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DGCL MBCA

Acting on
Consent (w/o a
shareholder
meeting)
Shareholders can act without a meeting, by written
consent, unless the charter takes away that power.
Shareholders can act by the consent oI the number oI
shareholders that would be necessary to approve an action
at a meeting, unless the articles take away the power to act
on consent. 228, 275(c)

In Delaware a majority coalition oI shareholders can act,
such as to replace the board, without having to ask the
board to call a meeting. Thus, shareholders not subject to
board`s tactical decisions.
Shareholders can act without a meeting, by written
consent, unless the charter takes away that power.
Unanimous consent is required. 7.04(a)


Not as important in MBCA jurisdiction because unanimous
consent is rare
Appraisals Shareholders who are given voting rights under state law
usually receive the right to challenge the merger price in
an appraisal proceeding. 262

Shareholders in short Iorm merger get appraisal rights
even though they don`t have voting rights

Exception: When selling shareholders have right to vote
on merger but start out with stock oI a public company
and end up with stock oI another public company, the
shareholders do not have appraisal rights

When shareholders have option oI asserting their right to
appraisal, they must vote against the transaction, notiIy
the company that they might assert their appraisal rights,
and then assert within allotted time. 262(d)
Shareholders who are given voting rights under state law
usually receive the right to challenge the merger price in an
appraisal proceeding. 13.02

Shareholders in short Iorm merger get appraisal rights even
though they don`t have voting rights

Exception: When selling shareholders have right to vote on
merger but start out with stock oI a public company and
end up with stock oI another public company, the
shareholders do not have appraisal rights

When shareholders have option oI asserting their right to
appraisal, they must vote against the transaction, notiIy the
company that they might assert their appraisal rights, and
then assert within allotted time. 13.22(b)(2)(ii)
Asset/Liability
Purchase
Unlike merger, the selling company`s assets and liabilities
don`t transIer automatically by operation oI law. Rather,
the liabilities that are assumed by the purchasing company
and those that remain with the selling company are subject
to negotiation. One oI the advantages oI sale oI assets is
increased discretion oI parties with regard to the transIer
oI assets and liabilities. 271
Unlike merger, the selling company`s assets and liabilities
don`t transIer automatically by operation oI law. Rather,
the liabilities that are assumed by the purchasing company
and those that remain with the selling company are subject
to negotiation. One oI the advantages oI sale oI assets is
increased discretion oI parties with regard to the transIer oI
assets and liabilities. 12.02










Procedure: Both boards adopt resolutions authorizing the
transaction. II selling company sells substantially all oI its
assets, then its shareholders have the right to vote to
approve the sale. 271(a)

Substantially all: Not precise b/c common law doctrine.
Look to qualitative and quantitative importance oI assets.
Are assets quantitatively vital to operation oI corporation?


Purchasing company`s shareholders don`t have voting
rights in an asset purchase transaction.

Dissenting shareholders don`t have appraisal rights.


A sale oI assets Ior cash is taxable, while a sale oI assets
Ior stock is nontaxable

Once the shareholders approve the sale, assets and
liabilities are transIerred in exchange Ior the merger
consideration. At the same time, the selling board adopts a
resolution dissolving the corporation, paying any creditors
that have not agreed to the substitution oI a new debtor,
cancelling the outstanding stock, and distributing any
remaining proceeds Irom the merger consideration to the
selling company`s shareholders.

Doctrine oI successor liability permits tort claims against
successor company notwithstanding the contractual
arrangements made by the two companies. Model Act
permits such claims to be asserted against shareholders oI
the selling company Ior 5 years aIter the sale oI assets.
14.07

Procedure: Both boards adopt resolutions authorizing the
transaction. II selling company sells substantially all oI its
assets, then its shareholders have the right to vote to
approve the sale. 12.02(a)

Substantially all: No voting or appraisal rights iI the
company will be leIt with at least 25 oI its presale assets
and either 25 oI aIter tax operating income or 25 oI
revenues. 12.02(a)

Purchasing company`s shareholders don`t have voting
rights in an asset purchase transaction (except iI the
company will issue shares greater than 20 oI outstanding
shares beIore the purchase in exchange Ior the assets to be
purchased). 13.02(b).

