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Business Associations/Corporations
Temple University School of Law
Lin, Tom C.W.

CORPORATIONS
LIN
FALL 2017
 
REMEMBER TO ARGUE BOTH SIDES
Corporations
The Agent-Principal Relationship – Casebook (“CB”) CB: 1-6; Restatement (Third) on Agency (“RS”) RS: § 1.01-1.04.
Limited Liability and the Corporate Veil – CB: 179-196; Delaware General Corporate Law (“DGCL”) DGCL: §101-102, 107-109, § 121, 122, 124, 141, 142, 161; Model Business Corporation Act (“MBCA”) MBCA: § 2.01-2.06, 3.01-3.02, 3.04, 8.01, 8.03, 8.20-8.25, 8.40, 8.43.
Shareholder Derivative Actions – CB: 199-202; 208-215; 226-242. DCGL: § 219-220. • The Purposes of Corporations and the Business Judgment Rule – CB: 242-257; DCGL: § 102(b)(7), 144; MBCA § 8.30-8.31, 8.42, 8.60-8.63.
Duties of Officers, Directors, and Other Insiders
Duty of Care – CB: 299-320.
Duty of Loyalty – CB: 322-331, 337-341.
Obligation of Good Faith – CB: 358-381.
Securities Regulation
What is a security? – CB: 395-402; Securities Act of 1933 § 2(a)(1), 4, 11-12. 2 
Disclosure and Fairness – CB: 402-411; 427-436; Securities Exchange Act § 10(b); Securities Exchange Act Rule 10(b)(5).
Insider Trading – CB: 455-480.
Shareholder Voting and Problems of Control
Proxy Fights – CB: 503-516; 527-531; 537-545 DCGL: § 211-214, 216, 22-223, 228; Securities Exchange Act § 14; Securities Exchange Act Rule 14a-1, 14a-2, 14a-8, 14a-9, 14a-11.
Mergers, Acquisitions, and Takeovers
Mergers and Acquisitions – CB: 667-675; 677-687. DCGL: § 251, 253, 259, 262, 264; MBCA: § 11.01-11.07, 13.01-13.02.
Takeovers – CB: 712-764
 
 
 
Corporations
The Agent-Principal Relationship –
Casebook (“CB”) CB: 1-6;
Gorton v. Doty
A principal-agent relationship exists when two persons agree that one person will act on behalf of, and subject to, the control of the other person.
Agency test- 1.
When the owner of a car authorizes an individual to drive that car for a specific purpose, the driver acts as an agent for the owner. No compensation or business association between the parties is necessary to create a principal-agent relationship.
ownership of a car is enough to create a presumption that an individual who drives that car acts as an agent for the owner.
Because the teacher volunteered her car for a specific purpose, and put an explicit condition on the offer that the coach was the one who had to drive, she manifested assent to the coach acting as her agent, and the coach manifested consent by driving the car.
Restatement (Third) on Agency (“RS”) RS: § 1.01-1.04
agency= fiduciary relationship that arises when one person (principal) manifests assent to another person (agent) that the agent shall act on the principal’s behalf for the principal’s benefit and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act
Only when all these elements are met is it an agency relationship
Manifest assent= written or spoken word or other conduct
Terminology
Limited Liability and the Corporate Veil
CB: 179-196;
Personal Liability can be established under 3 separate doctrines
Enterprise liability
Respondeat superior (agency)
Disregard of the corporate entity (piercing the corporate veil)
Walkovszky v. Carlton
A creditor cannot pierce the corporate veil without a showing that there is a substantial unity of interest between the corporation and its shareholders.
Under principles of respondeat superior, a whole enterprise can be held responsible for the acts of it’s agents
A plaintiff can pierce the corporate veil and hold a company’s owners liable for the debts of the company if the company is a dummy corporation, whose interests are not distinguishable from those of the owner or owners.
It is very relevant to the discussion of veil-piercing if a business is undercapitalized, because this suggests that the business is a fraud intended to rob creditors of the ability to

ses based in tort
MEC’s relationship with Bristol fulfills almost all of the factors for veil piercing
Bristol controlled MEC’s board, made employment and financing decisions, and made the final decision to pull the breast implants from the market.
Board members who did not work directly for Bristol were not necessarily told of board meetings. Bristol had to authorize hiring and compensation decisions for MEC.
MEC was undercapitalized, and while there is no evidence that MEC was committing a fraud on their creditors, that element is less important because the plaintiffs here are judgment creditors.
As to direct liability, Bristol tested and inspected MEC’s products and put Bristol’s own name on the products to show that they were safe. Some people who purchased breast implants did so in reliance on Bristol’s association with the product
Bristol provided marketing and testing services for MEC’s products, including putting their own name on MEC products
No need to apply second part of veil piercing test because evidence on first part was so strong
Delaware General Corporate Law (“DGCL”) DGCL:
101- how to form a corporation
Anyone can form in DE
For any legal business purpose
Special rules for public utility companies operating in DE
102- Contents of certificate of incorporation
Name and address
Purpose of business
How stock works for business
How management, voting, etc. works
CANNOT INDEMNIFY DIRECTORS FOR
Breach of duty of loyalty
Breach of good faith
Improper personal benefit