AGENCY - agency authority - an agency relationships exists only if both the principal and the agent have demonstrated

their assent to the principals right to control. Obj manif of

consent! // fiduciary relationship - arises when person (princ) manif assent to another person (agent) that agent shall act on princ’s behalf and agent consents so to act (duty is utmost
good faith, trust, confidence, candor, high degree honesty and loyalty // Actual authority (exp or imp) - P to A // apparent authority - P to 3P, exists only if party claiming it subj and reas
believes agent is auth // estop - fake salesman // ratific - exp or imp, if the princ decides to adopt a k negotiated by an unauth person purporting to act as agent, princl is bound, as is
3P // pwr of atty - no gifts bc not in benefit, if 3p is aware of exis of doc must review // warranty of auth - agent who warrants auth to 3P may b liab if he lacks auth // parties to k - 3P
and P, exc if P undisclos, then all 3 ppl // princ duties - compensate, comply with agmt, indem (reimburse, pay for legal expens, bear losses // agent duties - DOC, discl, DOL // liab -
princ vic lib for neg of agent where princ controls or agent torts w/i scope (agnt always on hook for agent’s own neg // control - right to princ to control essential for agency // dual agency
- agent cannot act on behalf of adv party to the transaction w/o permission of princ - if princ unaware, voidable - if princ knows, can either rescind or affirm and can recover damages from
other princ or the agent - doesn’t apply when both princ consent // power to end - both agent and princ have power to end at any time // incidental auth - agent acts when reas believes
in accord to Princ’s manifestations, that princ wants agent to act (reading inbetween lines) (under actual auth) // auth by custom - 3P must know that princ put agent in positin and must
be customary for agent to have auth to enter into the agmt (general manager, atty client, president, etc.) // termination note - agent who was terminated has no power to bind princ //
hartford elevator rule - for DOL, compensation recover when agency was disloyal, no per se forfeiture but TOC including damage done to employer
P’SHIP - creation - when 2 or more parties agree to carry on regard of subj intent // p’ship prop - presumption that prop purch w p’ship assets is p’ship prop, prop purchased w/ indiv
assets is NOT p’ship prop even if used in p’ship biz // rights to manage - differences bw partners about everyday stuff decided by maj (if only 2, one party cannot bind other)(summers v
dooley) // apparent auth - partner has app auth to bind p’ship to contract in ordinary courts of biz unless 3P has actual knowledge that partner lacks auth // embezz liab - if partner
embezzles client’s funds, other members not laib for client’s losses (also, mem of p’ship like law firm does not have app auth to accept funds on behalf of firm for any purpose other than
law // neg liab - partner who neg manages affairs is liab to another mem for that neg only if it results in personal injury or prop damage (or like conv of p’ship prob for mem personal
benefit) neg liab 2 - p’ship liab for neg conduct of partner acting in ord cors of biz even if partially motivated by personal reasons - but p’ship entities to indem from partner whose neg
subjects the p’ship to liab when partner’s neg was outside ord cors // meinhard v salmon - partners owe fiduc duty to eachother (highest loyalty) including sharing benefits that result
from the parties’ joint venture (not indiv side projects) // self-dealing - if leasing prop for less than FMV, can be self-dealing if not acting as RPP would (need informed consent of parties
to do it) even if agmt silent // DOL selling asset - no violation of DOL for p’ship to sell assets to aff entity over obj of min partners if p’ship agmt allows for sale of assets on maj vote but is
silent about sale to affil party (at&T) // p’ship agmts - can be oral // GPs - j&s liable for all debts // key elements of p’ships - sharing in profits & losses and control // p’ship by estop -
reas reliance/etc. // p’ship protection - prevent problems by either providing act notice to 3P OR file statement of p’ship auth restricting partners auth w/ appro office for recording //
compete - after dissolution, may immediately compete unless p’shp agmt says otherwise // RUPA - contractarian view of fiduc duties to eachtoher/ limited // doing biz w p’ship -
