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Unformatted text preview: ••••••••Corporations - Yablon I. THE CORPORATE FORM: LEGAL FUNDAMENTALS A. The Organization and Regulation Of Business Activities (casebook 1-10, Del. 101(b)) 1. Advantages of Being a Corporation: a. Limited Liability: Corp is liable, not the shareholders b. Perpetual Life c. Capital Formation: get people to give you $$. * Facilitative v. Mandatory Laws: Facilitative Law = If you want to do this, you have to do it this way. Mandatory Law = you can’t do these certain things. 2. DEL §101 (b): why corp have to get express statutory permission to do lawful things? -emphasizes that it is a democratic principle- available to everyone who wants to do business in a certain way. a. Why Delaware Law??: 50% of corp are incorporated there. In Del it is easier for a corp to exist. They also ct of Chancery. l There is constant conflict b/w managers and shareholders –> so who is Del good for M or S?? Corporate law also affects employees, creditors, and suppliers. b. Publicly Held v. Closely Held: Publicly held is traded on an exchange. A closely held you can’t buy shares publicly or over an exchange. A hybrid is when one owns 51% of the shares and the rest is held publicly. 3. Agency Relationships: l Interplay b/w control, incentive & specificity (Klein & Coffee 17). l Agency Cost: you need incentives to make agency do their best b/c when you have an agent there is a difference b/w how an agent reacts to a business and how the principal reacts to a business. a. Suppose instead that there is no MRS. FIELD but rather a Corp. X: - a publicly held company with shareholders widely dispersed. Will all the employees impose an agency problem? You can give them stock as an incentive to work harder. - if this is a publicly held company, who monitors the CEO and management?? The shareholders, but if you don’t like a CEO you can just sell your stock as an individual shareholder. l There is a conflict of interest b/w shareholder and the mgmt: Like how to run the company most efficiently. Same conflict like the agency cost conflict but the difference is that here there is no Msr. Field - so few constraints on the top officers. l Everyone who works for the corp is an agent. The CEO all the way to the janitors. 4. Fowler v. Penn Tire Co : What was the economic relationship b/w the two parties? : The K specified that it was a consignment since the K called for the title to remain in the party who delivered the goods (Penn). Consignment = party who delivers the goods remains title, but Sale = the person receiving has title. a. Holding : the intent of the party controls which decides which transaction takes place only if the K is unambiguous. Since the K is unambiguous, we follow the K....
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This note was uploaded on 02/14/2008 for the course LAW 7060 taught by Professor Haas during the Spring '07 term at Yeshiva.
- Spring '07