Business Organizations USA

8/12/2019 Business Organizations USA

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Language III: Make-up Examination (First Term)

*Business Organizations: US

Unit !": So#e $roprietors%ips an& $artners%ips

' So#e proprietors%ip: It is a orm o usiness oners%ip in %i+% on#, one in&ii&ua# a+.uires a## t%e eneitsan& risks o running an enterprise/ In a so#e-proprietors%ip t%ere is no #ega# &istin+tion eteen t%e assets aniai#ities o a usiness an& t%ose o its oner/ It is , ar t%e most popu#ar usiness stru+ture or startups/

- &antages: T%e oner %as +omp#ete +ontro# oer t%e usiness0 %e ma, keep a## o t%e proits ma&e, t%e so#e proprietors%ip0 t%is usiness is simp#e to egin an& en&0 t%e re+or& keeping re.uirements areminima#0 oners aoi& &ou#e taxation/

- 1isa&antages: T%e usiness existen+e &epen&s entire#, upon t%e #ie o t%e so#e proprietor: %ispersona# properties ma, %ae to e use& to pa, or expenses arising out o usiness a+tiities 0 oners o so#eproprietors%ips oten in& it &ii+u#t to raise a %uge amount o +apita# .ui+k#, or expansion purposes0 enture+apita#ists an& anks genera##, &o not #en& mone, to so#e proprietors/

' $artners%ips: T%e Uniorm $artners%ip +t (U$) &eines partners%ip as 2an asso+iation o to or more

persons to +arr, on as +o-oners o a usiness or proit/3 T%e s%aring o proits is +onsi&ere& prima a+ieei&en+e o t%e existen+e o a partners%ip/ $artners a#so s%are #osses/ Un#imite& #iai#it, +%ara+terizespartners%ips4 ut it is possi#e to stipu#ate in a gien +ontra+t t%at non-partners%ip propert, i## neer e use&to satis, a &et arising out o a +ertain agreement/

T%ere exist to t%eories %i+% %ae trie& to &eine t%e existen+e o partners%ips: on t%e one %an&4 t%eEntit, T%eor,&es+ries a partners%ip as an in&ii&ua# unit it% its on i&entit, (2a partners%ip is an entit,&istin+t rom its partners4 5U$4 arti+#e 64 se+tion 678(a)3)0 on t%e ot%er %an&4 a++or&ing to t%e ggregateT%eor,4 t%e partners%ip is simp#, an assem#, or +o##e+tion o partners %o &o usiness toget%er/

$artners%ips +an e orme& , +ontra+t (%i+% is +a##e& 2arti+#es o partners%ip3 or 2partners%ipagreement3): T%ere must e a ritten agreement esta#is%ing t%e partners%ip/ T%e +ontents o su+% agreementmust e t%e name an& nature o t%e partners%ip4 its &uration4 amount o +apita#4 amount o resere un&s4

#o+ation an& it%&raa#0 &uties o t%e partners4 #o+ation o a++essii#it, o a u## an& a++urate a++ount opartners%ip transa+tions4 times an& amounts ea+% partner is entit#e& to it%&ra rom partners%ip earnings4proisions or t%e preparation o an annua# a#an+e s%eet an& in+ome statement an& t%e &istriution o netproits or net #osses eteen partners4 #imitations on partners4 an& termination on noti+e pro+e&ure/

$artners%ips , estoppe# are #ega##, in&ing partners%ips t%at ma, arise %ere4 in a+t4 no orma#partners%ip agreement is in ee+t in or&er to &een& inno+ent t%ir& parties/ person %o , +on&u+t or or&srepresents4 or a##os %imse# to e represente&4 as a partner in a irm is #ia#e or t%e +re&it or #oans otaine&

, irm on t%e asis o su+% representation/$artners%ips , proo o existen+e: I a part, +#aims t%at a partners%ip exists an& t%e ot%er part, &enies

its existen+e4 t%e +ourt i## #ook at a series o e#ements to so#e t%e pro#em/ person %o re+eies a s%are ot%e proits o a usiness is presume& to e a partner in t%e usiness4 un#ess t%e proits ere re+eie& in

pa,ment o a &et4 as ages to an emp#o,ee4 or seri+es as an in&epen&ent +ontra+tor4 o rent to a #anor&4 as

an annuit,4 interest on a #oan4 as +onsi&eration or t%e sa#e o goo&i##4 et+etera/

