Ê
   

Ê
ÊÊ
ÊÊ 
 Ê



- 

-Second Restatement of Agency
-Ê
- (P. 2 SS) ±  
 
. Main points: Fiduciary relationship,
³manifestation of consent by one person to another that the other shall act on his behalf
and subject to his control.´ (2) The one for whom action is taken is the principal. (3) The
one acting is the agent.

-Ê
- (P. 3 SS) ± 

 




. Contracts with another to do
something for him but not controlled by the other nor subject to the other¶s right to
control for his PHYSICAL CONDUCT. May or may not be an agent.

-Third Restatement of Agency

-Ê
- (P. 17 SS) ±  
 
 ± No material differences from the
second restatement. Just defines agent and principal within the definition of agency.


 
 -Second Restatement of Agency
-Ê
- (P. 3-4 SS) ± (8)   (8A)   
(8B)
   

ž‘ Apparent Authority ± The power to affect legal relations of another person by

transactions with third persons, professedly as agent for the other, ARISING
FROM AND IN ACCORDANCE WITH THE OTHER¶S %

Ê
 Ê
Ê ! !"#
Ê Ê
ž‘ Inherent Agency ± Indicates the power of an agent derived $%&,
&'(&$%
"

)Ê Ê  !
#
  #
Ê Ê!
%
"
"

 * !
Ê
+


. Protects third parties in
situations where it can reasonably be assumed that the person acting is acting
within his capacity as an agent.
ž‘ Estoppel ± Change of Position ± If others have changed their position because
they believe the transaction was entered into by or for a person AND
(1)‘He intentionally or carelessly caused this belief
(2)‘Or knowing of the belief that others might change their position and didn¶t
take reasonable steps to notify them of the true facts

then that person may be held liable.

c
 Change of position indicates payment of money, expenditure of labor, suffering a
loss or subjection to legal liability.

-Ê
 ! ± (P. 4 SS) -   "#  $ ± other than statutory
requirements or explicit action in an instrument ± authority to do an act can be created by
SPOKEN WORDS or OTHER CONDUCT of the principal, which causes the agent to
believe the principal desires him to do that act.

-Ê
 % ± (P. 4 SS) ±     ± Apparent authority is created
as to a third person by WRITTEN OR SPOKEN WORDS OR ANY OTHER CONDUCT
of the principal which causes the third person to believe the principal consents to have the
act done on his behalf by the person purporting to act for him.

-Ê
& ± (P. 5 SS) ± ' 


  
± Authority to conduct a
transaction includes the authority to do '&&
%'(%, unless otherwise agreed.

-Ê
 ((P. 5 SS) ± $
 ± Affirmance by a person of a prior act WHICH

DID NOT BIND HIM but which was professedly done on his behalf, whereby the act is
given effect AS IF ORIGINALLY AUTHORIZED BY HIM. You have to  to
ratify.

-Ê
 ± (P. 5 SS) ± )
± (a) manifestation of an election by one on whose

account an unauthorized act has been done TO TREAT THE ACT AS AUTHORIZED or
(b) conduct by him justifiable only if there was such an election.

-Ê
*&- (P. 6 SS) ± 
+   , -.  ± An &

 who entrusts an agent with management is subject to liability for the acts of
that manager with third person ,&$-

-Third Restatement of Agency ±

-Ê
  ((P. 18 SS) ± Ê
 
  ± An agent has authority at the
time of his action if he ((, that the principal wishes the agent to act.
(2) An interpretation of the principals manifestations are reasonable IF it reflects any
meaning known by the agent that is common to the principal AND, what a (
 in the agents position would interpret the principal¶s manifestations.
(3) Understanding is reasonable under the reasonable person standard drawn from the
circumstances.

-Ê
 ± (P. 19 SS) ±    ± No material differences from the
second restatement, but it is much easier to understand. ³Power held by an agent or other
actor to affect a principal¶s legal relations with third parties 

÷
((,&($$
"
!


Ê 



  !
# #
.Ê%

Ê
 Ê-

-Ê
 ! ± (P. 19 SS) ± /,0




 ± MATERIAL
CHANGE FROM SECOND RESTATEMENTThis section requires a third part to
%/%&(, and it requires 
,$&/($
$$. This is more principal friendly. It introduces the estoppel
idea into the liability for the undisclosed principal. The principal must KNOW of the
detrimental change in position and then take steps to avoid it.

-Ê
- (P. 20 SS) ±     ± Only significant change to
the second restatement is that the manifestations for another¶s actions must carry legal
consequences.
RATIFICATION
-Ê
1 ± (P. 21-22 SS) ± $
2 
± The only material difference is the
inclusion of language requiring an agent to act with &&. Again, a little
change with the introduction of the term¶s legal relations.
-Ratification DOES NOT OCCUR  
ÊÊ, (1) the act is ratifiable according to
4.03, (2) the person ratifying has capacity as stated in 4.04, (3) the ratification is
% as stated in 4.05, and (4) the ratification %
 as stated in 4.07

-Ê
1 ((P. 22 SS) ± 
$
 ± Ratification retroactively creates

actual authority UNLESS:
(1) Ratification occurs in favor of a person by %
(2) Ratification occurs in favor of an agent 
$,-
(3) Ratification occurs to %$
$.

-Ê
1± (P. 22 SS) ± 
 + $

± Any act in which the actor acted
or purported to act as an agent.

-Ê
11 ± (P. 22 SS) ± 
$ ± A person can ratify an act if the person
existed at the time of the act and the person had the capacity to act as a principal.

%&$$$,&
%.

9
 -Ê
1& ± (P. 22-23 SS) ± ) $
 ± A ratification mus precede the
occurrence of circumstances that would cause the ratification to have adverse and
inequitable effects on the rights of third parties. See the statute for a list of exceptions.

-Ê
1! ± (P. 23 SS) ± 3.

$ 4 $
 ± You are not bound by
a ratification if you don¶t know of material facts involved in the original act when the
person was not aware of such lack of knowledge.

-Ê
1% ± (P. 23 SS) ± 5$
 ± It¶s all or nothing. It has to
encompass the entirety of the act.

-Ê
1 ± (P. 23 SS) ±  2 $
 ± If someone detrimentally

relies on your ratification, you cannot deny ratification. &
/$.
DISCLOSED AND UNDISCLOSED PRINCIPALS
-Ê
!- (P. 24 SS) ±  2


 ± When an agent acts with
actual or apparent authority for a disclosed principal, the principal and third party are
parties to the contract and the agent IS NOT a party unless agreed upon by the principal
and third party.

-Ê
! ± (P. 24 SS) ±  Y
 


 ± Same as above, except
the agent IS a party to the contract unless the agent and the third party agree that he is
not.

-Ê
! ± (P. 24 SS) ±  Y 
 
 ± Same as above except the
principal is a party to the contract unless excluded by the contract and the agent IS
ALWAYS a party to the contract.

