The court cites precedent that asserts that business

The court cites precedent that asserts that business decisions should not be disturbed just because a defendant can
make a reasonable case that the policy chosen by the company may not be the wisest policy available.
Shareholders
● Common stock : what you purchase when you buy stocks of public company on some sort of stock exchange. 1 share =
1 vote.
● **Voting is most important right associated with stock ownership.
● Preferred stock : gives owners a preferential treatment (e.g., faster or more divided payments, preferred access to
dividends).
○ If company decides to not pay out dividends and save the money, it’s still a sound decision (as long as decisions
not made in bad faith nor abuse of discretion).
● Treasury Stock : stock held by business entity but has not been issued.
○ “Sitting in inventory.”
● Right to receive dividends
○ Dividends are not mandatory.
○ Usually found in shareholder agreements.
● Preemptive Rights
○ Belong to current shareholders and apply to shareholder’s right to preemptively do something (like buying more
stock).
■ Very important for minority owners of a closely held business.
■ Ability to buy more dividends when company is growing. This can lead to a dilution in ownership share.
■ Preemptive rights helps to prevent dilution buying allowing them to buy more shares when business is
expanding.
■ Provisions.
■ May not allow spouses to buy into stock.
■ Selling stock to competitors.
● Right to Information
○ Right to financial info and inner workings of company.
○ Becomes much more important for small, closely held business.
○ Request for info needs to be valid and reasonable in 4 ways:
■ 1) Time: reasonable time frame.

■ 2) Place: confidentiality.
■ 3) Scope: access to appropriate medium.
■ 4) Purpose: for company profit or trying to find out if someone is having an illicit relationship you don’t
approve of?
● Restricted Shares (Stock)
○ Cannot vote or receive dividends.
***Case: Trump vs. Chang***
● ***Requirements for shareholder to file a lawsuit***
○ Requires own stock at the time the issue occurred.
○ Needs to continue owning stock throughout lawsuit process.
○ Plaintiff shareholder has to post a bond for plaintiff’s expenses in the event the Defendant wins.
○ Duty to represent corp fairly.
○ Ask board of directors to help with problem first before going to court.
● Forms of lawsuit:
○ 1. Derivative lawsuit
○ 2. Direct lawsuit
11/24/15 (Tuesday): Chapter 27
- Notes 1
● Going over Exam 2 Questions:
○ 1) Which of the following is/are benefits of a contract of adhesion?
■ ANSWER: They allow large companies to create uniformity in their contracts instead of individually
negotiating with large numbers of people or business entities.
■ Most common WRONG ANSWER: two or more of the above are true.
● They create a situation where one party may have virtually zero bargaining power.