Business Associations Syllabus (Prof.

Hazen spring 2014)

p.1

Business Associations Spring 2014

Law 228.1 (4 credit hours)
Law 429W.1 (1 credit hour)1
Tues, Wed. Thurs. Fri. 10:55 11:50 pm; room 5042
Professor Hazen
School of Law
The University of North Carolina at Chapel Hill
Office: 5094 (drop in or by appointment)
Email: thazen@unc.edu
Office Phone: (919) 962-8504

Required Materials:
Thomas Lee Hazen & Jerry W. Markham, Corporations and Other Business Organizations:
Cases and Materials (Standard 3d ed. 2009) (casebook);
Thomas Lee Hazen & Jerry W. Markham, Corporations Selected Statutes (2013-2014)
(statutory supplement).

Learning Business Basics

This course focuses on business transactions many of which are complex. Understanding
some basic business concepts is necessary to understand the context of the cases. I assume no prior
business knowledge and thus a large part of this course is learning the basics as we go through the cases
and materials. The assignments include notes that focus on the explanation of some basic business
concepts. It is strongly recommended that you pay particular attention to the explanations in the
assigned readings. I also recommend that you spend some time each day reading the financial news and
watching or listening to financial news. This will give you exposure to business concepts and terms as
they arise in everyday life. It also will familiarize you with current events that we may be referencing
in class.
A large part of this course is vocabulary. If, after going through the materials, there are terms
you do not understand, please do not be shy about asking questions before, during, or after class or via
email. Also, see the discussion of secondary materials below.

Class preparation and attendance:

For each class you should be prepared by having read 25-30 pages ahead in the casebook from
where we left off at the end of the previous class (this is a rule of thumb and I will notify you in
advance of any variation). When the casebook makes reference to statutory provisions, you should

All students enroll in LAW 228. Up to 10 students also enroll in LAW 429 and have additional writing
assignments for the 1 additional credit hour.

Business Associations Syllabus (Prof. Hazen spring 2014)

consult the statutory supplement as part of your preparation.

supplement to class every day.

p.2

You should bring your statutory

Note: Class participation or the lack thereof (including nonattendance) may be factored into
your final grade:
Class attendance and preparation will be counted in computing the final grade for this course.
Poor attendance can affect your grade negatively. Preparation, as evidenced by class participation, may
affect your grade positively (or in extreme cases have a negative effect).
Each day I will come to class a few minutes early with a class list, dated for that day of class. If
you are present, you should put a check next to your name when the list is circulated. Anyone whose
name is so checked will be counted as present for that day of class, whether or not I call on you.
I will keep a tally of attendance. You will be counted as present if you sign the attendance sheet
or if you have a bona fide excused absence (see below) and let me know that you have listened to the
class recording. If you are counted as present for less than 90% of our classes, your grade will
automatically be docked one grade (e.g., from a B to a B-). In the event that you are not counted as
present for 80% of the classes, you will be barred from taking the exam. If you are signed up as present
and you are not in class, in addition to the honor code implications, I will contact you and reserve the
right to lower your final grade for each occurrence. Hopefully, it will not be necessary to address this.
Classes will be recorded and made available under the following circumstances. If you have
what you believe is a legitimate excuse for missing class, please let me know and I will make
arrangements to provide you with a recording.

Except for an excused absence, you will not receive attendance credit for
classes you attend only via recording. In the case of an excused absence (e.g., a
medical excuse, family emergency, job interview, conflict with another mandatory
law school activity, or other preapproved excuse), I will give you attendance credit
after you inform me that you have listened to the recording. In such a case, the
burden is on you to request a copy of the recording and then subsequently inform
me that you have listened to it.
Honor Code Reminder
The Honor Code is in effect in this class and all others at the University. I am committed to
treating Honor Code violations seriously and encourage all students to become familiar with its terms set
out at http://instrument.unc.edu. If you have questions, it is your responsibility to ask me about the
Codes application. All exams, written work and other projects must be submitted with a statement that
you have complied with the requirements of the Honor Code in all aspects of the submitted work.
The exam will be a limited open-book exam; you may bring in your casebook, statutory
supplement, class handouts, class notes, and any outlines that you have had a substantial role in
preparing.

Business Associations Syllabus (Prof. Hazen spring 2014)

p.3

Secondary Materials
It is not necessary for you to purchase additional materials; nor is it necessary to consult
secondary sources on a regular basis. However, if you feel the need to seek further explanation or want
additional discussion of basic terms and concepts, the following materials are on reserve in the law
library:
James D. Cox & Thomas Lee Hazen, Business Organizations Law (Hornbook series) (West 3d
ed. 2011) (one volume student edition) and Treatise on the Law of Corporations (West 3d ed.
2010) (4 volume practitioners edition) and
Thomas Lee Hazen, Hornbook on the Law of Securities Regulation (West 6th ed. 2009) (one
volume student edition) and Treatise on the Law of Securities Regulation (West 6th ed. 2009) (7
volume practitioners edition).

