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Chapter 1: |
The Corporation in Perspective |
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- § 1:1 : Introduction1-1
- § 1:2 : What a Corporation Is1-2
- § 1:2.1 : Corporation As a Creation of the State1-2
- § 1:2.2 : Historical and Judicial Theories of the Corporation1-3
- § 1:2.3 : A Structural Theory of the Corporation1-4
- [A] : Rights and Obligations of Corporations1-6
- [B] : Corporation Defined1-9
- § 1:3 : Development of American Business Corporation Law1-10
- § 1:3.1 : Nineteenth-Century Developments1-10
- [A] : From Special Acts to General Corporation Statutes1-10
- [B] : From Restrictive to Enabling Statutes1-11
- [C] : From Unlimited to Limited Liability1-13
- § 1:3.2 : Twentieth- and Twenty-First-Century Developments1-14
- [A] : Emergence of Delaware and the Trend Toward Congruence in Other States1-14
- [B] : Perfection of the Enabling Concept1-16
- [C] : State Regulation to Coregulation with the Federal Government1-16
- § 1:3.3 : The Global Financial Crisis1-18
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Chapter 2: |
Approaching Corporation Law |
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- § 2:1 : Introduction2-1
- § 2:2 : Types of American Corporations2-2
- § 2:2.1 : Public Corporations2-2
- § 2:2.2 : Government Corporations2-3
- § 2:2.3 : Nonprofit Corporations2-4
- § 2:2.4 : Business Corporations2-6
- § 2:2.5 : Recent Developments2-11
- [A] : Social Enterprises2-11
- [A][1] : Low-Profit Limited Liability Companies (L3C)2-12
- [A][2] : Benefit Corporations2-14
- [B] : Digital Organizations2-14
- [C] : The Future of Business Organization Codes2-16
- § 2:3 : Distinguishing Features of Corporate Practice2-17
- § 2:3.1 : Prospective Viewpoint2-17
- § 2:3.2 : Skill As a Drafter2-18
- § 2:3.3 : Special Issues in Counseling Clients2-19
- § 2:3.4 : Involvement in Clients’ Affairs2-20
- § 2:3.5 : Main Client Contact2-21
- § 2:3.6 : Conservatism2-21
- § 2:3.7 : Collegial Approach2-22
- § 2:3.8 : Involvement of Securities Law2-22
- § 2:3.9 : Special Ethical Problem2-23
- § 2:3.10 : Public Service2-23
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Chapter 3: |
Choosing the Form of Business Organization |
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- § 3:1 : Introduction3-2
- § 3:2 : General Considerations3-3
- § 3:2.1 : What Is Required to Form and Operate the Business?3-4
- § 3:2.2 : Who Will Manage the Business and How Will Business Decisions Be Made?3-5
- § 3:2.3 : To What Extent Will Investors Be Personally Liable for the Company’s Obligations?3-6
- § 3:2.4 : How Will the Business Be Financed?3-7
- § 3:2.5 : How Do Investors Receive a Return on Their Investments?3-8
- § 3:2.6 : What Are the Tax Consequences of Forming a Business?3-9
- § 3:3 : Sole Proprietorship3-10
- § 3:4 : General and Limited Liability Partnerships3-12
- § 3:4.1 : Introduction and Special Considerations3-12
- § 3:4.2 : Development of General and Limited Liability Partnership Law3-12
- § 3:4.3 : Partnership Formation3-15
- [A] : Forming a General Partnership3-15
- [B] : Forming a Limited Liability Partnership3-17
- § 3:4.4 : Financing the Partnership3-18
- § 3:4.5 : Management of the Enterprise3-20
- [A] : Voting Structure3-20
- [B] : Fiduciary Duties of Partners to Each Other3-21
- § 3:4.6 : Liability of Partners to Third Parties for Partnership Obligations3-23
- [A] : General Partnerships3-23
- [B] : Limited Liability Partnerships3-24
- § 3:4.7 : Partnership Property3-25
- § 3:4.8 : Partners’ Return on Investment3-26
