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Definition
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Term
| Equipto Division Aurora Equip. Co. v. Yarmouth |
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Definition
| Not liable for debt if the corp. has been dissolved for missed due date of payment. MBCA requires actual knowledge (adminstrative dissolution) |
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| Escott v. BarChris Construction Corp. |
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Definition
| Defendant corporate officers will be held liable for false or misleading statements when they materially affect the purpose of the registration statement.——— The court reviewed many of the statements contained in the registration statement filed by Defendants. Some of the statements were within normal accounting standards, and some of the figures were only slightly different from what the court calculated. However, other statements were misleading or omitted figures altogether, and the difference was significant enough to be considered material under the Act. The case was remanded to determine which of the officers were responsible for the material omissions or misstatements to determine who should be considered the defendants moving forward. |
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Definition
| Affirms giving dividends. |
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| Ringling Bros.–Barnum * Bailey Combined Shows v. Ringling |
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Definition
| Shareholders should be allowed to band together and make pooling agreements. However, the court decided in this case not to invalidate the voting and held that the members that were voted in by Haley and North would remain. Eventually, DE supreme court disqualified Haley shares, and North became controlling shareholder. |
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| Blasius Industries, Inc. v. Atlas Corp. |
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Definition
| Unless the board can articluate a "compelling justificaiton" for its action, court intervene to protect "established principles of corp. democracy." |
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Definition
Any “right” to purchase stock must be approved by the board and evidenced in writing. This is in order to
(1) consolidate in its board of directors the exclusive authority to govern and regulate a corporations capital structure and
(2) to ensure certainty in the instruments upon which the corporation’s capital structure is based.
(3) (issuance of stock is very, very important and rules will be strictly construed) |
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| Lacos Land Company v. Arden Group, Inc. |
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Definition
| A shareholders’ vote authorizing a charter amendment is not valid if it is made under the threat that, unless authorized, the company’s principal shareholder and chief executive officer will oppose transactions that may be in the company’s best interests. |
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| Donahue v. Rodd Electrotype Co. of New England, Inc. |
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Definition
PRIMARY RULE: "stockholders in the closely held corporation owe one another substantially the same fiduciary duty in the operation of the enterprise that partners owe to one another[:]"
SECONDARY SIGNIFICANCE:
Definition of a closely-held corporation:
1) small number of stockholders
2) no ready market for the corporate stock
3) substantial majority stockholder participation in the mgmt, direction, and operations of the corp |
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Term
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Definition
Personal Relationship Rule: “A court should gvie relief, dissolution or some other remedy to a minority shareholder whenever corporate managers or controlling shareholders act in a way that disappoints the minority shareholder’s reasonable expectations, even though the acts of the managers or controlling shareholders fall within the literal scope of power or rights granted them by the corporation at or the corporation’s charter or bylaws.”
Factors for “reasonable expectations”
(1) History
(2) Reasonable expectations created at the inception of the participants’ relationship
(3) Reasonable expectations as altered over time
(4) Reasonable expectations which develop as participants engage in a course of dealing in conducting the affairs of the corporation
(5) Interests and views of other participants |
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Term
| In the Matter of Kemp & Beatley, Inc. |
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Definition
| Oppressive conduct (as distinct from illegal conduct) refers to conduct that substantially defeats the "reasonable expectations" held by minority shareholders in committing their capital to the particular closely-held corporation. — “[O]ppression should be deemed to arise only when the majority conduct substantially defeats expectations that, objectively viewed, were both reasonable under the circumstances and were central to the petitioner's decision to join the venture." |
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Term
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Definition
The business of a corporation shall be managed by its board of directors.
