Business law

(read page 1091 conflicting interest transaction )

Conflict of interest may arise when the directors or officers with a conflict of interest my prefer his own interest over those of the corporation .

Under the MBCA corporation There is no conflict of interest when 1. The transaction has been approved by a majority of informed, disinterested directors , 2. The transaction has been approved by a majority of the shares held by informed, disinterested shareholders , or 3. The transaction is fair to corporation .

Even if first two requirements are satisfied , the court will void the transaction if the third one is missing .

Generally, unanimous approval of an interested person transaction by informed shareholders conclusively releases an interested director or officers from liability , even if transaction is unfair to the corporation.

( read page 1093 usurpation of a corporate opportunity lecture # 6 after 1hour 58min )

As a fiduciaries, directors and officers are liable to their corporation for usurping

( stealing ) corporate opportunities .

( read page 1092 Sarbanes- Oxley ) after 2 hour 1 min

Congress included in the Sarbanes – Oxley Act of 2002 a section generally prohibiting public companies from making loans to their directors or officers.

But if the corporation is not a public company or if the loan is made to a nonexecutive , the SOA doesn’t prohibit the corporate loan .

( read page 1095 oppression of minority shareholders ( freeze out) ) after 2 hour 6 min

oppression may occur when directors of close corporation who are also the majority shareholders pay themselves high salaries yet refuse to pay dividends or to hire minority shareholders as employees of the corporation.

One method of oppression is freeze out - the article of merger says that only the shareholders of the new corporation will survive as shareholders of the surviving new corporation ; the shareholders of the old corporation will receive cash only .

The special term for a freeze out of shareholders of publicly owned corporations is – Going private

( read page 1096 trading inside information )

Securities Regulation, the illegality of insider trading is already federal law under the Security Exchange Act

( read page 1098 directors and officers liability for torts and crimes )

The liability of the corporation. For torts, the vicarious liability rule of respondeat superior applies to corporations . Directors and officers are personally liable when they commit torts or crimes during the performance of their corporate duties.

The directors or officers are usually not liable for the torts of employees of the corporation, since corporation not a director or the officer, is the principle but if they authorizes the torts but not involved they will have criminal liability.

(read page 1102 insurance and indemnification )

to encourage persons to become directors, corporation indemnify them for their outlays associate with defending lawsuit brought against them and paying judgments and settlements amount . it is the same as to purchase insurance to protect themselves against lawsuit.

( read page 1108 share. Meetings and conduct meeting just understand the concept)

Conduct of meetings : to conduct business at shareholders’ meetings, a quorum aof outstanding shares must be represented at the meeting . If the approval of more than one class of shares is required, a quorum of each class of shares must be present .

A Quorum is a majority of shares outstanding, unless a greater percentage is established in the article

( read page 1122 and 1123 dividends)

there are two type of dividends : cash and share – look at the book

( read page 1124 share repurchases )

A corporation may also distribute its assets by repurchasing its shares from its shareholders , it can be either redemption or open market repurchase

Review first exam on the march 25 lecture , multiple choice questions ( Iphone)

Securities

Definition

The Howey test states that an investment contract is an investment of money in a common enterprise with an expectation of profits solely from the efforts of others

In order to satisfy the definition of securities it should me met to these three attributes

If anyone violate HOWEY TEST ( security law ) the SEC will come after them some cases it will end up appearing in the jail .

One of the violations is trading inside information : about the rate of securities and so on

Basic and fundamental distinctions of 1933 and 1934 acts are that 1934 has ongoing reporting requirements ( all the time companies do ongoing reporting about their financial statements for exp. 10K is under 34 act and so on ), under the 1933 act it is when you issue the shares , so the inssuance of the shares subject to 1933 act . First time you sell your share to the public , that initial public offering is called IPO, so if you have an IPO you fall under 1933 act

Important Materials also highlitied in the book starts page 1140

There are certain exemptions that companies will not only offers their securities for investors , but also state residents ( single investor) in this case the company has to go all of the steps that was described that they did for investors .

And there is a specific rule ( page 1150 ) called 506 rule , which is not statue , it is a rule . that is saying that there are two requirements for selling securities : in the book

Page 1150 rule 506 )

1934 act is about financial reports , so 10q is quarterly financial statement , 10k is annual report, 8k is special events is not gonna affect financial report that investor should know about that , 14A proxy statement .

Employment law

Employee at will – being employee you can leave the company any time unless you have specific contract with them not to leave the company in certain period of time and vise versa employer can fire you any time , so you can be fired and you can quit with no reason any time .

But - if you are discriminated based on ; race , age, religion , gender , disability , ethnicity you are protected by law

Under older worker protection act ( ADEA) prohibits employment discrimination against persons 40 years of age or older.

Collective bargaining is a good system because you have a group negosiating or one entity negosiating on behalf of entire employee group where as each individual negosiating own her own that wont have that collective bargaining power .

Business Ethics

Kantian Ethics?

Abiding by the rules applied to others in making decisions.

The applicability of "do unto others as you would have them do unto you."

All cases should be treated alike.

Someone who believes that the principles of justice and moral duties are based on universal rules, and that the actor must abide by the same rules being applied to others, believes in which moral theory

Rawls's social justice theory includes which of the following?

the belief that the moral rules should be determined by persons who have a "veil of ignorance" about their place or station in society

The moral theory of ethical relativism can best be characterized by:

the belief that a person must decide what course of action is proper based on that person's own set of beliefs or feelings

the maximizing profits theory

The theory of business social responsibility that holds that a business owes duties solely to produce the highest return for its shareholders is:

A business that is concerned solely with the financial implications of alternate courses of action is applying which theory of the social responsibility of business?