A sale oI assets Ior cash is taxable, while a sale oI assets
Ior stock is nontaxable

Once the shareholders approve the sale, assets and
liabilities are transIerred in exchange Ior the merger
consideration. At the same time, the selling board adopts a
resolution dissolving the corporation, paying any creditors
that have not agreed to the substitution oI a new debtor,
cancelling the outstanding stock, and distributing any
remaining proceeds Irom the merger consideration to the
selling company`s shareholders.
Assets A corporation may not repurchase its shares iI doing so
would cause impairment oI capital unless expressly
Solvency test: Distributions that would result in insolvency
are prohibited. This test depends on operational aspects oI


authorized by 160. A repurchase impairs capital iI the
Iunds used in the repurchase exceed the amount oI the
corporation`s surplus (excess oI net assets over par value
oI corporation`s issued stock). 154 (does not require
speciIic method oI calculating surplus).

Solvency test: Delaware does not have a solvency test

Balance sheet tests-impairment oI capital test in
Delaware. Distributions Irom surplus plus any amounts
the board has elected to add to its capital account are
allowed. 170

Boards can rely on experts to determine compliance with
160.

Value oI shares. 262

Legal capital is par value oI shares multiplied by shares
outstanding
corporation







Balance sheet test technical insolvency test in Model Act:
prohibits distributions that would result in total assets
being insuIIicient to pay the sum oI the corporations
liabilities and any liquidation preIerences that would be
owing iI the corporation dissolved at the time oI
distribution. 6.40(c)(2)





No such thing as legal capital
Authority Board has statutory authority to manage the corporation
141(a). Any limitation on the board`s authority must be
set out in the certiIicate oI incorporation

Board Meetings Board meetings do not need to take place in state oI
incorporation. 141(g)

Directors can be 'present at board meetings even iI not
physically present (telephone). 141(i)

Directors can act without holding a meeting, as long as all
directors consent to the action (and the charter oI bylaws
don`t provide otherwise) 141(I)

A majority oI directors being present satisIied statutory
quorum requirements, but the charter or bylaws can alter
the quorum requirements to speciIy more or less than a
Board meetings do not need to take place in state oI
incorporation. 8.20(a)

Directors can be 'present at board meetings even iI not
physically present (telephone). 8.20(b)

Directors can act without holding a meeting, as long as all
directors consent to the action (and the charter oI bylaws
don`t provide otherwise) 8.21

Directors may act at meetings that may be held regularly,
as speciIied in the bylaws, or at a special meeting (requires
notice oI date, time, and place, but not purpose (unless


majority. 141(b)

Once the directors are properly assembled, a majority vote
oI the directors present is required to act, unless charter or
bylaws prescribe a greater number. 141(b)
charter or bylaws require it)). 8.22

Directors can waive notice oI a meeting by participating or
in writing. 8.23

A majority oI directors being present satisIied statutory
quorum requirements, but the charter or bylaws can alter
the quorum requirements to speciIy more or less than a
majority. 8.24(a),(b).

Once the directors are properly assembled, a majority vote
oI the directors present is required to act, unless charter or
bylaws prescribe a greater number.8.24(c).
Bylaws Shareholders have power to adopt, amend or repeal
bylaws relating to the business oI the corporation and the
conduct oI its aIIairs by majority vote. 109.
Shareholders have this power even iI the board has
concurrent power to make changes to the bylaws granted
to it by the charter
Shareholders and board have concurrent power, but articles
can reserve the power to change the bylaws exclusively to
the shareholders. 10.20(b)(1).
Charitable
Donations
Charitable donations are expressly authorized by 122(9).
No limitation on charitable donation, courts have
interpreted 122(9) to limit to reasonable giIt oI charitable
or educational nature

Charter ClassiIication oI stock: A corporation may amend its
certiIicate oI incorporation to reclassiIy its authorized
stock. 242 Or to create a new class oI stock with rights
and preIerences superior to other classes oI stock.
242(a)(5) and (b)(2). 'The holders oI the outstanding
share oI a class are entitled to vote upon a proposed
amendment, whether or not entitled to vote thereon by
certiIicate oI incorporation, iI the amendment would
increase or decrease the aggregate number oI authorized
shares oI such class, the par value oI shares oI such class,
or alter or change the powers, preIerences or special rights
oI the shares oI such class so as to aIIect them adversely

Exculpation clauses: Can include exculpation clause in
certiIicate oI incorporation. 2.02(b)(4). Companies may
not eliminate liability Ior harming the company. Can
eliminate or limit director liability to corporation or
shareholders Ior money damages Ior any action taken or
Iailure to take action in breach oI duty oI care including
breaches that constitute an intentional violation oI civil
law. 2.02(b)(4)(D).