-Ê
!1 ± (P. 25 SS) ± 
2 56/
7
 ± An agent

becomes a party to the contract if he acts knowing that the principal does not exist or
cannot act within that particular capacity.


 
-Second Restatement of Agency
MASTER AND SERVANT
-Ê
 * ± (P. 7 SS) ± ' + /, 8-9Ê :
(1) when the servant is acting within the scope of his employment
(2) NOT liable for acts outside the scope of their employment unless the master
 the conduct or consequences, was , the conduct violated a
(&, or the servant purported to &&.

ñ
-Ê
  ± (P. 7 SS) ± 2 Ê : ± A person employed to perform services
and is subject to the master¶s control for his &.
FACTORS CONSIDERED: 0$'&(&'
/$&'/1&&'
&
&%'$%%'%$%'&(2,
($'(&-
SCOPE OF EMPLOYMENT DOCTRINE
-Ê
  ± (P. 8 SS) ± Ê
 )) 2
 ± Conduct is within the scope
of employment if, (&$, it is the kind of employment hired to perform, occurs
substantially within the authorized time and limits, actuated by a purpose to serve the
master, force is intentionally used by the servant against another, the use of force is not
unexpectable by the master.

-Ê
 * ± (P. 8 SS) - 3



'  Ê
 ))  ± Conduct
has to be of the same general nature of the conduct authorized. List of factors on page 8
describes whether conduct, although not authorized, is still within the scope of
employment.

-Ê
 ((P 9 SS) ± 8,


 ± An act although forbidden or done in a

forbidden manner can still be within the scope of the employment.

-Ê
  ± (P. 9 SS) ± )
 ± A criminal or tortious act can still
be considered within the scope of the employment.

-Third Restatement of Agency (Agency language rather than servant language)

-Ê
 1- (P. 19 SS) ± $ 
Ê  ± No material difference from the
definition in the second restatement of agency.

-Ê
% ± (P. 26 SS) ±  ;/, 

 ± Extends the agent¶s
tortious conduct to third parties, while acting as an agent or employee within the scope of
employment.

-Ê
%1 ± (P. 27 SS) ±  
. 
  ± Same as second

restatement. Principal is liable to acts of an agent within the scope of employment.

-Ê
%& ± (P. 27 SS) ± 
;  




 
:   "

;
  .    ± Principal is subject to liability if
the agent¶s conduct and harm results from the principal¶s negligence.



 &3$$&&4
-Second Restatement of Agency
- Ê
%*± (P. 10 SS) ± 2 
Ê7 ± An agent paid to do an act for a
principal is subject to a duty to act with standard care and skill given the locality, unless
otherwise agreed.

-Ê
 ± (P. 10 SS) ± 2#



 ± Unless otherwise agreed, agent is
subject to a duty to conduct himself so that he does not bring disrepute to the principal.

-Ê
 ± (P. 10 SS) - 2#: ) ± Unless otherwise agreed, the
agent has a duty to use reasonable efforts to give the principal relevant information. The
agent also needs notice tht the principal would desire to have the information and it can
be communicated without violating a superior duty to a third person.

-Ê
 ± (P. 10 SS) ± 23 

$ 


 ± Unless otherwise
agreed, an agent has to keep and give to the principal an account of the money or other
things he has paid out on the principal¶s behalf.

-Ê
 ± (P. 10 SS) ± 2
- <

± An agent has to act within
the principal¶s manifestation of consent UNLESS he is privileged to protect his own or
another¶s interest. This cannot be agreed out of.

-Ê
1 ± (P. 10 SS) ± 25 ) ), 

 ± unless

otherwise agreed, Can¶t continue to act if it is impossible or impracticable for him to
accomplish the objects of the principal AND if he cannot communicate with the
principal.

-Ê
& ± (P. 10 SS) ± 2-,  - Unless otherwise agreed, agent has to obey
all reasonable directions from the principal for the duties he is to perform.

-Ê
!((P. 11 SS) ± 2   ) ± unless they agree, agent is under a
duty to stop performing the acts after termination.

-Ê
% ± (P. 11 SS) ± 2/ ± agent has a duty to act solely for the benefit
of the principal unless they agree otherwise.

Ê 566#-77± "&&$$&$%%-

Ê568#-77 ±
,* ! # #
.Ê  Ê

(I referenced the singer case here for some reason) ± can¶t deal with your principal as an
adverse party unless you agree otherwise.

©
Ê589#-77±
,* !# #
.Ê  Ê
± if
you are allowed to act as an adverse party on your own behalf, you have the duty to deal
fairly ith the principa and disclose all facts he should know, unless he manifests that he
already knows the facts or that he doesn¶t care about them.
Ê587#-77
$,* ! # #
.Ê  Ê

± again, an agent cannot act on behalf of an adverse party in a transaction connected with
his agency unless otherwise agreed.
Ê58:#-77
$,* !# #
.Ê  Ê
± an
agent who acts for both principal¶s (and they know it) has to act fairly and disclose all
information to EACH of them.
Ê585#-7: %&(2%$ ± Unless they agree,
an agent cannot compete with the principal concerning the subject matter of his agency.
Ê58;#-7: ±
$$ ± Unless they agree, agent
has a duty not to act for persons whose interests conflict with the principal in matters in
which the agent is employed.
Ê58<#-7: ± " $$% ± self explanatory,
exception of information that is a matter of general knowledge.
Ê58=#. 7:$$%$%$ ± (I
referenced the Town Homes case here) Again, self explanatory, agent has a duty not to
disclose confidential agency after the relationship is terminated unless otherwise agreed.
He does not have a duty NOT to compete with the principal though.
Ê58>#-7: ± * ± agent gets the rights to his
patents and discovery made within the relationship unless they agree otherwise.
Ê586#-7: $&. ± agent has a
duty not to act like the principal¶s things are his own when dealing with third persons.
Ê588#-75%$#3$%4 ± see the statute. All
actions generally available are available against the agent.
LIABILITY FOR ACTIONS
Ê;97#-75($& ± agent is subject to liability for loss
caused to the principal by a breach of duty
Ê;9:#-75($%&$#.# ± agent is liable for
the value or money of a possession if the agent misuses the property.
Ê;95#-7;($,,$&$ ± (I
referenced the military guy carrying stolen goods here ) ± If an agent reveives anything
BECAUSE of a violation of his duty, he owes it to the principal.
Ê;9;#-7;($$#.
If an agent uses an asset of
the principal or a third party for personal purposes outside the scope of his employment,
then he is liable for the value of that use.