Shareholders can not form an agreement to control the decisions traditionally vested in the judgment of the directors of a company |
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Term
| Lash v. Lash Furniture Company of Barre |
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Definition
| Have to contract around this kind of situation. Fiduciary duty not to let outside commitments detracts - presence of competing interests may prevent directors from acting ——— Director may not profit at the expense or against the interest of the corporation. The duties of good faith and loyalty require that a director must not allow personal interests to interfere with or supersede the interests of the corporation. |
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Term
| Francis v. United Jersey Bank |
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Definition
| Court says: kind of like a bank - in that respect (creditors) were also dependent on directors. Company was in a precarious was in a precarious financial position as a result of unauthorized loans. Ps here are creditors - there is duty there. |
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Term
| Stone ex rel. Amsouth Bancorporation v. Ritter |
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Definition
| (1) Caremark standard is the appropriate standard for director duties with respect to corporate compliance issues; and (2) there is no duty of "good faith" that forms a basis, independent of the duties of care and loyalty, for director liability. |
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Definition
| Business judgment rule will not shield an uninformed decision. Board didn't do adequate research. |
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Term
| In re The Walt Disney Company Derivative Litigation |
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Definition
| Court says: if you effectively abdicate your responsibilities, knowlingly fail to implement any system to ensure corp. is complying with law or in instance, pay no attention to what is before you at board meeting - that is a breach of duty of good faith - and - because of Stone v. Ritter, a breach of duty of loyalty |
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| Sinclair Oil Co. v. Levien |
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Definition
| Defendant did not engage in self-dealing by issuing large dividends but it did engage in self-dealing when they breached the agreement. Defendant complied with Delaware statute 8 Del.C. Section: 170, concerning the payment of dividends, and Defendant’s motives are not a factor when all shareholders benefit from the transaction (not self-dealing). However, the contract breach was to the detriment of Sinven and its minority shareholders with the positive effect being exclusive to Defendant, so the breach is self-dealing. |
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Term
| Zapata Corp. v. Maldonado |
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Definition
| The court should first determine if a defendant corporation proves that the appointed committee is independent, and then determine, when applying their business judgment standard, whether the motion to dismiss the derivative suit should be granted. |
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Term
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Definition
| The Court of Chancery’s holding is reversed because the Plaintiff failed to first make a demand to Defendant Directors before bringing a derivative suit. Plaintiff further failed to show that such a demand was excused because he did not allege particularized facts that indicate such a demand would be futile. |
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Term
| Tooley v. Donaldson, Lufkin & Jenreete, Inc. |
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Definition
| The highest court (1) redefined a test to determine if the shareholders' claim was a direct or a derivative claim, (2) found they did not state a derivative claim, (3) found they did not state a ripe direct claim upon which relief could be granted, but that that issue was not argued, and (4) affirmed the dismissal, but reversed the judgment and remanded for the trial court to dismiss the case without prejudice--with leave to replead. Grimes test holds. |
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Term
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Definition
| Misleading statements during merger discussions will be material under Rule 10b-5 if the misstatements would have changed the view of the total information by a reasonable investor |
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Term
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Definition
| A duty to disclose information arises if there is a relationship of trust and confidence between parties to the transaction. Chiarella had no such duty. He was not a corporate insider in the acquiring corporation and he did not receive confidential information from the target company. He also had no fiduciary relationship with the shareholders of the target company: he was not their agent; they placed no trust or confidence in him; indeed, they had no prior dealings with him. A duty to disclose under Section 10(b) does not arise from the mere possession of nonpublic market information. |
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Term
| Dirks v. Securities and Exchange Commission |
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Definition
| A tippee owes a fiduciary duty to shareholders if the tippee received material nonpublic information from an insider that breached his fiduciary duty by disclosing the information, and the tippee knows of the breach. |
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Term
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Definition
| An outsider who misappropriates confidential information to personally benefit violates Section:10(b) because there is deception in connection with the purchase or sale of a security. |
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Term
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Definition
| A majority shareholder owes a fiduciary duty to minority shareholders to provide all relevant information that would pertain to a proposed cash-out merger. |
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Term
| Unocal Corp v. Mesa Petroleum Co. |
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Definition
TWO PART TEST (first, is there a change in control or identifiable threat?)
1. Board must reasonably perceive the bidder's action as a threat to corp. policy - a threshold dominant-purpose inquiry into the board's investigation AND
2. Any defensive measure the board adopts "must be reasonable in relation to the threat posed" - proportionality test |
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Term
| Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. |
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Definition
| When a takeover is inevitable, the directors’ duty is to achieve the best price for the shareholder. (this is contrasted by the Time case - where court allows board to consider future interests of the company) |
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