Meehan v. Shaughnessy
Partnership Dissolution
Facts
Issue
Rule
Poore v. Fox Hollow Enterprise
Characteristics of an LLC
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Rule
Stanley J. How v. Boss
Premature Commencement
Facts:
The Δ promoter entered a K with the : Corporations, as a separate entity, must be represented by counsel. Partnerships can represent themselves. This court finds that the LLC must have counsel therefore it is more like a corporation in this sense. Can an LLC represent itself or must it have counsel? An answer to a complaint filed by an individual, not an attorney, on behalf of an LLC: 1) An attorney does not have to inform his partners prior to setting up new firm but must inform if asked directly by another partner (fiduciary duty). 2) You can take clients with you but you must inform the client of the choice to stay with the old firm. 3) Covenants not to compete are completely unenforceable against lawyers the client has the choice to counsel.: 1) Does a parting law partner have to inform his partnership that he is leaving before taking action? 2) Can you take partnership clients with you? 3) Are covenant not to compete ok for lawyers?: Two partners in a law firm start new firm and take other employees and clients from their old law firm. п for architectural services prior to the formation of the corporation. Incorporation never took place and the Δ ceased making payments to the п.
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Bartle v. Home Owners Coop.
Piercing the Corporate Veil – the most difficult
General rule is that the promoter is personally liable unless otherwise intended (the court says this applies here). Three alternatives exists: 1) revocable offer – party is making a revocable offer (no K exists = no liability) 2) irrevocable offer – for limited time with consideration of a promise to use best efforts to convince the corporation to agree to the K (no liability) 3) Novation – a party agrees to a K with an express agreement that a 3rd party may be substituted as a party to the KΔ oriented test
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Fletcher v. Atex
Piercing the Corporate Veil
Facts:
Issue:
Rule:
“Single economic unit” – look for
A
Cargill v. Hedge
“Reverse Piercing”
Facts:
Issue:
Rule:
SEC v. Ralston Purina
Public Offerings
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Issue:
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Gottfried v. Gottfried
Distributions in Closely Held Corporations
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Issue:
Rule
McQuade v. Stoneham
Traditional Roles of Shareholders & Directors
Facts:
: Dividends are generally discretionary but a corporation with an adequate surplus available may not withhold the payment of dividends in bad faith. Can a close corporation be compelled to pay dividends? Class A and common stock were issued. Class A had a right to receive a dividend before the common stock dividends were paid. The minority common stock owners claimed that the Δ paid themselves excessive salaries and made corporate loans to themselves. They claim bad faith and want to compel the close corporation to pay dividends. The Securities Acts were designed to protect the investors by promoting full disclosure of information to facilitate informed investment decisions. Therefore, the applicability of the exemption is based on the investors need for the protection. Secretaries have no access to necessary information to make informed choices about investment and thus unless the offering is made to only the highest-ranking employees the offering is considered public and is not covered by the exemption.Does an offering to key employees constitute a public offering? Δ claims that stock offering qualified under a §4.2 exemption “transaction by an issuer not involving any public offering” because they only offered to “key employees” (the employees were basically anyone who they were not firing). Reverse piercing is allowed in only the most limited circumstances to avoid debtors abusing the process and defrauding creditors. Here the identity of the family and the corporation was one in the same. No rent was paid to the corporation for the home and few formalities of the corporate form were adhered to.Is it possible to “reverse” pierce the corporate veil? The family farm had been incorporated. The corporation had a judgment creditor and stood to lose their home because it was a corporate asset. The family sought to pierce the corporate veil in order to qualify for the homestead exemption. ) Undercapitalization B) Proper behavior of the officers and directors – all formalities were used C) Siphoning of funds – centralized cash management (all $ kept w/ Kodak) is ok D) Amount of the affairs handled by the parent – majority S/H c/b involved in general executive responsibilities (i.e. approval of real estate leases & major capital expenditures)Must prove 1) “operated as a single economic unit” 2) “overall element of injustice or unfairness is present” (not necessarily fraud) What is necessary to prove an alter ego claim?п has carpal tunnel syndrome and attempt to pierce the corporate veil to recover damages from Kodak the parent company. The п questions several practices of the parent sub relationship claiming that the sub is merely an alter ego.To pierce the corporate veil there must be evidence of fraud, misrepresentation and reliance on the fraud. (the court said that this questionable deal was ok.)What is the test to pierce the corporate veil?П can establish bad faith if can show àIntense hostility, high salaries, bonus
ion each owning different types of stock (AL &AC). Each elected 2 directors to the four man board. The C decided to issue a new type of stock (1 share AD) that would be able to elect a 5th director in the event of a voting deadlock. L sued after a series of event found the lawyer who owned the AD stock in the 5th director then president etc.. L claims that the this was an illegal voting trust and should be void because the only power the stock had was voting.: It is the record ownership that counts not the beneficial owner. Does the company need to look at the beneficial owner or the record owner? Yes, the court refuses to enforce the agreement because choosing the officers of a corporation is the duty and power of the board of directors not the S/H. A K for the election of directors is ok because that is the job of the S/H. : Two factions fighting for control there were 29,000 votes in the name of Pioneer Casualty, but the shares had been sold to Shepherd. Both Shepherd and PC were in bankruptcy, and needed the approval of the bankruptcy court to vote them. The shares were transferred into Shepherd’s name. He’s the “beneficial owner”, but he’s not the record owner.: Vote Inspector – usually general counsel of the company who decides which votes to count, which ones to throw out, and then counts the votes and decides who won.
Missouri Law – Voting Inspectors are not allowed, unless the bylaws of the
company call for a voting inspector. The statute includes an inspector’s oath that must be signed by the voting inspector.
It’s possible for LOTS of shares in a company to be recorded under “street names”. In such situations, the beneficial owners of the shares do get to vote, but they do so through the owner of the street name.
Is a K between shareholders to elect certain officers and pay certain salaries void for public policy?Home Owners Coop. set up Westerlea to build homes. The corporation was not set up to make a profit and therefore had no $ to carry it through down cycles. Bartle is the bankruptcy trustee for Westerlea and is attempting to pierce the corporate veil in order to have Home Owners pay the debt of Westerlea. What is the liability of a corporate promoter?