¬
 -Third Restatement of Agency ± THE LIST IS THE SAME AS THE SECOND
RESTATMENT, WITH TWO PRIMARY ADDITIONS OUTLINED BELOW

‘ The third restatement limits the ³authority´ concept to ³actual authority´

-Ê6-7;#-59"&%$ A PRINCIPAL has a duty to indemnify an

agent in accordance with the terms of their contract and unless agreed when the agent
makes a payment within the scope of his actual authority beneficial to the principal.
Ê6-7<#-59 ± #.&$$ ± The principal
also has a duty to deal with the agent fairly and in good faith, including disclosing
information about risk and pecuniary loss that the principal would have reason to know

#

Ê!#

&#
Uniform Partnership Act
Ê=#-5:#"$An association of tow or more persons to carry
on as CO-OWNERS OF A BUSINESS FOR PROFIT.
Ê>#- 5:55&$"%
0$#

(1)‘Persons partners to each other are not partners to third persons

(2)‘Common ownership of something (like joint tenancy) does not alone establish a
partnership
(3)‘Sharing gross returns does not itself establish a partnership
(4)‘Receipt of a share of profits of a business is prima facie evidence that a person is a
partner.

Ê7=#-5<5=#(
 ± If a person represents himself as a partner in
which he is not actually a partner, he is liable to a person for those representation if the
person has VEN CREDIT TO THE ACTUAL OR APARENT PARTNERSHIP. When this
happens he is liable as though he was an actual partner. If he is represented as a partner by
others actually in a partnership he is an  of that partnership and he is treated as though
he is a partner in fact.

Revised Uniform Partnership Act

Ê7973=4#-;6 ± #"$ ± no material difference from the uniform
partnership act
Ê:97#-<7#
 ± A partnership is an entity distinct fom its
partners and a limited liability partnership continues in this fashion after conversion.

Ú
 Ê:9:#-<7 %$# ± A partnership can be formed whether the
partners intend for its formation or not. The same rules for existence apply as section 7 of
UPA.
Ê596#. <<<=($#&#- (I cited young v. jones for this
case) ± same substance as section 16 of UPA with a few additions. If the representation of a
person as a purported partner is made in a public manner, than he can be held liable to a third
person even though he is not aware that he is being held out as a partner to that particular
person. Also, if no partnership liability exists, then the purported partner is liable jointly and
severally. The same concept applies if fewer than all of the partners agree to hold that person
out. The partners who do hold him out, if partnership liability ensues, are jointly and
severally liable.

##' ,
Uniform Partnership Act
Ê6#-55## ± All property originally brought into partnership
stock or subsequently acquired is partnership property.
Ê8#. 55#
$##&Every
partner is an AGENT of the partnership for the purposes of its business. The act of very
partner for carrying on the business binds the partnership, unless the partner actually has no
authority to act for the partnership in that particular manner AND the person he is dealing
with has / of this. Section three lists acts a partner CANNOT do on behalf of the
partnership unless authorized by all the partners.
Ê76#- 5=5>&"%"&$# ± Each partner
shall be repaid his contributions and share equally in the profits. (2) The partnership has to
INDEMNIFY every partner for personal liability while conducting the partnership business.
(3) Partners who make advance payments are to receive interest on those payments. (4)

#

Ê!
+

?
! Ê  !
%


%

"  "  
!
#

Ê!#Ê
ÊÊ. (5) No person can be a partner without the consent of
all the partners. (6) Majority of partners decides any differences in opinion.
Ê:;#-56
0$#$#The property rights of a
partner are HIS RIGHTS IN SPECIFIC PARTNERSHIP PROPERTY, HIS INTEREST IN
THE PARTNERSHIP, AND HIS RIGHT TO PARTICIPATE IN MANAGEMENT.
Ê:<#-56 &$#.Ê$## ± A
partner is a co-owner with his partners of specific partnership property holding as a
TENANT IN PARTNERSHIP. This right is not assignable unless it is in connection with the
assignment of rights of all the partners. His right cannot be attached except against the
partnership. When he dies, his right to specific partnership property vests in the remaining
partners.
Partner¶s Interest

J
 Ê:=#. 56 &$#.# ± his interest is his
share of the profits and the same is PERSONAL PROPERTY.
Ê:>5658
%$#.A partner assigning his interest in
the partnership does not itself dissolve the partnership nor does it give the assignee the right
to interfere in the management and administration of the partnership. IT MERELY
ENTITLES THE ASSIGNEE TO RECEIVE THE PROFITS THE PARTNER WOULD
GET. Same for dissolution.
Ê:6#58 #.Ê&(2  ± just describes what
happens if a judicial order dissolves the partnership.

Revised UPA
Ê:95#-<:## ± no material changes from UPA
Ê:9;#. <:*### ± Only a few additions to
UPA. First, property is acquired by the partnership if it is transferred to the partnership in its
name or one or more partners in their capacity as partners. Second, property is PRESUMED
to be partnership property if purchased with partnership assets.
Ê;97#. <=#."& ± no material change to UPA
Ê<97#. <6#  $##a partner is NOT a
co-owner of partnership property and has no interest in it which can be transferred.
DIFFERENT FROM UPA.
Ê<9:#. <6#. $(#same as UPA ± just
profits and losses are personal property that is transferrable.
Ê<95#. <6<8 $$#. $( ± Same as UPA with a
few VERY MATERIAL ADDITIONS. (1) Upon transfer, the transferor retains the rights and
duties of a partner other than the interest in the distributions! That¶s the really big difference.
It allows the partner to retain his right to participation in management after he has transferred
his rights.
Ê<9;#. <8=9#. $(Ê&(2  ± no
material differences from UPA.

# &3,($$&&$

,%#
%
"0#
4
UPA
Ê:7#-5>#
&( & ± Every partner has to account to
the partnership for any benefit and hold as TRUSTEE for it any profits derived by him
WITHOUT THE CONSENT OF OTHER PARTNERS.

RUPA
Ê;9;#-<><6Ê$#. & ± Pretty damned different
at least from the language of UPA. !
  " 
" 
#



c

 *
Ê  !
#

Ê!#
" !
 !
#

ÊÊ !
"  

 
" !
"  

.
DUTY OF LOYALTY: limited to-

(1)‘Duty to account and hold as trustee partnership profits

(2)‘Refrain from dealing with partnership in the conduct or winding up of the property
as or on behalf of an adverse party
(3)‘Refrain from competing with the partnership before it¶s dissolution

DUTY OF CARE: limited to refraining from engaging in grossly negligent conduct,

intention misconduct, or knowing violation of law.