- [A] : Allocation of Profits and Losses3-26
- [B] : Transfer of Partnership Interest to Third Parties or to the Partnership3-30
- § 3:4.9 : Dissolution of the Partnership3-30
- § 3:4.10 : Merger, Consolidation, Domestication, and Conversion3-34
- § 3:5 : Limited Partnerships3-36
- § 3:6 : Limited Liability Companies3-43
- § 3:6.1 : Introduction and Special Considerations3-43
- § 3:6.2 : Formation3-44
- § 3:6.3 : Management of the Company3-46
- [A] : Member-Managed Companies3-46
- [B] : Manager-Managed Companies3-47
- § 3:6.4 : Liability of Members and Managers3-47
- [A] : Liability to Third Parties3-47
- [B] : Members’ Liability to Each Other—Fiduciary Obligations3-48
- § 3:6.5 : Financing the Business3-48
- § 3:6.6 : Return on Investment3-49
- § 3:6.7 : Dissociation and Dissolution3-49
- § 3:6.8 : Merger, Consolidation, Domestication, and Conversion3-50
- § 3:6.9 : Derivative Suits3-52
- § 3:7 : Corporations3-53
- § 3:7.1 : Advantages of the Corporate Form3-53
- [A] : Limited Liability of Shareholders3-53
- [B] : Management Structure3-54
- [C] : Capital Structure3-55
- [D] : Separate Entity Status and Perpetual Life3-56
- [E] : Usual Form3-57
- § 3:7.2 : Disadvantages of the Corporate Form3-57
- [A] : Expense and Trouble of Formation and Maintenance3-57
- [B] : Required Initial and Continuing Formality3-58
- [C] : Tax Treatment3-59
- § 3:7.3 : Statutory Close and Professional Corporations3-60
- § 3:8 : The Future of Business Organization Codes3-61
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Chapter 4: |
Preincorporation Transactions and Incorporation |
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- § 4:1 : Preincorporation Transactions4-2
- § 4:1.1 : Rights and Liabilities of Corporations on Promoters’ Contracts4-2
- [A] : Ratification4-2
- [B] : Adoption4-3
- § 4:1.2 : Rights and Obligations of Promoters on Promoters’ Contracts4-3
- [A] : Intent of the Parties4-3
- [B] : How a Contract Is Drafted4-4
- [C] : Promoter’s Liability After a Corporation’s Adoption4-5
- § 4:1.3 : Ethical and Practice Issues4-5
- § 4:1.4 : Share Subscription Agreements4-6
- § 4:2 : Incorporation Overview4-7
- § 4:3 : Where to Incorporate4-7
- § 4:3.1 : Advantages of Delaware Incorporation4-9
- § 4:3.2 : Disadvantages of Delaware Incorporation4-10
- § 4:4 : How to Incorporate4-12
- § 4:4.1 : Articles of Incorporation4-15
- § 4:4.2 : Mandatory Charter Provisions4-16
- [A] : Corporate Name4-16
- [B] : Capitalization4-19
- [C] : Registered Office and Registered Agent4-20
- [D] : Incorporators4-20
- [E] : Corporate Purposes4-21
- [F] : Regulation of the Corporation’s Internal Affairs4-24
- [G] : Directors4-25
- [H] : Preemptive Rights4-26
- [I] : Duration4-26
- § 4:4.3 : Optional Charter Provisions4-27
- § 4:4.4 : Amending the Articles of Incorporation4-32
- § 4:5 : Qualifying to Do Business4-34
- § 4:6 : Domestication4-35
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Chapter 5: |
Capitalization |
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- § 5:1 : Introduction5-2
- § 5:2 : Equity5-2
- § 5:2.1 : Types of Equity Securities5-2
- [A] : Common Stock5-2
- [B] : Preferred Stock5-3
- [C] : Model Act5-4
- [D] : Warrants, Rights, and Options5-5
- § 5:2.2 : Related Concepts5-6
- [A] : Par Value5-6
- [B] : Mechanics of Equity Capitalization5-8
- § 5:2.3 : Duly Authorized, Validly Issued, Fully Paid, and Nonassessable5-13
- § 5:2.4 : Watered Stock5-15
- § 5:2.5 : Treasury Stock5-21
- § 5:3 : Debt5-22
- § 5:3.1 : Types of Debt5-22
- § 5:3.2 : Leverage5-24
- § 5:3.3 : Thinly Capitalized Corporations5-26
