Corps 3

Question 1

**FUNDAM. corp. changes in corp. Structure
[/SALE of (subst.) all of a Co’s ASSETS
/DISSOLUTION /Mergers.
MIN. SH argue: MAJ.SH’s sale of his interest is tantamount to sale of corp. assets. =>req.s SH approval.
Look: if selling stock at value]
[Cf. for ORDIN. issues, only a maj. of shares Present or Actually voting is req’d]

Answer 1

[*Unless AoI provide otherw., DIRs have SOLE DISCRETION to manage the Co’s REGULAR Affairs. **CA: BUT]
Any EXTRAordinary Occurrence OUTSIDE the REGULAR COB requires:
1) Bd RESOLUTION
2) SH MEETING w/ 10d Notice
3) APPROVAL by a MA J. of ALL SHARES entitled to vote.
4)+DISSENTERS’ Appraisal Rights!

Question 2

Statutory Appraisal Rights
(Statutory right to get bought out)
DISSENTING SHs may:

Answer 2

FORCE the Co to BUY DISSENTERS’ shares at a FAIR price if they:

1) VOTE AGAINST the [proposed] change
&
2) make a WRITTEN DEMAND for PAYMENT.

Question 3

Amendment of AoI:

Answer 3

is done by the Bd & requires:
“SH APPROVAL” (see 1-3)
+if so approved:

4) File AM AoI w/ SoS.

[Note: Does NOT Trigger
Dissenting SH Statutory Appraisal Rights]

Question 4

Mergers or Consolidations:

Mergers are +CA:

Answer 4

"SH APPROVAL" (see 1-3) by BOTH Cos. 
UNLESS it’s a 
SHORT FORM Merger: 
i.e., a >90% owned SUBSIDIARY is merged into the PARENT Co. 
=> ONLY Bd Approval.
Note:
\+Triggers Appraisal Rights.

Question 5

Voluntary Dissolution

Answer 5

is a FUND. change
that needs “SH APPROVAL (see)”

4) +”Articles of Dissolution”
must be filed w/ SoS.

5) +NOTICE given to Co’s CREDITORS.

Question 6

Involuntary Dissolution:

Answer 6

SH may PETITION for a COURT-ordered Dissolution under some CIRCUMSTANCES, incl.

1) Dirs. act in an OPPRESSIVE or FRAUDULENT manner
2) D WASTE corp. ASSETS
3) Bd is DEADLOCKED which causes HARM to the Co.

Question 7

Winding Up:

Answer 7

After Dissolution, the Co must 
WIND UP by: 
1) GATHERING all Assets
2) LIQUIDATING all Assets to Cash 
3) Paying off CREDITORS &
4) DISTRIBUTING any REMAINDER to the SHs.

Question 8

*FED. Rule 10b-5 of the SEC makes it UNLAWFUL for a FIDUCIARY D/O to:

[Rule is aimed at preventing DECEIT

1) Rule viol.?
2) if yes: Standing?]

Answer 8

1) use an INSTRUM. of IC [phone /mail. CA: In-person CASH deal!]
*2) to DEFRAUD others by INT. or Recklessly making a False Statem.
[CA: mere N.]
*3) of a MAT. FACT
[=reas. investor would find important in deciding whether to invest. /insider info. CA: OUTsider]
4) in CONNECTION WITH the SALE or PURCHASE of securities by P
[CA: P is defrauded to NOT sell.]
5) Result: Justifiably RELYING P has STANDING to sue for $DMG.

Question 9

CA: P=CONTINUING SH,
who neither purchased nor sold shares based on the False information,:
has NO CoA against corp. INSIDER under FED. Rule 10b-5,
but only a …:

Answer 9

1) State law (CL) claim against O/D for MISREPRESENTATION 
=DIRECT Action.
2) BREACH of DoL
=DERIVATIVE Action, Or
3) NON-DISCLOSURE

Question 10

An INSIDER is liable under 10b-5 b/c an INSIDER …:
+TIPPER & TIPPEE liable if …+CA:

*CA: OUTsider: =NO FD
=>canNOT be a Misappropriator Or Tipper
=>there can be no NO Tippee either!

Answer 10

has a FD to NOT: 1) DISCLOSE NON-PUBLIC INFO for PERSONAL gain,
2) or TRADE on such info.
TIPPER is Liable if:
Tipping for ANY Improper PURPOSE [kickback].
TIPPEE is Liable if:
1) TRADING on the Tip w/
2) K of Tipper’s violation.

Question 11

MISAPPROPRIATIATOR violates 10b-5 by:

[TRADERS liable under 10b-5:
INSIDER, TIPPER (& TIPPEE), MISAPPROPRIATIATOR ]

Answer 11

1) TRADING on NON-public INFO
2) in viol. of a FD owed to the SOURCE.
[which need not be the Issuer/ its SH.
E.g., Co Lawyer buys stock from target Co before merger.
=>Misappr. must DISGORGE profits. ]

Question 12

**Sec.16(b) Prevents SPECULATION by INSIDERS by imposing SL & allowing Recovery by Co for “Profits” gained by Certain insiders from “Short Swing Trading.” Rule 16(b) prohibits: …

[No Fraud or Inside info needed.]

Answer 12

1) a D/O [BorS] or >10% SH [at time of B&S] of a Co
2) traded on a NAT’L exch. OR w/ 500+ SHs + >$10M in Assets
3) to profit form a purchase-sale or S-P of the Co’s stock w/in a period of

Question 13

**STATE LAW Liabilities for:
a) CL NON-Disclosure+Remedy:…
b) CL MISREPRES. if: D made:
1) FALSE STATEMENT
2) w/ SCIENTER =K./RECKLESS
disregard as to its truth / falsity
3) w/ INT to induce Reliance on
4) CAUSED justif. reliance &
5) DMG.

Answer 13

an INSIDER D/O has FD to EXISTING SHs to DISCLOSE “Special Facts,” (=that a reas. investor would consider IMPORTANT in making decisions).
DMG: DIFF. b/w Price Paid & Stock Value Reas. Time after PUBLIC DISCLOSURE.
[Some jx.: FD only to the Co:
=>Co recovers PROFITS from INSIDER who used inside info [geologist]].

Question 14

[ PREEMPTIVE RIGHTS: (Trigger: Co issues NEWLY AUTHORIZED Stock for CASH. Q: Existing SH RIGHTS?)
CA: 1) Treasury Stock.
2) Stock to buy Pr!
3) PRIOR auth. but UNissued stock]

Answer 14

allow an EXISTING SH to buy sufficient newly issued stock FOR MONEY to maintain his % of OWNERSHIP.
MODERN: SH have
NO Preemptive rights,
UNLESS AoI provide so.

Question 15

[
Co Officers have the same FD (DoC & DoL) as Dirs. But they are AGENTS who can bind the Co by their acts.
*A [Prez.] is an AGENT:
[Cf. Bd member is NOT an agent b/c canNOT act as individual].
]

Answer 15

& has whatever power Co grants him, incl. entering into Ks involving the day-to-day operations.
Officer’s Authority can be:
1) ACTUAL =expressly given
[in AoI /Bylaws /Bd Resolution]
2) APPARENT=Co HOLDS Out O as its Agent +3P RELIES on it, or
3) IMPLIED =resulting from O’s TITLE /POSITION [to do Custom /NECessary tasks or INCIDENT to auth. task /Based on PAST auth.]