#"&
UPA
Ê:8#-58"&"$³Change in the relation of the partners caused by
any partner ceasing to be associated in the carrying on as distinguished from the winding up
of the business.´
Ê59#- 58#  %("&when a partnership
dissolves, the partnership is not terminated, but continues until the winding up of partnership
affairs is complete.
Ê57#- 58 &$"&$%%

374‘Termination of the definite term specified

3:4‘Express will of any partner without specific term
354‘Express will of all partners who haven¶t assigned their interests
3;4‘Expulsion of any partner from the business

Ê, in contravention of the agreement where you can¶t otherwise dissolve under the
statute it can be done at will by any of the partners. Finally, by any event which makes it
unlawful for the partnership to be carried on.
Ê5:#-58"&("$ &Can apply to the court for dissolution
of the partnership under various circumstances including (this is not comprehensive, there is
a long list of examples in the SS); one partner is declared a lunatic, partner incapable of
performing his duties, guilty of some offense making it prejudicial to carry on business,
business can only be carried on as a loss etc.
Ê55#- ;9
$$$"&
&$#dissolution
terminates all the authority of a partner except in winding up the business and finishing deals
started before the dissolution.
Ê5;#- ;7$# (&$% #$"&
± Each partner is liable to others for his share of any liabilities created by other partners±
UNLESS partner acting had no knowledge of dissolution OR if death or bankruptcy occurs
and the partner had knowledge.

cc
Ê5<#. ;7#$## #$
"&partner CAN bind partnership after dissolution by: any act appropriate for
winding up, any transaction which would bind them if dissolution never happened. The
second part of the statute determines the liability of partners and how it is satisfied out of
partnership assets. PARTNERSHIP IS IN NO CASE BOUND AFTER DISSOLUTION IF:
it is dissolved because of unlawfulness unless proper for winding up, or a partner has become
bankrupt, or the partner has no authority to wind up partnership affairs.
Ê5=#. ;:
$$$"&#.
0( ± dissolution does
not of itself discharge the existing liability of any partner. Can agree to be discharged though
with the partnership.
Ê5>#. ;:* ± Unless otherwise agreed, partners who have not
wrongfully dissolved the partnership have a right to wind up the affairs.
Ê56#. ;:$#
$##unless
otherwise agreed, each partner can apply partnership property to discharge its liabilities.
Partners can also bring a suit for damages against the partner who wrongfully dissolved the
partnership.
Ê58#. ;5*#",$ &
%when a contract is rescinded on the ground of fraud or
misrepresentation, the party entitled to rescind is entitled to a lien on surplus partnership
property, to stand in the place of the creditors of the partnership after all debts satisfied, and
to be indemnified by the person guilty of the fraud.
Ê;9#. ;;&$"(&This section lists the rules of how assets are
treated and how liabilities of partnerships rank. See Section, probably too technical for test.
Ê;7#. ;<($# &&  if the
partnership is carried on creditors to the first partnership are creditors of the next partnership.
This section essentially says that you can continue the business if just one partner retires.

RUPA
Ê697#-=<
, &"&*$#
EXLUSIVE LIST of how a partnership is dissolved.

374‘In partnership at will, an express will to withdraw as partner

3:4‘In partnership of definite term, express will of ALL partners or completion of the
undertaking.
354‘Event agreed to in partnership agreement resulting in the winding up of the
partnership.
3;4‘Event that makes it unlawful for the partnership to continue

ALSO, this section deals with judicial determination. By application of partner, a partnership
can be judicially dissolved (VERY DIFFERENT FROM UPA):

(1)‘Economic purpose is likely to be unreasonably frustrated

c÷
 (2)‘Can¶t reasonably carry on with a particular partner.
(3)‘Not otherwise reasonably practicable to carry on the partnership business within the
scope of the partnership agreement.
(4)‘DIFFERENT FOR A TRANSFEREE: judge will only dissolve partnership for these
transferee¶s at the end of the specified time period of at any time if the partnership
was at will at the time of the transfer.

Ê69:#-==# &
$"& ± Partnership continues

after dissolution ONLY FOR the purpose of winding up. After winding up completed,
partnership terminates. At any time after dissolution and before winding up, ALL
PARTNERS may agree to waive the right to wind up and terminate. In that case, the
partnership resumes its business as if dissolution had never occured.
Ê695#-==*#&Can apply to have
judicial supervision of winding up. Otherwise same as UPA.
Ê69;#- =>#.##
$"& ± only two
actions that can bind are listed ± whatever appropriate for winding up ± and any act that
would have bound the partnership under 301 before dissolution if the other party had no
notice of the dissolution
Ê69>#-=>Ê%$
& (&
%#
regular procedures for how money and property is distributed. Partners have to contribute
to the partnership an amount equal to any excess of liability charges over the credits in a
partner¶s account.

!
 #


 
Model Business Corporation Act
Ê:-97#7>8s ± One or more persons can act as the incorporator/s of a
corporation by delivering articles of incorporation to the secretary of state.
Ê:.9:#7>8
$
The articles of incorporation %& have some things included, which are listed on P 179

(1)‘Corporate name
(2)‘Number of shares authorized to issue
(3)‘Street address
(4)‘Name and address of each incorporator

The articles of incorporation % set forth other things as well

(1)‘Names and addresses of initial directors

(2)‘Provisions for the purpose of the corporation, managing the business and regulating the
affairs of the corporation
(3)‘Defining limiting and regulating the powers of the corporation, its board, and
shareholders

c9
(4)‘Par value for authorized shares or classes of shares
(5)‘Provision eliminating or limiting the liability of a director to the corporation or its
shareholders
(6)‘Provision permitting or making obligatory indemnification of a director for liability

Ê:-95#-769Corporate existence begins with the articles of

incorporation are filed and the sec state¶s filing of the articles is conclusive proof that
incorporators satisfied all conditions for incorporation.
Ê:-9;#769($#  ± anyone purporting to
act on behalf of a corporation knowing no incorporation had taken place yet are jointly and
severally liable individually.
Ê:.9<#769@$ After incorporation, if the directors
are named in the articles, then those initial directors SHALL hold an organizational meeting
at the call of the majority of the directors to complete organization by appointing officers and
adopting bylaws. If directors are not named in the articles, the incorporator/s hold this
meeting to elect directors and complete the organization.
Ê:.9=#769incorporators or board of directors have to adopt initial
bylaws for the corporation. They may contain any provision for management of the business
and regulation of the affairs that is not inconsistent with law or the articles themselves.
Ê5.97#767#&Every corporation has the purpose of engaging in ANY
lawful business UNLESS a more limited purpose is set forth in the articles.
Ê5.9:#767#3+
%#
Ê
 4Unless articles
say differently, EVERY corporation has PERPETUAL DURATION and succession in
corporate name has same powers as an individual to do all things necessary to carry out
business, including power:

(1)‘To sue and be sued

(2)‘To have a corporate seal
(3)‘To make or amend bylaws not inconsistent with articles
(4)‘To purchase or somehow hold property
(5)‘To sell or dispose of property in any way
(6)‘To purchase or dispose of any interests in another entity
(7)‘To make contracts
(8)‘To lend money
(9)‘To be any type of member in a partnership
To conduct business inside and outside of the state
To elect directors and appoint officers
To pay pensions
To make donations
To transact any lawful business
To make payments or donations that further the affairs of the corporation

cñ
 Ê5-9;#76:+the validity of corporate action may not be challenged on
the ground that the corporation lacks/lacked the power to act except: in a shareholder
proceeding against the corporation to enjoin the act, any direct or derivative suit, and action
under 14.30
Ê;-97#76:  % A corporate name has to contain a word
resembling ³corporation´ and has to be distinguished from another corporate name already in
use, reserved, a fictitious name made by a foreign corporation, or a corporate name from a
not for profit incorporated in the state.
Ê<-97#765$$
 Each corporation has to
continuously maintain in the state: a registered office, and a registered agent, who may be an
individual residing in the state, a domestic corporation, or a foreign or not for profit foreign
corporation authorized to do business within the state.

