Lecture 19 Blaw 3312 -001
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This 3 page Class Notes was uploaded by loveena Cherukunnathu on Tuesday November 10, 2015. The Class Notes belongs to Blaw 3312 -001 at University of Texas at Arlington taught by John D Dowdy in Summer 2015. Since its upload, it has received 56 views. For similar materials see Law II in Business at University of Texas at Arlington.
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Date Created: 11/10/15
Lecture 19 111015 Chapter 40 corporations corporate directors officers and shareholders CM shareholders rights 1 Stock certificates Each shareholder is entitled to his documentation of his or her ownership If shareholder owns stock they have stock certificates that evidences that shareholders ownership of so many products of the company So corporation is obligated to provide that to shareholders Preemptive rights Common in closely owned and closely willed There will be a provision on the bylaws of that corporation that in effect of any new issue of stock proves the percent of current ownership of the shareholder If a shareholder wants to sell hisher stock to an outsider the stock is freely transferred as a general rule You are free to sell that stock to anyone you want to But if your stock is restricted to transferability that doesn t mean you can t sell it Either way you can sell your stock This can be a provision in the bylaws orjust separate agreement among shareholders Dividends Does shareholders have an inherent right to dividends Dividends is up to board of directors it s strictly up to them to do what with it So shareholders have no inherent right to dividends If the shareholders want to order declaration of payment of dividend the shareholders will get that relief only if they can prove a clear discriminatory discretion from directors side 0 Example you have all these minority shareholders who bring this lawsuit asking the court board of directors to pay deviance Plaintiffs are able to show by all the financial records that they got a ton of money 0 They say they have money but saving it to expand to different places Even if the places seems stupid they won t think its discriminatory discretion 0 It s an extremely narrow window of when court will let them give access to the money because board of directors does make the call for the most part of what to do with the money Example 1916 case Dodge vs ford motor company Ford was making huge profits Minority shareholders felt like they should get some dividends Majority shareholders don t go for lawsuit because they can overrule the board with their power and even vote in new directors 0 They put into evidence all kinds of stuff how much money was making and etc and Ford couldn t reasonably come up with something they are doing with the money Some of that even goes to charity So ford lost 0 The took the dividend money and went out and formed their own company Inspection rights Shareholders have the right to inspect corporate records They don t have the same right directors have Shareholders have limited rights They can see information about financial meetings Rights on dissolution You entitle to 35 if you owe 35 of the stocks Shareholders derivative suits Specialized type of lawsuit where one or more shareholders see something going on that shouldn t be going on makes demand on board of directors and if that doesn t work bring a lawsuit If board of directors fail to act on it then the shareholder can step in and file the lawsuit himselfherself The money recovered from the suit will go to the damages payable to the corporation after the shareholder is reimbursed for any expenses Example shareholder in a company came to Dawdy There was a person on the payroll that said the person worked in president s office All that person was doing was managing a side business of the president Told board of directors to re address this problem Chapter 41 corporations merger and takeovers CP Merger and consolidation 1 Mergers Between 2 corporations one is going to require the other Corporate A and corporate B will merge Corporation A is going to inquires the stock of corporation B inquires everything including corporations debt Maybe planned merger that merge has to be present to the board of directors and in the minute book Both of the corporation s board approves it has to go to each company s shareholder and they have to approve Then corporation B will be formed into Corp A What if some shareholders oppose Then they have a choice Once the merger goes through he will issue stock to shareholders of corporation B What if the shareholder doesn t want stock in Corp A That shareholder can assert the right of applausive This means instead of getting stock shareholder can take cash based on the market value of stock Consolidations A plan of consolidation will involve neither of the corporations to survive a new corporation will be born to absorb corp A and corp B Procedure works same way as a merge CQ purchase of assets Example two competing corporations swimming pool construction Corp A sells Corp B if you want to buy assets since they don t want to compete so much anymore Corp B gives cash for all of it Not buying any company stock just the machines and other assets the company is selling That s usually want the buyer wants to do instead of buying stock this way you don t buy the liability of the company Corp A has cash as asset and it is still in existence they might just start some other type of organization CS Termination Dissolution Make sure all the creditors are taken care of Get a certificate to show that their tax is good standing Then give it secretary of state And certain other bases A corporation didn t exist until board of directors gave a charter And same with dissolution and they have to give a certificate of dissolution After the creditors and all are taken care off Then it s divided among the shareholders Chapter 38 other organizational forms for small business note emphasis on limited liability companies LLCA Limited Liability companies historical background 1st limited liability was passed down in Wyoming legislation in 1976 This went to tax cord 1989 Texas passed it LLC has been in Texas since 1990 LLCB limited liability companies If corporation qualifies as an S corporation profits passes through C corps doesn t pass through LLC is a separate entity Members of LLC are like shareholders to a corporation they are shielded from individual liability of debt of LLC n LLC does not have to make a separate election to be treated like an S corp because it s automatically given that tax fee LLC is not limited to 100 people can have any number of members Not limited to individuals and trusts They can even can be investors
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