Enterprise Organization Outline

                                                                                                                       
                                                                                                                        Prof. Khanna
                                                                                                                        Winter 2006
 
Table of Contents
 
 
I. Introduction and Agency – 3
            A. Principles, Agents, Vicarious Liability in Tort – 3
            B. Authority, Fiduciary Care, and Agency Costs – 5
           
II. Partnership – 6
            A. Formation, Creditor Rights, Management Structure – 7
            B. Dissolution, Accounting, and Limited Partnership – 9
 
III. Corporate Form – 12
            A. The Legal Structure of the Corporation: Management and Ownership in Public             and Closely Held Corporations – 12
            B. Elementary Valuation Principles, Debt, Equity, and the Rationale for Limited             Liability – 14
            C. Safeguarding Contractual Creditors: Dividend Restrictions, Fraudulent             Conveyance Law, Equitable Subordination, and Veil Piercing – 17
            D. Limited Liability in Tort – 19
 
IV. The Voting System – 21
            A. Public Shareholder’s Collective Action Problem – 21
            B. Proxy Contests, Books and Records and Two-Tiered Stock – 22
            C. Separating Control From Cash Flow Rights, Vote Buying, and Controlling             Minority Structures – 24
            D. Federal Proxy Rules – 25
 
V. Fiduciary Duties – 29
            A. The Duty of Care – 29
            B. The Business Judgment Rule – 30
            C. The Duty of Loyalty and Self-Dealing Transactions – 33
            D. Corporate Opportunities and Executive Compensation – 37
 
VI. Shareholder Lawsuits – 42
            A. The Collective Action Problem and Attorney’s Fees in Derivative Suits            – 42
            B. Balancing the Rights of Boards to Manage and Shareholders’ Rights to Judicial             Review – 44
            C. Settlement and Indemnification – 46
            D. Assessing Derivative Suits – 47
 
VII. The Acquisitions Markets – 48
            A. Sales of Control Blocks – 48
            B. Sale of Corporate Office – 49
            C. Looting – 49
            D. Tender Offers: The Buyer’s Duties – 50
 
VIII. Mergers and Acquisitions – 53
            A. Overview of the Transactional Form – 53
            B. Structuring the M&A Transaction – 55
            C. The Appraisal Remedy – 56
            D. The Duty of Loyalty in Controlled Mergers – 58
 
IX. Public Contests for Corporate Control – 62
            A. Defending Against Hostile Tender Offers – 62
            B. Private Law Innovations: The Poison Pill – 62
            C. Choosing a Merger or Buyout Partner: Revlon, Its Sequels, and Prequels – 63
            D. Pulling Together Unocal and Revlon – 64
            E. State Antitakeover Statutes – 67
            F. Proxy Contests for Corporate Control – 68
 
X. Trading in the Corporation’s Securities – 70
 
Enterprise Organization Outline
 
Efficiency is the guiding principle of corporate law. 
 
Two concepts of efficiency usually comes into play
-Pareto Efficiency – Everybody is made better off and no one is made worse off. This rarely happens in the real world. 
-Kaldor-Hicks Efficiency – This is where those who lose from a transaction can be compensated for their losses while still producing a net gain in the transaction. 
 
Themes to consider in course:
1. What are motivations of parties? This can directly affect judicial decisions and the structuring of organizations. 
2. What sort of opportunistic behavior might occur by the principal or agent? 
3. What are the costs to contain such opportunistic behavior, and what are the costs of such legal rules?
4. What are the roles of the courts in solving these problems? 
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