However, cant exculpate a director Ior receiving Iinancial
beneIits to which they are not entitled, Ior approving
improper dividends, Ior intentionally harming the
corporation, or Ior intentional violation oI criminal law.


Exculpation clauses: Can include exculpation clause
(limits director liability Ior money damages Ior certain
types oI breach oI duty oI care) in certiIicate oI
incorporation. 102(b)(7). Companies may not eliminate
liability Ior acts or omission in bad Iaith. Good Iaith is
part oI duty oI loyalty. Important because directors do not
have beneIit oI business judgment rule Ior duty oI loyalty
claims, cannot be exculpated Ior dol claims, and cant be
indemniIied Ior dol claims (Disney and Stone v Ritter).
Corporation may nto exculpate director Ior breach oI duty
oI loyalty or Ior acts or omission not in good Iaith or
which involve intentional misconduct or a knowing
violation oI law. 102(b)(7). Shareholders can still pursue
injunctions

Mergers: Process oI merger 251. No vote required in
merger iI rights and preIerences do not change. 251(g).

Preemptive Rights: No stockholder shall have any
preemptive right unless and except to the extent that such
right is expressly granted in certiIicate oI incorporation.
102(b)(3)

Voting on amendments: Shareholders have right to vote
on amendments to the certiIicate oI incorporation that
would alter powers, preIerences, rights so as to aIIect
them adversely. 242(b). Issuant oI shares that have
priority will not adversely aIIect the rights oI junior
security. (common law)
2.02(b)(4). Shareholders can still pursue injunctions

No capital requirements
Classes of
Shares
Corporations can issue more than one class oI shares, each
having unique rights. 151

Corporation can create a new class oI stock with rights
and preIerences superior to other classes oI stock.
242(a)(5) and (b)(2). 'The holders oI the outstanding
share oI a class are entitled to vote upon a proposed
amendment, whether or not entitled to vote thereon by
Corporations can issue more than one class oI shares, each
having unique rights. 6.01


certiIicate oI incorporation, iI the amendment would
increase or decrease the aggregate number oI authorized
shares oI such class, the par value oI shares oI such class,
or alter or change the powers, preIerences or special rights
oI the shares oI such class so as to aIIect them adversely
Classified
Board
Can have classes oI directors. What most people call
staggered board is called classiIied board in Delaware.
141(d).
Can stagger the board by dividing the board into diIIerent
classes to be elected in alternating years. 8.06
Committees of
the Board
The board may act through committees comprised oI one
or more directors. 141(c) Actions taken by the
committees may carry same weight as actions taken by
whole board. Id

Actions that need to be put to a shareholder vote may not
be delegated to a board committee, nor may a committee
adopt, amend, or repeal bylaws oI the corporation.
141(c)(2).

Can set executive compensation
The board may act through committees comprised oI one
or more directors. 8.25(a).

The rules governing meeting oI whole board governs
meetings oI committees. 8.25(c).

Actions taken by the committees may carry same weight as
actions taken by whole board. 8.25(d). Actions that need
to be put to a shareholder vote may not be delegated to a
board committee, nor may a committee adopt, amend, or
repeal bylaws oI the corporation. 8.25(e). Also,
committee cant Iill vacancies on the board or authorize
dividends except pursuant to Iormulas whole board has
adopted. Id.
Conflict of
Interest
ConIlict oI interest transactions are not void or voidable
iI: (1) the material Iacts are disclosed to the board or
shareholders, AND (2) either the disinterested directors or
disinterested shareholders authorize, approve, or ratiIy the
transaction. 144. They are also not void iI iI they are Iair
to corporation

Director`s conIlicting interest transactions: any transaction
in which the beneIicial Iinancial interest oI a director is oI
such Iinancial signiIicance to the director that the interest
would reasonably be expected to exert an inIluence on the
directors judgment iI he were called upon to vote on the
transaction.
ConIlict oI interest transactions are not void or voidable iI:
(1) the material Iacts are disclosed to the board or
shareholders, AND (2) either the disinterested directors or
disinterested shareholders authorize, approve, or ratiIy the
transaction. 8.31. They are also not void iI iI they are Iair
to corporation.

