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Unformatted text preview: Spring 2003 Corporations Outline Professor Yablon 1 I. REGULATION OF BUSINESS ACTIVITIES: LEGAL FUNDAMENTALS A. Organization and Regulation of Business Activities b Introduction to Agency Law 1. Introduction to Corporations a) A Corporation is a legal entity , a creature of the law and doesnt necessarily have to be involved in business, i.e. a University (a not for profit corporation) or a The City of New York (a municipal corporation). However, the most common corporations are business entities and are, the primary economic vehicles for conducting business activities in the US. b) 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 $$. c) Delaware 101(b): A CORPORATION MAY BE INCORPORATED OR ORGANIZED UNDER THIS CHAPTER TO CONDUCT OR PROMOTE ANY LAWFUL BUSINESS OR PURPOSES - This statute emphasizes that anyone can set up a Corporation to do anything that is lawful and that you do not need indicate a specific activity in order to set up a Corporation (in contrast to old times, when Corporations started out as grants of power by the King in order to perform specific tasks). d) About 50% of corporations are set up under Delaware law based on the Delaware General Business Corporation Law . B In Del it is easier for a corporation to exist. They are administered under the court of Chancery. e) Publicly Held v. Closely Held : Publicly held corporations are traded on an exchange. In a closely held corporation, you cant buy shares publicly or over an exchange. A hybrid is when one owns 51% of the shares and the rest is held publicly. f) Fowler v. Pennsylvania Tire Co. ( 5 th Cir. 1964): Penn Tire and Martin entered into an agreement, whereby PT agreed to deliver to Martin tires for resale at prices fixed by Martin. The contract was termed a consignment, with the title expressly being reserved with Penn Tires. When Martin went bankrupt, Penn Tires filed a petition to reclaim the tires in Martins possession, asserting that the transaction was a consignment and, therefore, the title to the tires did not pass to the bankrupt and consequently could not pass to the trustee, Fowler. Fowler, Martins trustee, said that the tires were assets of Martins company and, therefore, title remained with Martin. Fowler said that the actions of the parties indicated that they were treating the tires as belonging outright to the bankrupt (which is the side that the Dissent agreed with). The issue was whether the agreement was a consignment or a sale , for i f the relationship was a consignment, the tires would be returned to Penn Tires; if it was a sale with a right to return, then the tires belonged to Martin and, now, Martins trustee, Fowler....
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- Spring '07