,
A%#%( %
Uniform Limited Liability Company Act
---------First, ,$%%#
$:99<)Ê#-8 a
limited partner does not have to right or power as a limited partner to act for or bind the
limited partnership.
Ê:97#->>%( %
 ± a limited liability
company is legally distinct FROM ITS MEMBERS
Ê:9:#. >>@One or more persons can organize an LLC by delivering
articles of organization to sec state.
Ê:95#->>
$@ ± The articles %Ê set forth

374‘Name of the company

3:4‘Address
354‘Name and street address for initial agent for service of process
3;4‘Name and address of each organizer
3<4‘Whether company is a term company and if so the term specified
3=4‘Whether the company is manager-managed and if so the name and address of each initial
manager
3>4‘Whether one or more of the members will be personally liable

ALSO, MAY set forth provisions permitted to be set forth in an operating greement or other
matters (whatsoever) not inconsistent with the law.

Ê597#>8
$%%(% ± Each member of the LLC is an

agent for the purpose of its business and each member can bind the business unless they
have no authority to act in a particular manner and the person they acted with knew or had
notice that they could not act that way.

c
 %%%, A member is NOT an agent solely by reason of being a
member. Each manager is an agent.
Ê59:#-69%( %($%%(.%.

( &An LLC is liable for loss or injury or penalty caused by a member or
manager acting in the ordinary course of business of the company or with the authority of the
company.
Ê595#- 69($%%(% ± Liabilities of the company are
solely liabilities of the company, not the members and managers. Failure of the company to
observe usual company formalities is NOT grounds for holding members/managers
personally liable. BUT a member or manager CAN be liable if it is specified in the articles
AND that member has consented in writing to that provision.
Ê;9;#. 67%%$%( %

(1)‘In a MEMBER MANAGED LLC, each member has equal rights in management and any
matter relating to the business of the company can be decided by a majority of them
(2)‘In a MANAGER MANAGED LLC, each manager has equal rights in the management
and any matter relating to the business of the company may b exclusively decided by a
majority of them.

%1&$%%(B%A30&,4

(1)‘Amendment of the operating agreement

(2)‘Authorization/ratification of acts otherwise violating duty of loyalty
(3)‘Amendment to articles
(4)‘Compromise of an obligation to make a contribution
(5)‘Admission of a new member

#

 " 

Ê
"&$ 
Delaware General Corporation Law
Ê7;734#-775$"Business and affairs of every corporation shal
be managed under a board of directors except as may be provided in the statute or in the
certificate of incorporation. Even if it is in certificate, those people still have to act like
directors.
Ê7;734#- 77=$" ± A member of the board shall be protected by
relying in good faith on corporate records or committees reporting to him.
Ê79:3(43>4#. 796 $ $$ ± a provision
eliminating or limiting the personal liability of a director of a corporation can be included,
provided that it shall not eliminate or limit the liability of a director for any breach of duty of
loyalty to the corporation, for acts or omissions not in good faith or which involve intentional
misconduct.

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Model Business Corporation Act
Ê:-9:3(43;4#-7>8Ê%,%
different from DGCL because it
DOES NOT MENTION THE DUT OF LOYALTY. Instead, it just says it does not apply if
the director intentionally inflicts harm on the corporation or shareholders.
Ê6-97#-:951&%$ &$$"Each
corporation must have a board of directors. All corporate powers are exercised under their
authority and they manage the affairs. Then lists oversight responsibilities of (business
performance plans, major risks to which corporation is exposed, performance and
compensation of senior officers, policies and practices to comply with law) and ethical
responsibility for oversight of (preparation of financial statements, effectiveness of internal
controls, arrangement for providing adequate and timely info to directors and composition of
the board and its committees.)
Ê6-59#-:98Ê$ &$" ± Each member of the board has
to act IN GOOD FAITH and IN A MANNER THE DIRECTOR REASONABLY
BELIEVES TO BE IN THE INTERESTS OF THE CORPORATION. Also have to use
reasonable care. Board has to disclose material information about decisions. Also says that
the directors may rely on their committees.
Ê6.57-:79Ê$($" ± A director is NOT liable to the
corporation of its shareholders UNLESS P CAN SHOW:
-Conduct not in good faith, or a decision which the director didn¶t reasonably believe to be in
the best interest of the corporation.
-A lack of objectivity due to conflict of interest with another person have a material interest
in the challenged conduct. These relationships include relationships where: 1 domination or
control could be expected to affect judgment 2 then maybe can show that it was still in best
interest
-A sustained failure to devote attention to oversight of the business (Caremark)
-Receipt of financial benefit to which the director was not entitled.
#/((&$$: harm has been
suffered and it was proximately caused by the director.

&"
 !
No statutory material

"&$
DGCL
Ê7;;#-776"C?&&% ± No contract or transaction between a
corporation and on or more of its directors or between a corporation and anything else a
director may be interested in is void SOLELY for this reason IF:

c¬
-The %$ of the relationship are disclosed or are known to the board AND the
board in good faith authorizes the contract by affirmative votes of a %2$
 even though LESS THAN a quorum.
-The material facts are disclosed and there is a $,$.
-The contract is $ to the corporation anyway.
Common or interested directors can be counted in determining a quorum.

MBCA
Ê7-;5#-7>6?&$" ± A qualified director is a director who at the time
of the action:
-does not have a material interest in the outcome of the proceeding or a material relationship
with a person who has such an interest
-is not a party to the proceeding or a director for a party who has a material interest in the
proceeding
-is not a director who has a conflicting interest or who has a material relationship with
another director with a conflicting interest
MATERIAL RELATIONSHIP = familial, financial, professional
MATERIAL INTEREST = actual or potential benefit or detriment that would reasonably be
expected to impair the objectivity of the director¶s judgment when participating in the action
Ê6-=9#-:78"$$Ê&(³Director¶s conflicting interest
transaction´ means a transaction to which the director is a party or at the relevant time the
director knew that a related person was a party or had a material financial interest.
³Control´ means having the power directly or indirectly to elect or remove a majority of the
members of the director or being subject to a majority of the risk of loss from the entity¶s
activities
³Relevant Time´ means time at which director¶s action under 8.62.
³Material Financial Interest´ means a financial interest in a transaction that would
reasonably be expected to impair the objectivity of the director¶s judgment.
³Related Person´ means spouse, child or familial interest, individual living in the same
home of the director, an entity controlled by the director etc.
-³Fair to corporation´ means that the transaction a sa whole was beneficial to the corporation.
Ê6-=7#-::9D&
A transaction will not be judicially voidable only on
the grounds that a director had an interest in the transaction. (2&
($    

