Business Associations (Louis)

Amelia Earheart sits on the boards of both Otter Aircraft Ltd. and Owens Corning Composites, Inc. ("OCC") Otter has been purchasing from OCC composite wing assemblies for its new Tri-Otter commuter airliner. The Otter purchasing dept has been purchasing approx $900,000 of wing assemblies per year. Otter's annual sales are $100 million. Amelia has discovered these facts. Need Amelia take any action?

• No. She has no conflict of interest bc the transactions are not material as a percentage of Otter's sales or profits.

• No. She has no personal interest in the subject matter other than the "interlocking" directorate position

• Yes. She must disclose to the Otter board of directors her interest in the transaction (namely the interlock) and have the disinterested directors approve (or reject) the transaction with OCC

• Maybe. She must disclose and recieve board approval if she participated in or influced negotiation for the transaction

Is there any form of entity that will give them all, or most all, of what they want?

• A corparation

• A "subchapter S" corporation

• A limited liability company

• A family limited partnership

In general partnerships, which of the below is not accurate regarding the dissolution process

under the RUPA?

• Dissolution marks the end of a general partnership.

• A partner withdrawing is a form of dissociation.

• Creditors have the highest priority in the distribution of assets during winding up.

• Disassociation can trigger dissolution.

Select the following that may trigger the termination of an agent's authority

(Multiple answers)

• Death of principal (on notice vs at moment of death – depends on state)

• Incapacity of principal

• The dissolution of a partnership

• If an entity, the dissolution of such entity

• By revocation

An agency relationship requires all of the following EXCEPT

• the principal’s assent

• an agent acting for the principal (though no consideration is necessary);

• the principal has the right to control

• an agent authorized to engage in a series of transactions or all transactions of a particular type

• the agent ‘assents’

Which of the below is the most accurate statement of sole proprietors’ liability as business

owners?

• Sole proprietors face personal as well as vicarious liability for their businesses’ contracts and

  torts, such mitigated only by insurance.

• Sole proprietors have no practical concern for liability because insurance covers every form of

  liability that sole proprietors face as owners.

• Sole proprietors only face personal liability for their businesses’ contracts and torts since they

  are always their businesses’ agents.

• Sole proprietors only face vicarious liability for their businesses’ contracts and torts because

  they are always passive investors.

This rule can be determined when there is a decision: (1) made by directors who are financially disinterested or independent officers, (2) who have become duly informed before exercising judgment and (3) who exercise judgment in good faith effort in advance of corporate interests.

According to MBCA ------ a shareholder must serve a demand on the board a procedural first step ahead of a lawsuit, unless one of three exceptions apply

MBCA ------ BUSINESS JUDGMENT RULE: in the absence of facts of self dealing, improper motive, OR lack of good faith… board members/directors are not liable for bad decisions unless it is egregious (duty of care or good faith).

Which is NOT one of the three pillars of securities law?

• Purchases and sales, and where anyone purchasing or selling equity or debt securities must be mindful of securities law. Securities law does not govern gifts.

• If the sale is directed outside of your state (interstate commerce), then it is regulated by federal securities law, most relevantly the Securities Act of 1933 and the Securities Exchange Act of 1934.

• Shares of stock entitling a person to lease an apartment with no opportunity to profit are not subject to federal securities laws.

• If the sale is entirely within a state, then it is regulated by the law of the state in which the sale happens. (State securities laws are collectively known as “Blue Sky Laws”).