partners can do biz w/ p’ship as outsider subject to usual laws governing those transacs // waiving DOL - partners may waive (but not elim) DOL unless manifestly unread - all partners of
#/% specified in p’ship agmt may auth/ratify after full disclos an act or transac that would otherwise violate DOL // transferability - only transfer interest of partner in p’ship is partner’s
share of profits and losses and partner’s right to receive distribution // creditors - get paid from p’shp funds before they are divided among partners // unanimous consent needed - an
act outside of ord cors of buz to partnership or amendment to p’ship agmt needs unanimous consent // at will/for term - if at will can term p’ship whenever, if for term can breach if leave
early // leaving - no one can force u to stay but u may not have legal right to leave w/o paying damages // court ordered dissolution - partner conduct makes carrying on biz prejudicial
or not practical (cont. breach) // Dissol under UPA - court may order dissoc of p’ship where partner engaged in wrongful conduct w/ material affect, partner willfully/persistently materially
breached agmt or duty, not reas prac to carry on biz. Dissol under RUPA - pship is an entity, departure of partner does not dissolve p’ship except under circumstances like express will,
expulsion, bankrupt, death, etc. // LLP - must file annual report w/ state and if fails to do so, sec of state can revoke status and increase personal liab by doing so //
LLCs - governing docs - art of incorp, cert of form, op agmt // management - member managed - all members have auth (p’ship law) - manager managed - managers have auth,
members do not (limited p’ship law) // compete with the llc - members can modify duty of loyalty in the contract to make it ok to compete with the LLC (hockey team owner) //
transferability - prop interest in LLC is “freely alienable” unless contract says otherwise (then the transfer is void) - anti-assignment clauses (modern approach) creates duty (does not
restrict power) not to assign thus can bring breach of k claim - restricting who can obtain an interest all falls down to the k // expulsion - varies by state/found in statutes - member can be
expelled if op provides OR by unan consent of members in cert circum // oppression - can be basically forcing someone to sell ownership, LLC member may sue co-member for BFD if
reas expec have been disapp by unanticipated actions of other members // series LLC - lowers cost, may be terminated w/o resulting in dissol of LLC but the termina of the LLC results in
the dissol of each series // 3LC - lets priv foundations invest in for-profit comp w/o losing tax exempt status // modern approach - breach of contract claim if assignment bad bc duty (not
restriction) to not assign //
CORPS purpose - either stated or MBCA says any lawful purpose // art of incorp req - corp name, # of auth shares, state of reg corps office AND name of reg agent at that office, only
powers if want to curb or eliminate that power (for TN, address of PPB of corp, info req by chap 16, for or non profit // ultra vires - either going beyond purpose, granting 3P debts that
don’t benefit corp, unauthorize excess payments to 3Ps or char may be waste/ultra vir // tailored AOIs - cap/eliminate DOC, exculp, elim of BOD, install pre-empt rights, treatments as
CC, indem clauses, cum voting clz // filing - w/ sec of state, corp commences when SOT accepts filing // small v big - market capitaliz, # of SHs, rev, ass, # of emp // gen diff - SH not
pers liab for acts/debts of corp unless prov in AOI (if if own conduct), indv BOD mem has no power (must act as unit), BOD acts, SHs react (ratify what BOD gives them), off/execs just
employees (agents w/ fid duties) // Byls v AOI - pwr to adopt, amend, or repeal, byl shall be in SH entitled to vote, but in AOI, corp can confer that pwr for byl changes to BOD. byl can
contain any prov not incons w/ law or AOI, contain day to day rules, only SHs can amend AOI // finance - auth shares; # perm to be sold;; unissued; not yet sold;; lim iab means lim to
what SH invested, not 0;; par value; if pay less than par, shares are assessable (meaning D’s who issued AND person who bought are liab for amount below par;; MBCA and TN say not
every SH has to pay same amount of consid;; infl land val can be issue of val way higher than actual val // div at BOD discrec - am of div usually up to BOD unless stat or contr