- § 5:4 : Protecting the Shareholder’s Investment Interests5-28
- § 5:4.1 : Preemptive Rights5-28
- § 5:4.2 : Share Transfer Restrictions and Buyout Provisions5-30
- [A] : Share Transfer Restrictions5-30
- [B] : Buyout Agreements5-31
- § 5:5 : Advanced Corporate Finance5-33
- § 5:5.1 : Short-Term Resources5-34
- [A] : Bank Loans5-34
- [B] : Trade Credit5-34
- [C] : Commercial Paper5-34
- § 5:5.2 : Beyond Equity and Debt5-35
- [A] : Leases5-35
- [B] : Convertibles5-35
- [C] : Asset-Backed Securities5-36
- § 5:5.3 : Derivatives5-36
- [A] : Interest, Currency, and Commodity Swaps5-37
- [B] : Equity Total Return, Credit Default Swaps, and CDOs5-37
- [C] : Regulation of Financial Derivatives5-38
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Chapter 6: |
Organizing the Corporation |
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- § 6:1 : Introduction6-1
- § 6:2 : Organization Meeting6-2
- § 6:3 : Consent in Lieu of Meeting6-2
- § 6:4 : Bylaws6-4
- § 6:4.1 : Position in the Hierarchy of Regulation6-4
- § 6:4.2 : Bylaws’ Content, Adoption, and Amendment6-5
- § 6:4.3 : Bylaw Conflicts6-8
- § 6:4.4 : Bylaws As a Contract6-10
- § 6:5 : Election of the Initial Directors6-10
- § 6:6 : Election of Officers6-10
- § 6:7 : Other Organizational Matters6-11
- § 6:7.1 : Sale of Stock6-11
- § 6:7.2 : Promoters’ Contracts and Expenses6-13
- § 6:7.3 : Compensation of Directors and Officers6-14
- § 6:7.4 : Adoption of Corporate Seal6-14
- § 6:7.5 : Qualification to Do Business6-15
- § 6:7.6 : Banking Relationship6-15
- § 6:8 : Agreements Among Shareholders6-16
- § 6:9 : Personal Liability for Corporate Obligations6-16
- § 6:9.1 : Defective Incorporation6-16
- § 6:9.2 : De Facto Corporation Doctrine and Corporations by Estoppel6-17
- [A] : Common Law6-17
- [B] : Statutory Developments6-19
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Chapter 7: |
Disregard of the Corporate Entity |
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- § 7:1 : Introduction7-1
- § 7:2 : Inadequate Capital7-4
- § 7:3 : Failure to Follow Formalities7-5
- § 7:4 : Importance of Equities7-7
- § 7:5 : Multiple Corporations7-8
- § 7:6 : CERCLA7-9
- § 7:7 : Other Statutory Claims7-10
- § 7:8 : Empirical Studies7-11
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Chapter 8: |
Corporate Authority |
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- § 8:1 : Introduction8-1
- § 8:2 : Functions and Authority of Shareholders8-2
- § 8:2.1 : General8-2
- § 8:2.2 : Derivative Suits8-11
- § 8:3 : Functions and Authority of Directors8-13
- § 8:3.1 : Directors’ Powers8-13
- § 8:3.2 : What Directors Actually Do8-22
- § 8:3.3 : Corporate Governance Reforms8-26
- § 8:4 : Functions and Authority of Officers8-29
- § 8:4.1 : What Officers Are Required and How They Are Selected8-29
- § 8:4.2 : How Officers’ Powers Are Created8-31
- § 8:4.3 : Hierarchy of Officers8-32
- § 8:4.4 : Principal Officers8-33
- [A] : President8-33
- [B] : Chair of the Board8-34
- [C] : Vice President8-35
- [D] : Secretary8-36
- [E] : Treasurer8-37
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Chapter 9: |
The Duty of Care |
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- § 9:1 : Introduction9-1
- § 9:2 : Directors’ Duty to Direct and Their Liability for Negligence9-2
- § 9:2.1 : Case Law on Directors’ Negligence Liability9-3
- § 9:2.2 : Charter Limitations on Money Damages for Directors9-10
- § 9:2.3 : Statutory Standards of Care and Protections9-13
- § 9:2.4 : Other-Constituencies Statutes9-15
- § 9:2.5 : Internal Control9-17
- § 9:3 : Business Judgment Rule9-21