Further note on class recordings:

The University of North Carolina School of Law has established a policy governing distribution
of audio or audiovisual recording of classroom sessions. Under the law schools policy, each faculty
member will determine the practice for the courses they teach. Each of your instructors will announce to
you his or her practice on recording class, and any conditions under which they will distribute any class
recordings that may be made. Except with the explicit permission of the faculty member teaching the
class, law school policy prohibits the distribution of class recordings.
Notice and Agreement
Any class recording is distributed for the exclusive use of students in the University of North Carolina
School of Law class that was recorded. Student access to and use of class recordings are conditioned on
agreement with the terms and conditions set out below. Any student who does not agree to them is
prohibited from accessing or making any use of such recordings. Any student accessing class recordings
(1) acknowledges the faculty members intellectual property rights in recorded lectures and class
materials and that distribution of the recordings violates the UNC-Chapel Hill Copyright Policy; (2)
recognizes the privacy rights of fellow students who speak in class; (3) accepts that distributing, posting,
or uploading class recordings to students not authorized to receive them or to those outside UNC School
of Law is an Honor Code violation; and (4) agrees that recordings are to be accessed and used only as
directed by the faculty member(s) teaching the course.

Writing Section
The writing section will involve four writing assignments and will not be meeting separately from the
regular class. The first two writing assignments are drafting exercises and likely will involve rewrites.
The third and fourth writing assignments are research oriented. The first three writing assignments are
geared to cases we will be discussing. The first assignment will be distributed the second week of class

Business Associations Syllabus (Prof. Hazen spring 2014)

p.4

and will be due in late January or early February. The second writing assignment will be distributed in
Mid-February and will be due in early March. The third and fourth writing assignments will be
distributed in mid-March. The third assignment will be due in late March and the fourth assignment will
be due the last day of class.

Reading Assignments
I. Background and Introduction
Read as background pp. 1-26

II. Introduction to Agency Law

pp. 27-44

III. Partnership Law (general partnerships)

A. What is a partnership?
pp. 44-52
UPA 6, 7; RUPA 101(6), 202(c)
B. Partnership Fiduciary obligations
pp. 52-58
UPA 21
C. Partners authority and governance (agency revisited)
pp. 58-62
UPA 9, 18; RUPA 301
D. Entity versus aggregate; Partnership liabilities and duties
pp. 62-65
E. Partnership Dissolution and Dissociation
pp. 65-72
UPA 29, 31; RUPA 601, 701, 801

Business Associations Syllabus (Prof. Hazen spring 2014)

IV. Limited Partnerships, Limited Liability Partnerships, and Limited Liability

Companies
A. Business Trusts
Reread pp. 20-21

B. Limited Partnerships
pp. 74-75, [skim pp. 75-81], Read pp. 81-83
ULPA; RULPA
C. Limited Liability Partnerships (LLPs)
pp. 94-97
RUPA 1101
D. Limited Liability Companies (LLCs)
pp.97-103

V. Corporations Formation and Financing

A. Introduction to Corporations
Review pp. 1-26 (that you read for background for the first day of class)
B. Start-up companies and corporate promoters (agency and fiduciary duties revisited)
pp.117-119, 123-134
C. Mechanics of incorporation
pp. 134-137
MBCA 2.03, 2.01-2.02, 4.01, 4.02
Handout available on Sakai
D. Defective incorporation de facto and estoppel doctrines
pp.138-142
MBCA 2.04
E. Overview of corporate finance
pp. 142-149

p.5

Business Associations Syllabus (Prof. Hazen spring 2014)

Handout available on Sakai

F. Limited liability and ultra vires
1. Piercing the corporate veil; equitable subordination compared
pp. 150-173

2. Ultra Vires (and social responsibility)

pp. 173-199
MBCA 3.01, 3.04

VI. Management of Corporations

A. Corporate structure and distribution of powers
pp. 200-219
MBCA 8.08, 8.09, 10.02, 10.20
B. The board of directors
pp. 219-232
MBCA 8.01, 8.20-8.25; compare MBCA 7.01-7.08, 7.22, 7.25
C. Officers and their sources of power (agency revisited)
pp. 232-240
MBCA 8.40-8.44
D. The duty of care
pp. 241-250
MBCA 8.30, 8.31
E. The business judgment rule
pp. 250-295 [skim 295-329]
MBCA 8.31
MBCA 2.02(b)(4), Del. 102(b)(7)
F. The duty of loyalty
1. Self-dealing

p.6

Business Associations Syllabus (Prof. Hazen spring 2014)

pp. 330-339
2. Other conflicts of interest
pp. 339-349
Del. 144
NC 55-8-31 (handout available on Sakai)
3. The corporate opportunity doctrine
pp. 350-360
4. Loyalty and competition
pp. 364-377
5. Executive compensation
pp. 377-388