Interest transactions cant be enjoined iI (a) board approves
transaction in accordance with 8.62; (b) the shareholders
approve the transaction in accordance with 8.63; or (c) the
transaction si Iair to the corporation at the time it is
authorized
Corporate Corporation has power to renounce, in certiIicate oI


pportunity incorporation or by action oI board, any interest speciIied
business opportunities or speciIied classes oI categories oI
business opportunities that are presented to the
corporation or one or more oI its oIIicers, directors, or
shareholders. 122(17).
Cumulative
Voting
Shareholders do not have right to cumulate their votes Ior
directors unless the articles oI incorporation provide
otherwise. 214
Shareholders do not have right to cumulate their votes Ior
directors unless the articles oI incorporation provide
otherwise. 7.28(b)
Directors Business and aIIairs oI corporation managed by board oI
directors. 141(a).

Public corporation must have board, while closely held
can do away with board by agreement among
shareholders. 141(a) and 351.

Charter or bylaws can set director qualiIications, but
statutes do not. 141(b)

Only need to have one director, with exact number or
range to be speciIied in charter or bylaws. 141(b)

All directors are elected by shareholders at annual
shareholder`s meeting, unless the board is staggered or a
vacancy occurs mid-term. 211(b)

Each director holds oIIice until his successor is elected
and qualiIied or until his earlier resignation or removal.
141(b)

Directors may be removed by shareholders with or
without cause unless charter provides removal only Ior
cause. 141(k). II the board oI staggered, then directors
can only be removed Ior cause. Id.

Directors can resign anytime, usually need written notice
oI resignation. 141(b). Vacancies may be Iilled by
Business and aIIairs oI corporation managed by board oI
directors. 8.01(b).

Public corporation must have board, while closely held can
do away with board by agreement among shareholders.
8.01(a) 7.32

Charter or bylaws can set director qualiIications, but
statutes do not. 8.02

Only need to have one director, with exact number or
range to be speciIied in charter or bylaws. 8.03(a)

All directors are elected by shareholders at annual
shareholder`s meeting, unless the board is staggered or a
vacancy occurs mid-term. 8.03(c)

Each director holds oIIice until the annual meeting
Iollowing his election unless terms are staggered. 8.05


Directors may be removed by shareholders with or without
cause unless charter provides removal only Ior cause.
8.08(a).

Directors can be removed by a judicial proceeding Ior
Iraudulent or dishonest conduct or gross abuse oI authority.
8.09


remaining directors or shareholders. 223(a)(1).

Board has exclusive authority to issue stock and regulate
corporation`s capital structure. 151, 152, 153, 157, 161,
166. Resolutions providing Ior the issue oI stock must be
adopted by board pursuant to authority expressly vested in
certiIicate oI incorporation. 151. Board determines
manner oI payment Ior purchase oI capital stock issued by
corporation. 152, 153. Board approval Ior rights and
options oI stock. 157. Board can issue additional stock
up to level allowed by certiIicate. 161

Directors can rely in good Iaith on records, reports, and
experts. 141(e).

Power to run corporation includes power to select time
Irame Ior achievement oI corporate goals and cant be
delegated to shareholders

Directors can resign anytime, usually need written notice
oI resignation. 8.07(a). Vacancies may be Iilled by
remaining directors or shareholders. 8.10(a).

MBCA biIurcates the standards applicable to directors
between standards oI conduct (duty oI care) and standards
oI liability (business judgment rule). 8.30-31.

Standard oI care is the same Ior both classes oI cases
(action and inaction)('to discharge their duties with the
care that a person in a like position would reasonable
believe appropriate under similar circumstances). The
oversight context merits unique standard oI liability under
8.31: must establish that challenged conduct consisted or
was the result oI a sustained Iailure oI the director to be
inIormed about the business and aIIairs oI the corporation
or other material Iailure oI the director to discharge the
oversight Iunction

Demand requirement: PlaintiII must always bring demand
to the board that it initiate derivative litigation Ior breach
oI Iiduciary duty. 7.42. II board doesn`t act within 90
days, then plaintiII can initiate litigation. 7.42(2)

Shareholder agreements: Shareholder agreements allowed
even when they limit board powers in certain enumerated
ways. 7.32 However, agreement providing that directors
have no duty oI care or loyalty is against public policy.
7.32(a)(8).