restrictions, cts less def to BOD refusal to pay div in CCs if not in reas expec of SHs; apply DGF, if there is adequate corp surpl BOD cannot withhold div in BF (and BF is motivating
cause) // factors for BF withh div CC - intense host, excl of min from empl, high salaries to contr, desire to get min out cheaply; in DE, distr cannot exceed corp surpl (SE = A - L where
SE = stated capit, paid in surpl, earned surpl); MBCA says no distr if corp insolv or would make corp insolv // liab for improp distr - DE corp may not repurchase shares if it would cause
impairment of capit (reasonable methods to get level of capit - P would need to show that BOD failed to excer reas care in selecting expert (to determ value) AND that rendering a solv
opinion is outside experts realm of competence for BOD to be liab for improp distr here; MBCA req party asserting liab to establish directors did NOT compl w stat standard of conduct
(protects directors by recog GF reliance on reports from officers/emp/lawyrs/accountants, if found liab, right of contrib from other directors who voted OR assented to imrpop distr AND
may be permit to obtain recoup from each SH who received imrpop distr if SH had knowledge of illeg (SH arent liab for improp distr unless they knew!); contractual restrictions on corp
distr; make sure in compliance w loan agmts // defective corps - improp/incomplete filing OR administratively dissolved for fail to pay taxes/make reports;; modern statutes preempt de
facto, but to assert de facto, cannot know of error;; MCBA/TN - for active participants BEFORE incorp - if act as or on behalf of corp that does not exist KNOWING corp doesn’t exist -
personal j&s liab for all liab created while doing // promotor liab - promoter pers liab for all contracts BEFORE corp exists, when corp exists, BOTH are parties/liab, until corp makes
nov // corp death - invol dissol; SOS invol dissol if 1) do not pay taxes/penalties w/i 60 days, 2) do not deliv report within 60 days, 3) w/o reg agent or w/o being in state for 60 days.;
reinstatement - 2 yr window, back taxes/pens, relat back to date of dissol (if grace period/reinstatement window pass, j&s liab unless file new corp w/ novs) // PCV - CC only; def - the
legal privilege of lim liab to SH; alter ego - SH not treating corp as entity but as pers alter ego; “mere instrumentality”; lack of formal; commingling; undercap; pushing money to SH in
manner that leaves creds dry; 2 elements 1) dominion OR control (alt ego/mere inst) [CANNOT pierce where D didn’t use the corp as shell or for his own interest (walkovsky v carlton -
cab company splitting it up for insurance] 2) fraud/unjust (actual or construc) [where this elem not clear, no piercing]; cred via contract - vol cred only enter contract from mat misrep, more
likely to pierce; via tort - invol cred, when corp commits tort via agent and P seeks to hold active SH liab, more likely to pierce // corp fam pierce - maj theory - each viel must be pierced
through corp subsided to reach publicly held corp (min just lumps all together); remedies - corp is frag of larger corp which actually conducts - larg corp held respons - corp is dummy for
indiv SH - SH pers liab // rev viel pierce - cred needs to get to $ hidden in CORP not by pers // charit gifts - must be reas and adv corps interest (not for just total non-prof reasons
[dodge v ford trying to get out of spec div] [big corps can spend $ on ESG] // BJR general - where corp makes decision w business purpose in mind, courts don’t question [wrig]
CORP GOV SH voting - prim pwr of SH. str8 vot is def (1 vote per share for each D to be elected) cum vot (if SH has 500 votes and thr r 5 open seats, 2500 to split however // classes -
at least 1 needs to have vot rights // pooling agmts - valid ks // SH mtgs - formal, pwr to 1) elect Ds 2) amend AOIs 3) adopt/amend byl 4) approve m&a/consid 5) dissol 6) sell ass; req
to hold yrly mtg and notif date 10-60 days prior [if spec mtg, have to say why, MBCA says SH with >=10% has right to demand, DE only right to call spec mtg if in AOI; quorum - [MBCA
no min except for amen to AOI or dealing w/ m&a stuff (q is maj of shares ent to vote & maj of shares present to approve] [DE - min q ⅓ vot shares present // BOD mtgs - formal, take
minutes, q present, maj for action [DE simple polling not valid mtg]; reg meetings can be w/o notice, spec meetings req 48 hrs notice // informal acts - SH - [DE need min # of sigs as for