VII. Corporate Democracy State Law

A. Shareholder voting
pp. 389-410
MBCA 7.01-7.08, 7.22, 7.25; compare MBCA 8.20-8.25
Cumulative voting handout, available on Sakai
B. Shareholder meetings and informational rights
pp. 411-424
MBCA 7.20, 16.02, Del. 220; SEC Rule 14a-7
C. Proxy contests
[skim pp. 424-431] read 432-441
MBCA 7.22

VIII. Closely Held Corporations

A. Heightened fiduciary duties (and involuntary dissolution)
pp. 442-474
B. Shareholder voting agreements

p.7

Business Associations Syllabus (Prof. Hazen spring 2014)

pp. 475-510
MBCA 7.30, 7.31, 7.32, and 7.22; Del. 218
C. Voting and quorum requirements
pp. 510-518
MBCA 7.25
D. Shareholder agreements and director discretion
Read pp. 518-525, 535-538
MBCA 7.32; NC Gen Stat 55-7-31 handout available on Sakai
E. Restrictions on transfer (and buy-out arrangements)
pp. 538-543

IX. Duties of Controlling Shareholders

A. Do controlling shareholders owe fiduciary duties? (self-dealing revisited)
pp. 544-570
B. Sale of control transactions
pp. 570-601

X. Publicly-Held Companies the Federal Securities Laws

A. Overview of the federal securities laws
pp. 602-604, 655-657
1934 Act 12(a), 12(g), 13(a), 13(b); SEC Rule 12g-1
B. Federal proxy regulation
pp. 657-672, 684-694
1934 Act 14(a); SEC Rules 14a-1-14a-9.

XI. Securities Fraud

A. SEC Rules 10b-5, 14a-9, and private remedies
pp. 695-701

p.8

Business Associations Syllabus (Prof. Hazen spring 2014)

B. Materiality
pp. 701-715
C. The in connection with requirement (and standing to sue)
pp. 715-724
D. The standard of culpability negligence or scienter?
pp. 725-732
E. The deception requirement
pp. 737-745, [skim 745-750]
F. Causation in private rights of action
pp. 750-760
G. Reliance in private rights of action (including fraud on the market)
pp. 764-774
H. Litigation reform
pp. 783-784
1934 Act 21D
I. Projections and other soft information
pp. 790-794, 799-802
1934 Act 21E

XII. Insider Trading

A. Common law
pp. 842-864
B. Section 16 of the Securities Exchange Act of 1934
1. Reporting requirements and persons subject to section 16 (section 16(a))
pp. 865-880
1934 Act 16(a), SEC Rules 16a-1 et seq.

p.9

Business Associations Syllabus (Prof. Hazen spring 2014)

p.10

2. Disgorgement of short-swing profits (section 16(b); Note on short sales)

pp. 880-898
1934 Act 16(b), SEC Rules 16a-1 et seq.
3. Insider trading as securities fraud (Rules 10b-5 and 14e-3 also 10b5-1, 10b5-2)
pp. 899-964
SEC Rules 10b-5, 10b5-1, 10b5-2, 14e-3; 1934 Act 20A, 21A

XIII. Mergers and Acquisitions

A. Forms of corporate combinations (merger, consolidation, share exchange, purchase/sale of assets,
purchase of shares)
pp. 971-989
MBCA 11.01-11.05, 12.01-12.02; Del. 251, 253, 271(a)
B. Dissenters rights the statutory appraisal remedy
pp. 995-999, 1023-1035 (de facto merger doctrine)
MBCA 13.02; Del. 262
C. Judicial challenges to fairness of corporate combinations (including: are appraisal rights
exclusive?)
pp. 1050-1057, 1071-1089
D. Defending against hostile takeovers (duty of loyalty revisited)
pp. 1095-1116, 1124-1136, 1141-1158
E. Federal Regulation of takeovers and tender offers (the Williams Act)
pp. 1226-1229, 1240-1243
1934 Act 13(d), 13(e), 14(d), 14(e), 14(f)
SEC Rules 14d-1 et seq., 14e-1 et seq.
F. State regulation of takeovers
pp. 1258-1268