Agreements must be unanimous and must be included I
charter, bylaws, or separate agreement. Duration is limited
to ten years unless agreement provides otherwise. Must
include legend on shares to notiIy transIerees oI the
agreement. Limited to corporations. Shareholders will not
have personal liability even iI agreement creates a


partnership.

Voting pool: when shareholders vote together as a single
block. 7.31 expressly provides Ior voting pools
Disclosure In context oI charter amendments, only statutory
disclosure requirements area duty to provide notice oI
annual meeting 222(a) and duty to set Iorth and
summarize the proposed amendment 242(b)(1).

Dissolution II there are 2 stockholders with 50 each and cant agree
on whether to continue the corporation or how to dispose
oI assets, either shareholder, unless otherwise provide in
certiIicate oI incorporation or agreement between
shareholders, Iile a petition with court oI chancery Ior
dissolution. 273(a).

Shareholders have immutable right to vote on dissolution
275
Dissolution iI directors and shareholders are deadlocked
and irreparable injury threatends corporation; control
persons are engaging in illegal or Iraudulent behavior;
shareholders cant elect directors Ior two consecutive years;
and corporate assets are being misapplied or wasted.
14.30

Court can appoint custodian or receiver. 14.32

Corporation or shareholders can purchase shares oI
shareholder petitioning Ior dissolution (buyout). 14.34.
Ensures minority shareholders don`t use dissolution
strategically.
Election Section 225 provides a quick method oI review oI the
corporate election process in order to prevent a
corporation Irom being immobilized by controversies as
to who are proper oIIicers and directors

Incorporation Charters must include name oI corporation, number oI
authorized shares oI stock, and name and address oI a
registered agent in state oI incorporation. 102(a). Must
include purpose oI corporation

An incorporator can reIuse to name a board oI directors
until the Iirst annual meeting and manage the corporation.
107
Charters must include name oI corporation, number oI
authorized shares oI stock, and name and address oI a
registered agent in state oI incorporation. 2.02(a).

May include purpose oI corporation. 2.02(b)(2)(i)

3.02 presumes corporation is perpetual
Indemnification A corporation can indemniIy and person who is or was a
director, oIIicer, employee, or agent oI the corporation
against expenses, judgments, Iines, and amounts paid in
8.51-8.57

Advancement oI expenses prior to Iinal disposition is


settlements where (1) that person is threatened to be made
a party to that action and (2) that person acted in good
Iaith and reasonable manner in or not opposed to best
interest oI corporation 145 (this provision is permissive)

Thus director can be indemniIied Ior liability incurred by
reason oI violation oI duty oI care but not Ior duty to act
in good Iaith.

Advancement oI expenses prior to Iinal disposition is
allowed. 145(e)
allowed. 8.53
Mergers In a merger, one company is entirely subsumed by another
through the operation oI law. 251

The consideration used by the acquiring to pay the target
may be stock oI the acquiring company, bonds, cash,
securities oI another company, or some combination.
251(b). II cash is more than 50 oI purchase price,
transaction is taxable.

Mergers are accomplished in accordance with 251.
Merger agreement. 251(b)(3). CertiIicate oI merger.
253(c)(4)

Shareholders have immutable right to vote on mergers.
251 (except Ior short Iorm mergers)

Shareholders oI acquiring get voting rights only iI chater
oI surviving company will be amended by the merger,
rights oI shares oI surviving will be changed by the
merger, or surviving company is going to issue new
shares oI stock equal to 20 or more oI the common
stock outstanding prior to merger in order to pay Ior
merger. 251(I)

These shareholder rights can even be eliminated by using
a triangular merger. A triangular merger is when surviving
In a merger, one company is entirely subsumed by another
through the operation oI law. 11.02

The consideration used by the acquiring to pay the target
may be stock oI the acquiring company, bonds, cash,
securities oI another company, or some combination.
11.02(c)(3)






Shareholders have immutable right to vote on mergers.
11.04(b) (except Ior short Iorm mergers)

Shareholders oI acquiring get voting rights only iI chater oI
surviving company will be amended by the merger, rights
oI shares oI surviving will be changed by the merger, or
surviving company is going to issue new shares oI stock
equal to 20 or more oI the common stock outstanding
prior to merger in order to pay Ior merger. 11.04(g)


These shareholder rights can even be eliminated by using a
triangular merger. A triangular merger is when surviving


establishes a wholly owned subsidiary and capitalized the
subsidiary with merger consideration, which can includes
parents stock,c ash bonds, or combination. 251(b).