Ê -
Ê6-=:#-::7".
 ± Director¶s action respecting a conflicting interest
transaction is effective if the transaction has been authorized by the affirmative vote of a
majority of qualified directors after the required DISCLOSURE BY THE CONFLICTED
DIRECTOR provided that:
-the qualified directors have deliberated and voted outside the presence of the interested
director

cÚ
-all members of a committee (if it is done by committee) were qualified directors or the
committee was appointed by a majority of qualified directors
HOWEVER, if there is a COI simply because of the existence of a related person, the
director IS NOT OBLIGATED to make the required disclosure if he reasonably believes that
doing so would violate a duty imposed under law, a legally enforceable obligation of
confidentiality, or a professional ethics rule as long as he discloses everything he can AND
0&$$.
Ê6-=5#-:::Ê.
 ± these are effective if a majority of the votes
cast by holders of all qualified shares are in favor of the transaction after:
-Notice describing the action
-provision to the corporation of the information received
-communication to the shareholders who can vote on the transaction of the information that is
the subject of required disclosure
SO generally they can act to approve the transaction if these requirements are met. ALSO,
the provision in the end says that if the voting requirement applicable is not met, independent
action to satisfy those authorization requirements MUST BE TAKEN by the shareholders.
Ê6->9#-:::&& ± If a director takes advantage of a business
opportunity, he is not liable if he brings it to the attention of the corporation prior to his
activity and action by qualified directors disclaiming the corporation¶s interest is taken or
shareholder¶s action disclaiming the interest.
-Has to make all material facts disclosure concerning the business opportunity.

NYSE Corporate Governance Standards

Ê595
-97#-57$)Ê" ± Listed companies must have a
majority of independent directors capable of exercising independent judgment.
Ê595
.9:#-5:$)Ê  ± No director qualifies as independent
unless the board affirmative determines that he has no material relationship with the listed
company. Companies have to identify which directors are independent and disclose the basis
for that determination.
-A director is NOT INDEPENDENT if he is or in the last three years was an employee of the
listed company. Same goes for his family members.
-NOT INDEPENDENT if he or an immediate family member has received during 1 year of
the past three, more than 100K in direct compensation from the listed company other than
director and committee fees and pension.
-NOT INDEPENDENT if the director or immediate family member is or has been an
executive officer of another company or is a current employee that has made payments to, or
received them from, the company in excess of 1 million bucks or 2% of the company¶s
consolidated gross revenues.

cJ
 Ê595
-95#-5<$)Ê
0&,Ê ± Non-management directors of each
listed company must meet at regularly scheduled executive sessions without management
present. This serves to empower a more effective check on management.
Ê595
-9;#-5=$)Ê %B , %% ± Listed
companies have to have a committee for this composed entirely of independent directors.
They must have a written charter stating the committee¶s purpose and responsibilities AND
an annual performance evaluation of the committee.
Ê595
-9<#-5>$)Ê % %% ± listed companies have to have
a compensation committee composed entirely of independent directors. They also have to
have a charter stating the purpose and responsibilities, a review and approval or corporate
goals relevant to CEO compensation, make recommendations to the board with respect to
non-CEO officer compensation, and produce a report as required by the SEC.

Ê!

!"
"
+
+
 

MBCA
Ê>-;9#-:97"$ ± ³Derivative proceeding´ means a vivil suit in the right of
a domestic corporation. ³Shareholder´ includes a beneficial owner whose shares are held in
voting trust or held by a nominee on the beneficial owner¶s behalf.
Ê>.;7#-:97Ê ± A shareholder cant commence a DERIVATIVE
proceeding unless he 1 was a shareholder of the corporation at the time of the act and 2 fairly
and adequately represents the interests of the corporation in enforcing the right of the
corporation.
Ê>.;:#-:97"%No shareholder can commence a derivative proceeding
until 1 a written demand has been made upon the corporation to take action and 2 90 days
have gone by unless the shareholder was notified that demand was denied.
Ê>.;5#-:9:Ê$#If the corporation starts an inquiry into
allegations the court can stay the 90 period.
Ê>-;;#-:9:"% ± A derivative proceeding SHALL BE dismissed by the
court if one of the groups described below has made a good faith determination that
maintenance of the proceeding is not in the best interest of the corporation.
-These determinations are made by 1 a majority vote of qualified directors if they constitute a
quorum or 2 a majority vote of a COMMITTEE consisting of two or more quoalifie directors
appointed by a majority vote of qualified directors (don¶t have to constitute a quorum)
-If a proceeding starts AFTER demand has been rejected, the COMPLAINT has to say either
1 a majority of the board of directors were not qualified directors or 2 there has been no
determination described in A.
-If a majority of the board was at that time qualified directors, the plaintiff has the burden to
show that none of this has been met.
-ALSO THE COURT

## 
#

 
%
 "+"
Ê
"
"
EE

÷

 Ê>-;<#-:9:"&$Ê% ± Court has to approve a settlement or
discontinuance.
Ê>.;=#-:95#%$
0 ± the court can order the corporation to pay the
plaintiffs expenses if result actually was beneficial to corporation. It can also order the
Plaintiff to pay corporations fees.

 

""
 "
%  
 
" Ê

DGCL
Ê7;<#-776$$$$''%'
&A corporation can indemnify any person who was or is a party by reason of the
fact that the person is or was a director, against expenses, judgments, fines and amounts paid
in settlement.
-Requires that the person acted in good faith and in a manner the person reasonably believed
to be in the best interest of the corporation, or didn¶t know that conduct was criminal.
Corporation can also have the power to indemnify any person threatened by or in the right of
the corporation. Again this has the good faith requirement.
-NO INDEMNIFICATION SHALL BE MADE FOR ANY CLAIM UNLESS THE JUDGE
APPROVES IT!!! 145B
-If any director is successful on the merits, then they shall be indemnified against expense
(watch out for ³on the merit´ vs. settlement).
-The indemnification has to be authorized (unless ordered by the court) by 1 a majority vote
of directors, 2 committee of such directors, 3 with no directors, then by independent legal
counsel or 4 the stockholders.
-Corporation can prepay expenses for matters
-Corporation CAN PURCHASE AND MAINTAIN INSURANCE for this
-Court of Chancery has exclusive jurisdiction to hear cases on indemnification
%
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*

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Ê*!
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Ê
" 
Ê
MBCA
Ê6-<7#-:7;#%(%$ ± This is almost the same as DGCL ±
main difference is definitely that the corporation
  "
%   a director if it is
brought in a derivative action (unless ordered by the court) except for reasonable expenses
incurred in connection with the proceeding IF it¶s determined that the director met the
relevant standard of conduct. Again I think this limits it to judicial approval.
Ê6.<:#-:7<%%$ ± This makes it mandatory to indemnify
a director who was WHOLLY SUCCESFUL, on the merits or otherwise, in the defense of
any proceeding because he was a director of the corporation.
Ê6.<5#-:7<
,
0 ± Corporation can before final disposition
advance funds to pay for or reimburse reasonable expenses ± Little difference here, where the

