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.
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- Spring '08
- Law, State court