Short Iorm: Parent owns 90 or more oI target. The
parent can merge by avoiding shareholder vote. 253

Boards can submit merger agreement Ior stockholder
vote. 251(c)

Board can`t remain committed to merger but recommend
its stockholders vote it down. Nor could it be neutral and
leave decision to shareholders. Two options under
251(b): to proceed with merger and stockholder meeting,
with boards recommendation oI approval or (2) to rescind
its agreement with merger company, withdraw approval
oI merger, and notiIy shareholders that proposed meeting
was cancelled
establishes a wholly owned subsidiary and capitalized the
subsidiary with merger consideration, which can includes
parents stock,c ash bonds, or combination. 11.02(c)(3)

Short Iorm: Parent owns 90 or more oI target. The parent
can merge by avoiding shareholder vote. 11.05

Monitoring Board has supervisory and monitoring role under 141
rganizational
Meeting
Organization meeting must be held aIter Iiling Ior
incorporation att he call oI majority oI incorporators or
directors to adopt bylaws, elect directors. 108. Single
incorporator can have meeting with himselI

Poison Pills Directors can adopt rights plans 157(poison pill)
Reports Directors are Iully protected in relying in good Iaith on
reports made by oIIicers

Shareholder
Meetings
Corporations must hold annual meeting to elect directors.
211(b)

Shareholders can seek judicial order to set date Ior
meeting. 211(c)

Corporations can call special meetings to vote on issues
between elections. 211(d). Board has the power to call
this meeting. Shareholders can iI they are allowed to by
charter or bylaws. 211(d)
Corporations must hold annual meeting to elect directors.
7.01

Shareholders can seek judicial order to set date Ior
meeting. 7.03(a)(1)

Corporations can call special meetings to vote on issues
between elections. 7.02. Board or 10 shareholder has
power to call special meeting. 7.02(2).


Supermajority Supermajority may be speciIied in charter or bylaws. 216

Supermajority requirements can be adopted through a
majority vote. A supermajority vote is required only when
voting to amend, alter, or repeal a current supermajority
provision. 242(b)(4).

Repealing supermajority requirements: when
supermajority voting provisions appear in the charter, the
can only be repealed by the greater vote speciIied in the
charter. 242(b)(4). There is no restriction on repeal oI
supermajority requirement Irom bylaw (so you only need
simple majority, unless bylaws speciIy greater vote).
Delaware has no provisions Ior repeal oI supermajority
quorum requirements.

Supermajority can also be applied to votes on actions oI
board iI speciIied in charter or bylaws. 141 (b)
Supermajority requirements may be speciIied in charter
only. 7.27

Any amendment to the articles that adds a grater quorum or
voting requirement must meet that quorum requirement
and be adopted by the same vote. 7.27(b)

Supermajority can also be applied to votes on actions oI
board iI speciIied in charter or bylaws. 8.24

In close corporations, supermajority requirements oIten
appear in shareholder agreements 7.32
Transfer
Restrictions
TransIer restrictions Iound in charter, bylaws, or
shareholder agreement. 202(b).

TransIer restrictions must comply with Iormal
requirements related to adopting the restrictions and must
be clearly noted on the shares. 202 (a),(b). Restrictions
must be Ior proper purpose (reasonable).

Types oI transIer restrictions laid out in 202(c).

TransIer restrictions may not aIIect shares issued beIore
adoption oI the restriction unless shareholders voted in
Iavor oI it. 202 (b)
TransIer restrictions Iound in charter, bylaws, or
shareholder agreement. 6.27(a).

TransIer restrictions must comply with Iormal
requirements related to adopting the restrictions and must
be clearly noted on the shares. 6.27 (a),(b)


Types oI transIer restrictions laid out in 6.27(d)

TransIer restrictions may not aIIect shares issued beIore
adoption oI the restriction unless shareholders voted in
Iavor oI it. 6.27 (a)
Voting Each share oI common stock carries one vote. 212(a).
Shareholders vote on the election oI directors. 211(b)
Shareholders also vote on Iundamental transactions:
Amending the charter (242(b)); Amending the bylaws
(109(a)); Approving a merger (251(c)); Selling all or
Each share oI common stock carries one vote. 7.21(a).
Shareholders vote on the election oI directors. 8.03,8.08
Shareholders also vote on Iundamental transactions:
Amending the charter (10.03); Amending the bylaws
(10.20(a)); Approving a merger (11.04(b)); Selling all or


substantially all oI the assets (271); Approving
dissolution oI company (275(b)); To ratiIy conIlict oI
interest transactions (144(a)(2)).