÷c
 director has to make a written affirmation of his good faith belief that he has met the relevant
standard of conduct and he has to submit in writing that he will pay the funds back if he
ultimately does not get indemnified (last part is common in both statutes, but not the written
part in Delaware). This can be done by either a majority vote of directors or shareholders.
Ê6.<;#-:7= &%$
,$
0a
party can apply for indemnification or an advance for expenses to the court conducting the
proceeding ± after receiving the request the court SHALL order it if it determines that the
director is entitled to mandatory indemnification under 8.52, order it if the court determines it
is proper under 8.58, order it if the court under all the circumstances determines that it is fair
and reasonable to indemnify the director ±
Ê6-<;#-:7>"%
&@$%$Basically
says that the corporation can¶t indemnify a director unless the relevant standard of conduct in
8.51 is met. This is pretty much the same as the requirement in Delaware that an
authorization of good faith conduct is made by directors or shareholders.
Ê6-<=#-:7>%$$$$ same extent as directors
Ê6-<>#-:76& A corporation can purchase and maintain insurance for
directors and officers whether or not they would have to power to indemnify in the end.


"



  #  %#

Ê
#Ê+'Ê
Securities Exchange Act
Ê7:34#-:=;1&%$Ê& ± Unlawful for any
member, broker or dealer to effect a transaction in any security on a national securities
exchange unless a registration is effective in accordance with the provisions of this title.
SHALL NOT APLY IN RESPECT OF A SECURITY FUTURES PRODUCT TRADED ON
A NATIONAL SECURITIES EXCHANGE.
Ê7:3(4#-:=;
&%(($
0A
-Such information as to the issuer and person controlling the issue and any rules the
commissions want FOR THE PROTECTION OF INVESTORS.
-Organization, financial structure and nature of the business
-terms on which securities are to be offered to the public or otherwise
-Directors, officers, and underwriters holding more than 10% of any class of any equity
security of the issuer
-Remuneration to others than directors and officers exceeding 20K annually
-Bonus and profit sharing arrangements
-Management and service contracts
-Options existing or to be created
-Material contracts not made in the ordinary course of business to be executed after the filing
of application

÷÷
-Balance sheet for not more than three preceding fiscal years
-Profit and Loss statements for not more than three preceding fiscal years
-any further financial statements the commission says are necessary.
Very very broad power given to the commissioner to ³ensure fair dealing in the security.´
Ê7:34#-:=<
,&%%$$
%%F%G3,4A
-report within 120 days after the last day of its first fiscal year ended after the effective date
of the subsection on which the issuer ha assets exceeding one million and a class of equity
security held by 750 or more people.
-the rest of this rule just further elaborates on the commission¶s power to proscribe periods
for reporting
Ê7;34#-:=8#0Unlawful for any person to solicit or to permit the use of
his name to solicit any proxy or consent or authorization in respect of any security registered
under section 12.
&7;346Ê#In order for a shareholder proposal to be
included on a company¶s proxy card, and included along with any supporting statement in its
proxy statement, the shareholder must be eligible and follow certain procedures.
A shareholder proposal is a shareholder recommendation or requirement that the company
and/or its board take action, which is intended to be presented at a meeting of the
shareholders.
Eligibility is determined by holding at least 2K in market value or one percent of the
company¶s securities.
Only one proposal can be presented per each shareholder at each meeting, and it cannot
exceed 500 words.
Reasons for excluding it by the company are found on pages 298-300
The company may elect to include in its proxy statement reasons why it believes
shareholders should vote against a proposal.
&7;8#-597 %%cannot make a solicitation subjet to
the regulation by means of proxy or any other communicative device which is false or
misleading with respect to any material fact, or which omits to state any material fact

DGCL
Ê::9#-7;;$(/ ± Upon written demand under oath
stating the purpose for it, any stockholder has the right during the usual hours of business to
inspect for any proper purpose and make copies of a corporations books and records.
-If the corporation refuses the inspection, stockholder can apply to the Court of Chancery to
compel such inspection.
-Directors are afforded the same rights for a purpose reasonably related to the director¶s
position as director.

÷9
 MBCA
Ê7=-9:#-:<>$Êthis is pretty much the
same as Delaware, but it is a little more specific about exactly what you can ask to inspect.


 &A&79(<
SEC Act
Ê79(#-:=5&$$%&,",", ± to
use any manipulative or deceptive device or contrivance in contravention of such rules and
regulations proscribed by the commission is illegal in the public interest or for the protection
of investors.
-Applies mainly to $&'%&'-

&79(<#-:>8
%%$%&,,, ± it is unlawful
to use any device, scheme, or artifice to defraud, to make any untrue statement of a material
fact or to omit to state a material fact, and to engage in any act which operates as a fraud or
deceit on any person while purchasing or selling a security.


 &A 

SEC Act
Ê7=#-:>7"'$$'#ÊDirectors, officers, and
principal stockholders are required to file disclosure if they are the beneficial owner of more
than 10 percent of any class of any equity security registered under section 12
Have to file this within 10 days of becoming such an owner
Ê7=(#-:>:  ± for the purpose of preventing the unfair use of
information, any officer, director, or beneficial owner by reason of his relationship with the
company, cannot exchange securities is not allowed in LESS THAN 6 MONTHS unless such
transaction was acquired in good faith in connection with a debt previously contracted.
-All the proceeds from illegal insider deals go back to the issuer
Ê:9
#-:>;( %& $  ± ANY
PERSON who violates the title by engaging in insider trading while in possession of
material, nonpublic information is liable in an action in any court of competent jurisdiction to
any person who has purchased or sold securities of the same class.
-STATUTE OF LIMITATION IS FIVE YEARS!!!
Ê:7
#-:>< ,#$  - heavy civil penalties are also
administered by action by the commission
&79(<7#-:>8 ($%&($%
A purchase or sale of a security is ³on the basis of´ material, nonpublic
information if the person making eh purchase or sale was AWARE of the material nonpublic
information when he made the purchase or sale
Various alternative defenses are listed

֖
 &79(<:#-:67"&$&$%
a duty of trust or confidence exists whenever a person agrees to maintain information
in confidence, whenever the person communicating the info and he person who receives it
has a history or pattern of sharing such confidences, such that the recipient of the information
reasonably should know that it¶s material and nonpublic, or when you receive it from your
family (THIS ALL FALLS UNDER THE MISAPPROPRIATION THEORY)

$ ! 

DGCL
Ê:76#-7;5+ &
%One or 2 or more
stockholders can by a written agreement deposit capital stock to any person or entity who
may be designated by them as a voting trustee for the time proscribed in the agreement. It can
be amendd by amending it with a written agreement.