- § 9:4 : Indemnification and Insurance9-24
- § 9:5 : Scope of Liability9-27
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Chapter 10: |
Duties of Fairness |
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- § 10:1 : Introduction10-1
- § 10:2 : Directors’ Duty of Loyalty10-1
- § 10:2.1 : Transactions Involving Interested Directors10-2
- § 10:2.2 : Corporate Opportunity Doctrine10-4
- § 10:2.3 : Internal Control Oversight10-8
- § 10:3 : Shareholders’ Duty of Fairness10-8
- § 10:3.1 : Sale of Control10-8
- § 10:3.2 : Operation of the Corporation10-10
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Chapter 11: |
Dividends and Distributions |
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- § 11:1 : Introduction11-1
- § 11:2 : Mechanics of Dividends and Distributions11-2
- § 11:2.1 : Dividends or Distributions in Cash or Other Property11-2
- § 11:2.2 : Stock Dividends and Stock Splits11-9
- § 11:3 : Repurchase of a Corporation’s Own Shares11-12
- § 11:4 : Limitations on Dividends and Distributions11-14
- § 11:5 : Judicial Review of Dividend Policy11-17
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Chapter 12: |
Control Distribution Devices |
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- § 12:1 : Introduction12-1
- § 12:2 : Cumulative Voting and Classification of Directors12-2
- § 12:3 : Class Voting, Voting Groups, and Weighted Voting12-6
- § 12:4 : Charter and Bylaw Provisions12-9
- § 12:4.1 : Charter Provisions12-9
- § 12:4.2 : Bylaw Provisions12-11
- § 12:5 : Resignation, Removal, and Replacement of Directors12-14
- § 12:6 : Deadlocks, Dissension, and Dissolution12-16
- § 12:6.1 : Deadlocks12-16
- § 12:6.2 : Dissension12-17
- § 12:6.3 : Statutory Response to Deadlock12-19
- [A] : Judicial Dissolution of the Corporation12-20
- [B] : Buyout of Shareholder Petitioning for Dissolution12-21
- [C] : Appointment of a Custodian or Provisional Director12-23
- § 12:7 : Contractual Arrangements12-23
- § 12:7.1 : Voting Trusts12-23
- § 12:7.2 : Shareholders’ Agreements12-27
- § 12:7.3 : Employment Contracts12-31
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Chapter 13: |
Fundamental Corporate Changes: Mergers & Acquisitions; Dissolution; and Conversion |
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- § 13:1 : Introduction13-2
- § 13:1.1 : Devices/Tactics of Bidders and Targets13-3
- [A] : Tactics and Devices of Bidders13-3
- [B] : Tactics and Devices of Targets13-4
- § 13:1.2 : Negotiated Transfers of Corporate Control13-6
- § 13:2 : Forms of Business Combinations13-7
- § 13:2.1 : Mergers13-7
- § 13:2.2 : Consolidations13-8
- § 13:2.3 : Asset Acquisitions13-8
- § 13:2.4 : Tender Offers13-9
- § 13:2.5 : Negotiated Purchases of Stock13-11
- § 13:2.6 : Acquisitions Through Subsidiaries and Share Exchanges13-11
- § 13:3 : Voting Rights, Appraisal Rights, and the De Facto Merger Doctrine13-13
- § 13:3.1 : Introduction13-13
- § 13:3.2 : Standard Form of Statutory Merger13-14
- § 13:3.3 : Use of a Subsidiary Corporation13-15
- § 13:3.4 : Asset Acquisition13-16
- § 13:3.5 : Share Exchange13-16
- § 13:3.6 : Tender Offer13-16
- § 13:3.7 : De Facto Merger Doctrine13-17
- § 13:4 : Freeze-Out Mergers13-19
- § 13:5 : State Regulation of Tender Offers13-20
- § 13:5.1 : Judicial Response to Tender Offer Defenses13-20
- § 13:5.2 : State Legislation Regulating Tender Offers13-24
- § 13:6 : Dissolution13-27
- § 13:6.1 : Voluntary Dissolution13-27
- § 13:6.2 : Administrative Dissolution13-28
- § 13:6.3 : Judicial Dissolution13-28
- § 13:7 : Conversion13-29