Shareholders can vote in person or by proxy. 212(b)


Irrevocable proxies. 212(e)

Majority wins except in director elections when only a
plurality is required. 216(2),(3).

Most oI these can be altered by provisions in charter or
bylaws

DeIault rule is straight voting, but company can opt in to
cumulative voting in charter or bylaws. 214


substantially all oI the assets (12.02); Approving
dissolution oI company (14.02); To ratiIy conIlict oI
interest transactions (8.61(b)(2)).

Shareholders can vote in person or by proxy. 7.22(a) and
7.25(c)

Irrevocable proxies. 7.22

Majority wins except in director elections when only a
plurality is required. 7.28(a)

Most oI these can be altered by provisions in charter or
bylaws

DeIault rule is straight voting, but company can opt in to
cumulative voting in charter or bylaws. 7.28(b)




RUPA
Dissociation Departure oI partner leads to dissociation, because departure does not always result in winding up and termination oI the
partnership (dissolution). Dissociation in Article 6.

Partner can dissociated anytime. 602(a). But iI he leaves in breach oI partnership agreement or beIore partnership expired, the
dissociation was wrongIul. 602(b). The dissociating partner will be liable to the partnership and other partners Ior damages.
602(c)

II dissociation dosnt lead to dissolution, dissociating partner must be bought out under Article 7. His interest must be purchased
Ior the greater oI the liquidation value or the value based a sale oI the enture business without the dissociated partner. 701(c).
The dissociated partners liability and ability to bind are terminated. 702.
Dissolution Article 8 contains all events that trigger winding up or liquidation. The most common dissolution cause is dissociation, but it is
not necessary to have dissociation to cause dissolution.

Partnership can be dissolved by express will oI all partners. 801(2)(ii). Or by any event agreed to in the partnership agreement.
801(3)
Duties Partners owe duties oI loyalty and care. 404.

Duty oI loyalty limited to: anti-theIt duty, prohibition against selI dealing, and prohibition against competing against partnership.
404(b).

Partners can limit the duty oI loyalty by contract, but cant eliminate it completely. 103(b)(3).

Duty oI care is violated when conduct is gross negligence, intentional misconduct, recklessness, or knowing violation oI the law.
404(c)

Partners can modiIy the duty oI care by contract, but they are nto allowed to unreasonably reduce the duty oI care. 103(b)(4).

RUPA adds obligation oI good Iaith and Iair dealing. 404(d). This obligation is expressly nonwaivable, but parties may
determine the standards by which perIormance is to be measured iI the standards are not maniIestly unreasonably. 103(b)(5).
Formation Receipt oI proIits raises a presumption oI partnership. 202(c)(3)

Full to limited
conversion
RUPA provides Ior merger or conversion oI partnerships into limited partnerships
Liability All partners are jointly and severally liable. 306(a).



RUPA allows parties to contact Ior whatever arrangements they desire regarding paying creditors. 307(d)(3).
Management In absence oI agreement to the contrary, all partners have equal rights in management and conduct oI partnership business.
401(I).

II partners disagree about ordinary matters within scope oI partnership business, vote oI majority oI partners controls. 401(j).

Acts outside ordinary course oI business require unanimous consent. 401(j)
DeIinition A partnership is an association oI two or more persons to carry on as co owners a business Ior proIit. 202(a). No Iormalities are
required to create. Partnership can be Iormed in absence oI written agreement, conscious intent to Iorm, or knowledge that a
partnership was Iormed. One partner may be bound by acts oI the other and partners are personally liable Ior obligations oI the
partnership
ProIit/Loss
sharing
Equal sharing oI proIits is the deIault rule. 401(b). But can change by contract

DeIault is equal sharing even iI parneters have contributed diIIering amounts oI capital. Losses are shared in same proportion as
proIits

Partners are entitled to a repayment oI any capital contributions or advanced made to the partnership. 401(a) and (d).
Partnership must reimburse a partner Ior payments made and indemniIy a partner Ior liabilities incurred in ordinary course oI
business. 401(c).

