[§] 7.4
Freeze-Outs and Recapitalizations
760
7.4.1.
Freeze-outs
760
a.
Purposes and policy
760
b.
Mechanisms
765
c.
Judicial review based upon fiduciary duty and appraisal rights
769
7.4.2.
Recapitalizations
779
Appendix
783
Table of Cases
807
Index
829