+.uisition o partners%ip propert,: 9apita# +ontriutions are sums +ontriute& , t%e partners aspermanent inestments an& t%at t%e partners are entit#e& to %ae returne& %en t%e partners%ip is &isso#e&/

+apita# +ontriution is a +ontriution o +apita#4in t%e orm o mone, or propert,4 to a usiness , anoner4 partner4 or s%are%o#&er/ T%e +ontriution in+reases t%e oners e.uit, interest in t%e usiness/ 9apita#+ontriutions are not +ounte& as usiness in+ome4 un#ess t%e +ontriutions are in t%e orm o a #oan t%at isexpe+te& to e repai&/

$artners; rig%ts4 &uties an& #iai#ities are &etermine& in t%e 5U$ an& t%e partners%ip agreements:- Tenan+, in partners%ip: Tenan+, in partners%ip is t%e +o-oners%ip o t%e partners%ip propert, on#,

or partners%ip purposes an& t%at &oes not permit t%e separate assignment , a partner o %is rig%t to t%epropert,/ T%is tenan+, is +%ara+terize& , an e.ua# rig%t it% partners to possess an& use spe+ii+ partners%ippropert,/ partner;s interest in partners%ip propert, ma, not e assigne& to a non-partner0 partners; rig%ts in
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partners%ip propert, are not su or persona# &ets or +#aims against t%e partnerst%emse#es/ &e+ease& partner;s interest in rea# propert, %e#& , t%e partners%ip passes to t%e suriing

partners.- Interest in t%e partners%ip: In prin+ip#e4 t%e e+onomi+ interest in t%e partners%ip4 i/e/ proits an&

surp#us =utilidades>4 is s%are& e.ua##,/ Su+% interest +an e assigne&4 un&er an assignment %i+% &oes not estan, rig%t to parti+ipate in t%e a&ministration o t%e propert, in t%e assignee/

- Management rig%ts: 1e+isions are ma&e , a ma


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memers o or&inar, partners%ips4 t%e LL$ itse# is responsi#e or an, &ets t%at it runs up4 not t%e in&ii&ua#partners/

' Limite& $artners%ips: T%e 5eise& Uniorm Limite& $artners%ip +t (5UL$) &eines a #imite& partners%ipas 2a partners%ip => %aing one or more genera# partners =%o %ae un#imite& #iai#it, an& manage t%e irm

, irtue o t%eir agen+, aut%orit,> an& one or more #imite& partners =%o are nonparti+ipating inestors %oare not este& in an, manageria# or agentia# poer>/3

LPs are creatures of statute since they must file with the state to form them. Because of the

limited liability of limited partnerships, they often are used as vehicles for raising capital. The limited

partnership is a separate entity and files taxes as a separate entity.

#imite& partner %o exer+ises too mu+% +ontro# oer partners%ip aairs i## #ose t%e prote+tiemant#e o #imite& #iai#it,/ ai#ure to i#e a +ertii+ate o #imite& partners%ip i## &eprie a #imite& partner o#imite& #iai#it, i t%ir& parties attempting to %o#& t%e #imite& partner #ia#e &i& not kno t%at t%e, ere &ea#ingit% a #imite& partners%ip/

*Unit 37: Corporate Formation and Finance

' +orporationis a #ega# entit, (existing apart rom its oners) +reate& , eit%er a state or e&era#statute %i+% aut%orizes in&ii&ua#s to operate an enterprise/ T%e +orporate orm oers #imite& #iai#it, to its

s%are%o#&ers/ T%e #ega# status o t%e +orporation is not ae+te& , t%e &eat%4 in+apa+it,4 or ankrupt+, o anoi+er or s%are%o#&er/ T%e +orporation is &ire+t#, taxe& on t%e in+ome it earns/