II partner makes payment or advanced beyond amount agreed to be contributed as capital, he is entitled to interest on that
amount. 401(e)

RUPA 401(a) provides that each partner is deemed to have a capital account that is credited with cotnrbutions made and proIits
allocated and charged Ior any distributions Irom the partnership and losses allocated
Property Assets oI partnership are used to pay liabilities oI the partnership in the Iollowing order

1. amounts owed to creditors oI the partnership who are not partners
2. amounts owed to partners other than Ior capital and proIits
3. amounts owing to partners Ior repayment oI capital
4. amounts owing to partners Ior any remaining proIits.

II partnership assets are insuIIicient to cover partnership liabilities, partners must contribute to the payment oI those liabilities.
807

Partnership property is property oI the entity, not oI the individual partners. 203.


Theoretical
approach
Partnership is entity distinct Irom partners. 201
Limited Liability
Partnership
General partnerships that have registered with the state and have some amount oI limited liability.
Limited
Partnership
ULPA

LPs are in the chapter on LLCs

Must have one general partner, who manages, and one limited partner, who is a passive investor. 102(11)

II LP transIorms into LLLP, general partner is not personally liable Ior obligation Io a limited partnership incurred while the LP
is an LLLP.

Even iI limited partner involves himselI in management, he is not liable. 303




RULLCA Illinois LLC Act
Formation Formed through a Iormal Iiling oI certiIicate oI
organization with the state. 201(a)

Usually only contains minimal inIormation,
name, mailing address, members. 201(b)

II the certiIicate oI organization and operating
agreement conIlict, the operating agreement
controls with respect to members, dissociated
memebnrs, transIerees and managers, while the
certiIicate oI organization contros with respect
to third parties who reasonably rely on it.
112(d).

II articles or operating agreement conIlict with
statute, statute prevaisl with respect to
mandatory provisions and agreement between
parties prevails with respect to nonmandatory
provisions. 110.
5-1


5-5
Management Requires statement in opearint agreement iI it is
to be manager managed. 407(a)

DeIault is member managed

Members in member managed have equal
management rights and decide ordinary
business matters by a majority oI memebrs.
407(b). Extraordinary ,atters and amendments
to the operating agreement require consent oI
all the members. Id

In manager managed, managers have exclusive
management rights and decide all ordinary
businesss matters by a majority oI the
managers. 407(c). However, all members must



15-1

15-1


consent to (1) sell, lease, exchange, dispose, oI
substantilla all or all oI the LLC property; (2)
approve a merger; (3)undertake an act outside
ordinary course oI business; (4) amend the
operating agreement. 407(c)(4).

Members do not have right to bind the LLC.
301(a)

Management provisions can be changed in
operating agreement. 110
Limited Liability Every member has equal management rights
unless they elect Ior manager managed. 407

Members are not liable Ior obligations oI LLC
simply because they are members or managers.
304(a).

Failure to observe Iormalities relating to
exercise or management is not ground Ior
imposing liability on members or managers, Ior
debts, obligations, or other liabilities oI the
company. 304(b).
15-1



10-10


10-10(c)
Fiduciary duties Members in manager managed does not have
Iiduciary dut to company or any other member
solely by reason oI being a member. 409(g)(5).

Member oI member managed owes Iiduciary
duties oI care and loyalty. 409(a)

The operating agreement may not eliminated
the duty oI loyalty, the duty oI care, or any
other Iiduciary duty. 110(c). However, the
operating agreement can restrict or eliminate
Iiduciary duties iI not maniIestly
unreasonable.110(d). It can also speciIy the
15-3(g)



15-3


15-5







method by which a speciIic act or transactions
that would otherwise violate the duty oI loyalty
may be authorized or ratiIied. 110(e).

Some LLC statutes allow Ior possibility oI
derivative litigation. 902




40-1
Dissolution Dissociation allowed. 601 5-50 judicial dissolution

35-1 Events causing dissolution




1934 Act
Section 10(b) It is unlawIul by means oI any interstate commerce to use a manipulative
or deceptive device in connection with the purchase or sale oI securities
Rule 10b-5 It is unlawIul to employ any device or scheme to deIraud, to make an
untrue statement or omit a material Iact, or engage in Iraud or deceipt, in
connection with the sale oI any security
Elements oI a cause oI action (1) Misstatement or omission oI a (2) material Iact on which the plaintiII
(3) relied (4) in connection with the (5) purchase or sale oI securities, (6)
causing (7) damages.