normal mtg] [MBCA - unan consent] BOD [unan consent (mbca/DE)] // BOD generally - Ds are NOT agents of corp - no auth to bind corp on indiv basis, BOD acts only effective and
binding IF q present and action approv by maj of those present [SH and 3Ps cannot challenge BOD acts UNLESS claim that act violated BOD’s DOC/L] [when BOD actions are for
purpose of obstr legit efforts of diss SHs, this is inequit purp and contr to princ of corp democ][when BOD acts to interfer w SH vote, ct will enjoin act unless BOD has compelling just for
it // BOD struc - having ind dirc makes BOD impartial and obj - SarbOx- must have ind audit comm, FD act - must hav ind comp comm - def rule is D’s are elected yrly (unless AOI says
stagg board) // remov of Ds - SH can remov w/ or w/o cause, BOD lacks auth to remove D w/o cause UNLESS statute prov // officer role - DGF, DOC, DOL, can have act/app auth to
bind as agent, but agmt made by off that purports to bind corp w/ issuance of stock must be approved by BOD AND evid by written contract [BOD also cannot deleg approving sale of
stock to off] // SH making byls - cannot make byl when doing so would encroach on pwrs inv in BOD; MBCA/TN Ds and SHs have pwr to amn byls // problems in CCs - SHs in CC have
strict DOL/GF to all other SHs (like GPs); equal opportunity - corp has pwr to purchase own shares IF 1) not forbid by stat, 2) gf, 3) w/o prej to cred/ SH, and 4) SH acting as D or cont SH
cause corp to make stock purch agmt acted in GF to othe SH (each SH gets offered opp to sell corp shares at equal price; breaching strGF - [NOT in DE] weigh legit biz purp against less
harmful alt (min SH shows alt is less harmful); oppression - SH of CC can bring direct against against maj for breach of duties or ask for invol dissol if oppress actions by maj are part of
pattern and cause harm (and against reas expec) (if ct finds oppress, may dissoll or allow maj to buy out min at FMV [can elect for buyout in MBCA]) // SH agmts in CC - preempt rights
must be in AOI and wvble by conduct; sprmaj voting can be here or AOI/byl; quor prov; class of stock and BOD; SH agmts valid if auth in AOI/byl, by unan vote, or in written agmt signed
by all SH (no matter what’s in it) // restricti on transfers of shares in CC - first option vs. first refusal (first option is predetermined or by formula); consent restraints for transfering to 3P
must not be manif unreas; same for market restraints (ok to say can’t sell to compet)
DUTIES gen - dtys of D for their biz affairs, dtys of O’s for doing what BOD says, P must show causation. CORE PRINC - if disin board, BJR (gf/not gross neg). If int board, entire fairness
// BJR - avoid by showing direc int, rebut presump by showing direc not informed prior to dec. corp indem sued D if stat (or aoi) says. // DOL - dty to avoid confl of int. (was it
disclosed?) // approving confl int transacs - safe harb - cleansing the transac - if don’t disclose fully, must show transac is fair // self-dealing - Dir has burden to show it was fair // corp
opp - D or O may take corp opp if disclosing to comp first (factors - the corp is fin able to take opp, opp is in corp line of biz, corp, corp has int. or expec in opp, by taking opp, O or D
would create conf of int - use of corp assets test- if using anything beyond de minims corp assets or info, corp opp prob, also if only knw bc of virt of pos, prob corp opp (like mein v sal)
[defenses - abandonment of opp by corp, lack of fin or leg ability] // remedies for DOL - const trust/disgorg // DOL of SH - SH can vote selfishly but should do so in equitable manner - cts
may impose fid duties on cont shareholders when they control the BOD; when parent corp dominates subs, parent owes subs dtys // Caremark dtys - to only sustained or systemic
failure of BOD to exercise oversight will establish lack of GF [1) utterly fail to implement or 2) consc fail to monitor or oversee // compensation - not waste if routine biz purpose (like
disney golden parachute)
SH LIT claims belong to the corp // what to show - wrongful act, wrongful failure by the board to pursue/adequately extract remedy // demand - MBCA - MUST make demand, then
board has choice; DE and TN - derivP sues. BOD has choice. If chooses to DISMISS, zuck. [(i) whether the director received a material personal benefit from the alleged misconduct that