MBCA
Ê>-59#-788+ & ± One or more shareholders can create a voting trust,
conferring on a trustee the right to vote or otherwise act for them, by signing an agreement
setting out the provisions of the trust. Not materially different from Delaware.
Ê>.57#-788+% ± Can agree to vote a particular way according to
the agreement. This is SPECIFICALLY ENFORCEABLE.
Ê>-5:#-788Ê
% ± An agreement among the shareholders
that complies with this section IS EFECTIVE EVEN THOUGH IT IS INCONSISTENT
WITH ONE OR MORE OTHER PROVISIONS OF THE ACT BECAUSE:
-it eliminates the board of directors or restricts their discretion or poer
-it governs the authorization of making distributions whether or not in proportion ot
ownership of shares
-it establishes who shall be directors or officers of the corporation
-it governs, in general and specifically, the exercise or division of voting power
-it establishes terms and conditions of any agreement
-it transfers to shareholders authority to exercise corporate powers or to manage the business
-it requires dissolution at the request of one or more shareholders
-it otherwise governs the exercise of corporate powers
%&@(($$,
(%&(E
these agreements relieve directors of liability for decisions they would normally make
Still no ground to impose personal liability though

DGCL

÷
Ê5;7#-<7$)Ê
(   ± unless a corporation
elects to become a close corporation under the subchapter, it shall be subject in all respects to
this chapter
Ê5;:#. <7$)Ê $ ± a close corporation is a corporation
with a certificate providing that:
-All of the corporation¶s issued stock is held by no more than 30 people
-All the issued stock is subject to 1 or more restriction is section 202
-The corporation makes no offering of any stock which would be considered a ³public
offering´ under the SEC act
Ê5;5#-<7$)Ê %$ ± A close corporations
certificate shall contain a heading stating the name of the corporation and THAT IT IS A
CLOSE CORPORATION.
Ê5<9#-<7$)Ê
%$a written
agreement of the stockholders in a close corporation holding a majority of stock entitled to
vote, is ok even though it may interfere with the business and affairs of the corporation and
the powers and discretion of the directors. Again, this relieves directors of their liabilites for
acts or omissions forced upon them.
Ê5<7#-<7$)Ê%%(Ê/ ± certificate can provide that the
business will be managed by the stockholders rather than a board of directors. No meetings
need to be called to elect directors and the stockholders of the corporation shall be subject to
al liabilities of directors. Can be an amendment later with unanimous agreement among
stockholders

Florida Business Corporation Act

Ê=9>-7;59&$D&"&a circuit court can dissolve a
corporation. It must be established that the corporation attained its articles through fraud, or
that the corporation has continued to abuse the authority conferred upon it by law.
In a SHAREHOLDER PROCEEDING, it must be established that the directors are
deadlocked in the management of corporate affairs, the shareholders are unable to break the
deadlock, and irreparable injury to the corporation is threatened or being suffered.
In a proceeding by a shareholder or group of shareholders in a close corporation, it must be
established that the corporate assets are being misapplied or wasted, the directors or those in
control are acting in a manner that is ILLEGAL OR FRAUDULENT
Ê=9>-7;5<#,"A provisional director may be appointed in the
discretion of the court to remedy a deadlock. The director will have all the rights and powers
of an ordinary director, and he shall be an impartial person. From time to time, the
provisional director has to report back to the court about the proceedings.

֩
"&  
MBCA
Ê7;-59#-:<7&$D&"& ± The court can dissolve a
corporation:
-In a suit by the attorney general if it is established that the corporation obtained its articles
through fraud or the corporation has continued to exceed or abuse the authority conferred
upon it by law.
-In a proceeding by a shareholder if it is established that the directors are deadlocked in the
management of corporate affairs, the shareholders are unable to break the deadlock, and
irreparable injury to the corporation is threatened or being suffered, or the business of the
corporation can no longer be conducted to the advantage of the shareholders because of the
deadlock.
-Also in a proceeding by a shareholder, if the directors of the corporation acted/are acting in
a manner that is illegal, oppressive, or fraudulent. Finally if the shareholders are deadlocked
in voting power, or the corporate assets are being misapplied or wasted (Alaska v. Coppack).
-Section 3 describes necessary factor in suit by creditors
-Can always apply for voluntary dissolution or in a proceeding by a shareholder if the
coporation has abandoned its business and has failed within a reasonable time to liquidate.
Ê7;-5;#-:<5
#&&$"&
-In a shareholder proceeding to dissolve a corporation, the corporation may elect, or if it fails
to elect, one or more share holders can elect, to buy out the petitioning shareholders at the
fair market value of their shares.
-If a shareholder does this, the corporation has to give notice to all shareholders and advise
them of their right to join in the election to purchase shares.
-The court must determine that discontinuance of the proceedings is equitable after the
election to purchase.

DGCL
Ê5<5#-<5$)Ê
%$,
materially the same as Florida ± only apparent difference is the fact that a certain number
(more than half directors and more than a third shareholders) have to apply for it
Ê5<<#-<5$)ÊÊ/.,certificate of any close
corporation may include a provision granting any stockholder an option to have the
corporation dissolved at will or upon the occurrence of any specified event or contingency.

FBCA
Ê=9>-7;5=#-<;$)Ê
&$&exactly the
same as MBCA

÷¬
 BUSINESS ASSOCIATIONS STATUTORY OUTLINE
Table of Contents

Agency «««««««««««««««««««««.««««««««««««1

The Agency Relationship ««««««««««««.««««««««««««...1

Agency and Contract Law ««««««««.«««.«««««««««««««.1

Agency and Tort Law ««««««««««««««.««««««««««««.4

Agents as Fiduciaries ««««««««««««««.««««««««««««..6

Partnership ««««««««««««««««««««.«««««««««««...8

Introduction to Partnership ««««««««««.««««««««««««««.8

Partnership Property, Capital and Governance «««««««««««««««««9

Partners as Fiduciaries «««««««...««««««««««««««««««10

Partnership Dissolution ««.«««««««««««««««««««««««.11

The Corporate Entity ««««««...«««««««««««««««««««««13

Alternative Entities: Limited Partnerships and Limited Liability Companies «..««««..15

Corporate Fiduciaries ««««««««««««.«««««««««««««««.16

The Duty of Care «««««««««««..««««««««««««««««.16

The Duty to Act in Good Faith ««««««««««««««««««««««..17

The Duty of Loyalty ««««««..««««««««««««««««««««17

Shareholder Derivative Litigation «««..«««««««««««««««««««.20

Officer and Director Indemnification and Insurance «««««««««««««««..21

Introduction to Federal Regulation of Public Companies ««.«««««««««««..22

Federal Anti-Fraud Law: Rule 10b5 «««««««««««««««««««««...24

Federal Anti-Fraud Law: Restrictions on Insider Trading «««««««««««««..24

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Control of Closely Held Corporations «««...«««««««««««««««««.25

Fiduciary Duties is Close Corporations ««««««««««««««««««««..25

Dissolution of the Close Corporation «««««««««««««««««««««.26

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