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Unformatted text preview: B USINESS O RGANIZATIONS P ROFESSOR W ADE J AMES M ORGAN Role & Purpose of Corporations Corporate Social Responsibility • Communitarian Approach: • Contractarian Approach: Business Judgment Rule Donations: Delaware § 122(9), New York § 202(a), PA Profit Maximization: Dodge v. Ford Business Judgment Rule: Schlensky vs. Wrigley Promoters & the Corporate Identity Advantages of a Corporation Forming a Corporation Contracts Entered in the Name of a Corporation "To Be Formed" Contracts Entered Into in the Corporate Name • Corporation by Estoppel Doctrine • De facto Corporation Doctrine • Advice to Buyers/Sellers The Nature of the Corporate Entity & Limited Liability Limited Liability & MBCA § 6.22 Piercing the Corporate Veil • Van Dorn Test • Two Prongs of 7th Circuit: Sea Land Services • Two Prongs of 4th Circuit: Kinney Shoe Test • General Partnerships: Frigidaire v Union Properties Enterprise Liability: Walkovsky Advice to Avoid Liability Derivative Litigation Direct & Derivative Lawsuit • MBCA Qualification for a Derivative Suit • Delaware Derivative/Direct Test: Grimes • New York Derivative/Direct Test Process of a Shareholder Lawsuit • (1) Determine whether the suit is (A) Direct or (B) Derivative • (2) Examine Demand Futility • (A) Demand is Required: • (a) Demand is Not Refused • (b) Demand Refused • Wrongful Refusal Suit: Business Judgment Rule Standard • (B) Demand is Excused • MBCA § 7.42: No such thing as Demand Excusal • Delaware Demand Excusal: Aronson Test • New York Demand Excusal: Barr Test The Role of Special Committees • Delaware Approach to a Special Committee: Zapata • New York Approach to a Special Committee: Auerbach Fiduciary Duty of Officers, Directors, & Other Insiders The Business Judgment Rule • (1) As an Abstention Doctrine: • (2) As a Standard of Liability Fiduciary Duty: The Duty of Care Business Judgment Rule protects Unwise Decisions Duty of Care Breach must be Gross Negligence Business Judgment Protects most decisions regarding Dividends: Kamin Smith v Van Gorkom • No Business Judgment Rule Protection for an Uninformed Decision: • Adequate Process: Directors must make Reasonable Investigation • Adequate Disclosure: Directors must disclose all Material Information that a Reasonable Investor would consider important before approving a transaction Future Advice for Proposed Merger: Obtain a Fairness Opinion Delaware § 102(b)(7): Incorporation Document may Limit Director Liability Delaware § 141(a): Board of Directors can act on behalf of Corporation Delaware § 141(e): Directors Not be Liable for relying on Officers in Good Faith Brehm v Eisner : Sloppy Procedure, But Adequate Stanley Sexual Harassment Compliance Hypo Francis v United Jersey Bank • Decision Not to Act (protected by the Business Judgment Rule) vrs. Not Exercising a Decision At All • Duty to Monitor & Directors may rely on Officers in Good Faith • Directors can rely on Officers Until there is notice of something wrong – without...
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This note was uploaded on 02/15/2008 for the course LAW 3000 taught by Professor Baynes during the Fall '03 term at St. Johns Duplicate.
- Fall '03