Mgmt 108 Final

Question 1

Attachment

Answer 1

The bank’s right against the borrower; the secured party has priority to collateral over the borrower

Question 2

Attachment Takes Place When

Answer 2

All of the following occur:

1) The creditor gives value (the gave credit/economic value/consideration)
2) The debtor has rights in the collateral (its their item)
3) The creditor takes possession of the collateral or the debtor signs a security agreement; creditor needs proof in words or actions but not both

Question 3

Perfection

Answer 3

The bank’s right over all other people; the secured party has priority to collateral over all others

Question 4

Perfection Takes Place When

Answer 4

Any of the following occur:

1) The creditor files a financing statement
2) The creditor takes possession of the collateral (keeps possession of collateral, eg. pink slip for a car)
3) Automatic: a creditor is considered to be immediately perfected for PMSI in consumer goods

Question 5

Types of Collateral

Answer 5

Consumer goods, inventory, and equipment

Question 6

Rules for filing a financing statement

Answer 6

A creditor is allowed a 20 day lookback period for all PMSI except inventory; don’t have to file for consumer goods; no grace period for inventory; make sure someone has owned something 21 days before you buy it

Question 7

What is PMSI

Answer 7

Purchase money security interest

Question 8

When Does PMSI Exist

Answer 8

Exists if a lender provides financing that enables a borrower to have rights in collateral in the first place;
Ex) Buying a tv from best buy and financing it with them
*PMSI still exists even if financing is through a third party

Question 9

Trustee in Bankruptcy

Answer 9

Divides cash dispersal in bankruptcy

Question 10

Who wins if perfection has occurred

Answer 10

A secured party has priority to collateral over all others except: any buyer in the ordinary course of business, or a good faith buyer of used consumer goods, unless the original seller filed a financing statement

Question 11

Creditor rights upon repossession

Answer 11

1) Sell the collateral

2) Keep the collateral using a deficiency waiver agreement

Question 12

Creditor rights upon repo: Sell the collateral

Answer 12

A public auction or private sale is allowed; the sale must be commercially reasonable; if the proceeds exceed the unpaid debt and the selling costs, the creditor must return the excess proceeds to the borrower; if the proceeds are less than the debt and the selling costs, the creditor may still sue for the unpaid deficiency

Question 13

Creditor rights upon repo: Keep the collateral

Answer 13

General rule: if the borrower does not object in writing within 21 days, the borrowers silence is considered to be binding; But, if the borrower has paid 60% or more of the purchase price for consumer goods, the borrower’s actual signed agreement is required

Question 14

Types of Bankruptcy

Answer 14

1) Chapter 7 Liquidation

2) Chapter 11 Reorganization

Question 15

Voluntary Bankruptcy

Answer 15

You file for bankruptcy; only the poor half of the population can do this

Question 16

Involuntary Bankruptcy Definition and Requirements

Answer 16

Forced into bankruptcy;
Need three elements: the debtor is insolvent; the total unsecured debt is $10k or greater; and 3 co-signers are required when the number of creditors is 12 or more or 1 signer is required when the number is less than 12

Question 17

Automatic Stay

Answer 17

When a bankruptcy petition is filed, all lawsuits pending against the debtor temporarily are stopped

Question 18

Assets exempted from Bankruptcy

Answer 18

Necessities like clothes, tools for trade, medication, basic amount of equity in a car, and homestead exemption ($50k-100k in CA or full value of home equity in the south)

Question 19

Bankruptcy Estate: Preferential Transfers Definition

Answer 19

1) Creditor improves its postion
2) The transfer occurs shortly before the petition date: 1 year lookback to Insiders (family/friends) or 90 days for non-insiders
3) The transfer is to satisfy a pre-existing debt other than a debt arising in the ordinary course of business
4) The debtor is insolvent

Question 20

What can the bankruptcy estate take from the petition date up through 180 days out

Answer 20

All assets obtained except for: Alimony/child support, pension/social security, injury awards, and wages

Question 21

Order of How people are paid in bankrupty

Answer 21

CANEAT; child support, administrative, new credit obtained post filing, employee wages and pensions incurred within 90 days pre-petition ($5000 max per employee), advances from customers ($2500 max per customer), taxes, and lastly general unsecured debts (fractions of what is left)