is the subject of the litigation demand; (ii) whether the director faces a substantial likelihood of liability on any of the claims that would be the subject of the litigation demand; and (iii)
whether the director lacks independence from someone who received a material personal benefit from the alleged misconduct that would be the subject of the litigation demand or who
would face a substantial likelihood of liability on any of the claims that are the subject of the litigation demand.] If chooses to form SLC, zapata test [step 1 ct inquires into the ind and GF
of the comm. Step 2 striking the balance between legit corporate claims and a corp's best interests as expressed by the SLC. ct should determine, applying its own ind BJ, whether case
dismis. // SLC - decision must be in best interest of corp
M&A/takeover “substantially all” - qually vital to corp - no filing of SOS req // approval - [DE - req bd approv, res adopt by maj of SH, 20 day notice to SH] [MBCA - if in usual biz of
corp, no SH approve req, if outside reg biz, ONLY with SH // right to appraisal - dissenting SHs have right to appraisal for FMV if don’t want to merge // fairness test for when Ds on
both sides of transac - fair dealing + fair price // takeover def - ex. Poison pills (auth additional stock, makes takeover more expensive) golden parachutes, deal protection devices (ex.
No shop, termination fees) // enhanced scrut - BOD members trying to protect their own seat - BOD must show that it has 1) acted in best int of corp and made reas invest into takeover,
2) def maneuver must be reas related to threat, 3) then ct will protect as excercise of BJR (basically GF and reas investing and no draconian measures) [this is unocal duty] // SH
inspection - If SH only seeks to access the SH list, the BOP is on corp to show that the SH is doing so for an improp reason. If SH seeks access to other corp records, the BOP is on the
SH to prove req prop purp. // REVLON - if sale inevit, BOD has to get best deal for SH instead of protecting themselves from tkover
Del adv.liability
Limited
companyDE no income tax
advantages
on corporations
registered
Most in the state
common
which don't do
business in the state.
structure
SH who don't
and in Delaware
reside
specifically
need not pay tax on
createdinforthe state.
shares
small The judges are
businesses
experts in corp law,
andMust the decisions
have the ct tend to be
from
insurance
more predictable
in than
case ofinaother states.
those
suitFilings are
processed
Separatequickly.
legal Privacy
entity is
protected.
Usually When you
taxed
file in Delaware,
as a you
sole need to disclose
don't
proprietorsh
your directors' and
ip
officers' names to the
state.Unlimited
This allows for
number of
anonymity.
ownersResidency is not
Limited
required.
liability Officers,
company
directors, and
disadvantages
shareholders don't
need Can to be
be residents
costly
of Delaware.
to
form You can have a
slimmed-down
Yearly
administrati
corporate structure.
ve costs law allows
Delaware
justPersonal
one person to
tax liability
hold the role of officer,
director, and
shareholder, which is
attractive to small
businesses.
Investors prefer
Delaware. If you're
going to look for angel
investors or venture
capital, know that
most of these prefer
you incorporate in
Delaware.
Disadvantages
Filing is more
expensive. Delaware's
filing fees are
significantly higher
than other states'.
You will pay a
franchise tax. This is
generally minimal for
small businesses, but
it will increase as the
number of shares
increases, and as
your share value goes
Partnership advantages
● Easy to establish (with the exception of developing a partnership agreement)
● Separate legal status to give liability protection
● Profits taxed only once
Partnership disadvantages
● Partners are j&s liable for the actions of the other partners
● Profits must be shared with the partners
● Divided decision making
● Business can suffer if the detailed partnership agreement is not in place
C-corporation advantages
● Limited liability
● Transfer of ownership, shareholders can sell their shares
● Capital is easier to raise through the sale of stock
● Company paid fringe benefits
● Tax benefits
C-corporation disadvantages
● Double taxation (corporation and shareholder earnings taxed)
● Can be costly to form
● More administrative duties
● Pay corporate taxes at a different time than other forms of business