Role & Purpose of Corporations

Role & Purpose of Corporations - BUSINESS ORGANIZATIONS...

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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
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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 Notice there is no liability for Failure to Act:
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