Question 22

Discharge of Debts: General Rule

Answer 22

All debts owed by an individual are cancelled in bankruptcy, except: loans obtained through fraud, alimony/child support, debts that arose from intentionally injuring another person, unscheduled debts (no assurance of payment), student loans, and taxes

Question 23

Discharge of Debts: General Denial of Discharge

Answer 23

No debts at all are cancelled if the debtor: received a bankruptcy discharge within the past 6 years, concealed records or assets from the court, or is a corporation or partnership

Question 24

Chapter 11 Bankruptcy

Answer 24

All rules applicable to Chapter 7 bankruptcy also apply except:

1) A trustee is not necessarily appointed, instead the bankrupt debtor is often allowed to continue operating the company, this is called debtor in possession
2) The debtor’s assets are not liquidated and distributed, instead the debtor receives a partial discharge of certain debts and continues in business after a reorganization plan has been approved
3) After the court has grouped the creditors with similar claims into separate categories, each class of creditors must approve the reorganization plan. A class of creditors is considered to want the plan only if the vote is approved by: a majority of the creditors in number and by two thirds of the creditors based of dollar amount

Question 25

Trademark

Answer 25

Protects: Distinctive words, phrases, logotypes, symbols, packages, or product shapes that identify the source of the goods or services
Priority: first to use in commerce; sometimes first to file if delayed use is excused
Duration: 10 years but renewable
Filing Required: No but advisable

Question 26

Copyright

Answer 26

Protects: Creative, original expression of ideas, fixed in a tangible form
Priority: creator or business if it was a work for hire
Duration: life of author plus 70 years, or if created by a business 95 years
Filing Required: No

Question 27

Utility Patent

Answer 27

Protects: New and clever products, machines, and processes (novel and non-obvious)
Priority: First to conceive of invention and commence design work
Duration: 20 years from application date
Filing Required: Yes

Question 28

Trade Secret

Answer 28

Protects: Confidential info that has commercial value
Priority: N/A
Duration: Indefinite unless disclosed
Filing Required: No

Question 29

Conducting Agency:

Consideration

Answer 29

Consideration is not required for these agreements

Question 30

Conducting Agency:

Contract

Answer 30

An agent is liable when acting for an undisclosed principal;
A principal is liable for his agents authorized acts: actual (both express and implied), apparent, and ratification;
An agent owes his fiduciary duty to his principal: honesty, loyalty, and careful performance

Question 31

Conducting Agency:

Tort

Answer 31

An agent always is liable for his own torts (misconduct not within employment);
A principal is liable if its agent commits a tort within the scope of his employment;
An agent owes a fiduciary duty to his principal: honesty, loyalty, and careful performance

Question 32

Liability of a Partner for Partnership Debts

Answer 32

Exiting Partner: pre-existing debt is a personal liability; later-arising debt is a personal liability only if the continuing partners still have the apparent authority to bind the exiting partner on a new agreement
Entering Partner: pre-existing debt is a liability only up to the entering partner’s capital account invested; later-arising debt is a personal liability

Question 33

Conducting the Corporation: Directors

Answer 33

Always must act jointly; set major policies; select officers; declare proper dividends and treasury stock repurchases (only proper if company has adequate retained earnings and remains solvent); get their legal fees reimbursed if improperly accused of misbehavior; and have a fiduciary duty to the company

Question 34

Conducting the Corporation: Officers

Answer 34

Conduct the daily operations of the corporation; receive their agreed salaries; and have a fiduciary duty to the company

Question 35

Conducting the Corporation: Shareholders

Answer 35

Elect the directors; receive declared dividends; have a preemptive right to participate pro rata in any new stock offerings; vote on major corporate changes (mergers, changes in capital structure, changes in the line of business); have an appraisal right to get their shares repurchased at a fair price if they: vote against a corporate proposal and demand that their shares be repurchased in writing; commence a derivative lawsuit for the corporation against its officers or directors for misbehavior; and have personal liability if they: commingle business and personal funds, use the corporation to commit fraud, grossly undercapitalize the corporation, or buy watered stock