- § 13:7.1 : Introduction13-29
- § 13:7.2 : Conversion of a Domestic Business Corporation to a Domestic or Foreign Nonprofit Corporation13-30
- § 13:7.3 : Conversion of a Foreign Nonprofit Corporation to a Domestic Business Corporation13-31
- § 13:7.4 : Entity Conversion: Conversion of a Domestic Corporation to a Domestic or Foreign Unincorporated Entity or Conversion of a Domestic or Foreign Unincorporated Entity to a Domestic Business Corporation13-32
- § 13:7.5 : Summary Table of Conversions Governed by Model Business Corporation Act13-34
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Chapter 14: |
Introduction to Securities Law |
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- § 14:1 : Introduction14-1
- § 14:2 : Securities Act of 193314-2
- § 14:3 : Securities Exchange Act of 193414-4
- § 14:3.1 : Registration and Periodic Reporting Under the Exchange Act14-5
- § 14:3.2 : Regulation of Proxy Solicitations14-5
- § 14:3.3 : Regulation of Tender Offers14-6
- § 14:3.4 : Fraud in the Purchase or Sale of Securities: Rule 10b-514-7
- § 14:3.5 : Liability for Short-Swing Profits: Section 16(b)14-8
- § 14:4 : The Sarbanes-Oxley Act of 200214-9
- § 14:4.1 : Audit Committees and Auditors14-9
- § 14:4.2 : Internal Corporate Governance Procedures14-10
- § 14:4.3 : Officers and Directors14-11
- § 14:5 : The Dodd-Frank Act of 201014-12
- § 14:5.1 : Executive Compensation14-13
- § 14:5.2 : Shareholder Access to Proxy Materials for the Election of Directors14-14
- § 14:5.3 : Regulation of Derivatives14-15
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Chapter 15: |
Introduction to Accounting |
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- § 15:1 : Introduction15-2
- § 15:2 : Reading Financial Statements15-2
- § 15:2.1 : Balance Sheet15-3
- [A] : Assets15-6
- [A][1] : Current Assets15-6
- [A][1][a] : Cash15-6
- [A][1][b] : Accounts Receivable15-6
- [A][1][c] : Inventory15-7
- [A][1][c][i] : First-In, First-Out (FIFO)15-7
- [A][1][c][ii] : Last-In, First-Out (LIFO)15-8
- [A][2] : Fixed Assets15-8
- [A][2][a] : Straight-Line Method15-8
- [A][2][b] : Double Declining Balance Method15-9
- [B] : Liabilities15-9
- [C] : Equity15-9
- [D] : Historical Cost or Fair Value15-10
- § 15:2.2 : Income Statement15-11
- [A] : Net Sales15-12
- [B] : Cost of Goods Sold15-12
- [C] : Depreciation15-13
- [D] : Selling and Administrative Expenses15-13
- [E] : Interest on Long-Term Notes15-13
- [F] : Income Taxes15-13
- [G] : Net Income per Share15-14
- § 15:2.3 : Accumulated Retained Earnings Statement15-14
- § 15:2.4 : Statement of Cash Flows15-14
- § 15:3 : Valuation of Businesses15-14
- § 15:3.1 : Book Value15-15
- § 15:3.2 : Liquidation Value15-15
- § 15:3.3 : Company Cash Flow or Earnings15-15
- § 15:4 : Auditing15-16
- § 15:5 : Accounting and the Practice of Corporate Law15-17
- § 15:5.1 : A Note on GAAP15-17
- § 15:5.2 : Profits and Losses: Partnership Agreements15-18
- § 15:5.3 : Assets and Liabilities: Shareholder Distributions and Loan Agreements15-19
- § 15:5.4 : Business Scale: Asset Purchase Agreements15-20
- § 15:6 : Sensitive Accounting Areas15-22
- § 15:6.1 : Revenue Recognition15-23
- § 15:6.2 : Reserves15-23
- § 15:6.3 : Big Baths15-23
- § 15:6.4 : Materiality15-24
- § 15:6.5 : Off-Balance-Sheet Items15-24
- § 15:7 : Sarbanes-Oxley Act15-25
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Chapter 16: |
Table of Authorities |
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Chapter 17: |
Index to Soderquist on Corporate Law and Practice |
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