Cenera##,4 a +orporation i#es arti+#es o in+orporation it% t%e goernment4 #a,ing out t%e genera#nature o t%e +orporation4 t%e amount o sto+k it is aut%orize& to issue4 an& t%e names an& a&&resses o&ire+tors/ On+e t%e arti+#es are approe&4 t%e +orporations &ire+tors meet to +reate ,#as t%at goern t%einterna# un+tions o t%e +orporation4 su+% as meeting pro+e&ures an& oi+er positions/

' T,pes o +orporations:- $riate: 9orporation orme& , priate persons to a++omp#is% a task est un&ertaken/ It +an e

organize& or proit-making purposes or or nonproit +%arita#e4 e&u+ation4 or s+ientii+ purposes/- $u#i+: More proper#, use& to &es+rie a +orporation +reate& , t%e e&era#4 state4 or #o+a#

goernment or goernmenta# purposes/ Large priate +orporations %i+% genera##, se## t%eir sto+k to t%epu#i+ at #arge ma, a#so e reerre& to as $u#i+ +orporations/

- Duasi-pu#i+: It is priate#, organize& or proit ut a#so proi&es a seri+e upon %i+% t%e pu#i+ is&epen&ant/

- 1omesti+: Operates in t%e states granting t%e +orporation;s +%arter/- Foreign: Operates in a## ot%er states , grant o t%e +ommer+e +#ause o t%e U/S/ 9onstitution/ For

grant4 it must otain a +ertii+ate o aut%orit, , proi&ing inormation simi#ar to t%e inormation proi&e& ,a &omesti+ +orporation app#,ing or a +%arter/

- #ien: 9orporation it%out t%e +ountr,/

- 9#ose: usiness +orporation ma, e &esigne& as +#ose +orporation %en t%e outstan&ing s%ares o

sto+k an& manageria# +ontro# are +#ose#, %e#& , eer t%an it, s%are%o#&ers or , one person/

- $roessiona#: Seera# states a#so a##o a ariation o t%e +orporation or use , proessiona#s (i/e/4t%ose in&ii&ua#s t,pi+a##, +onsi&ere& as proessiona#s %o re.uire a #i+ense rom t%e state to +on&u+t

usiness)/

- S +orporation: It aoi&s &ou#e taxation: s%are%o#&ers %ae agree& to %ae t%e proits o t%e+orporation taxe& &ire+t#, to t%em rat%er t%an to t%e +orporation (sing#e taxation or pass t%roug% in+ometaxation)/ In+ome an& #osses are &ii&e& among s%are%o#&ers on a per s%are asis/

T%e o##oing re.uirements must e met:- Must e an e#igi#e entit,4 a &omesti+ +orporation4 or a #imite& #iai#it, +ompan,/- Must %ae on#, one +#ass o sto+k/

- Must not %ae more t%an 877 s%are%o#&ers/


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- S%are%o#&ers must e U/S/ +itizens or resi&ents4 an& must e natura# persons4 so +orporates%are%o#&ers an& partners%ips are genera##, ex+#u&e&/ @oeer4 +ertain trusts4 estates4 an& tax- exempt+orporations are permitte& to e s%are%o#&ers/

- Must not e an ine#igi#e +orporation i/e/ +ertain inan+ia# institutions4 insuran+e +ompanies4an& &omesti+ internationa# sa#es +orporations/

' Limite& Liai#it, 9ompanies: T%e, are est t%oug%t o as a +ross eteen a partners%ip an& a+orporation/ Like a +orporation4 t%e LL9 oers t%e prote+tion o #imite& #iai#it, to its memers0 ut un#ike

+orporations4 t%e, &o not pa, taxes4 %i+% a## to oners (pass t%roug% in+ome taxation or sing#e taxation)/LL9;s ma, on#, +ome into existen+e i t%e oners o##o t%e pre+ise #egis#atie steps (t%e, are

statutor,)0 a#t%oug% t%e, are usiness entities4 t%e, are a t,pe o unin+orporate& asso+iations/ T%e oners o anLL9 are +a##e& memers0 t%ose managing t%em are managers/

' 9orporate Formation:- $romoters: $eop#e i##ing to egin a ne +orporation or i##ing to in+orporate an existing usiness

are +a##e& promoters/ T%e, must a+t in t%e est interests o t%e ne +orporation an& its s%are%o#&ers: t%e, muste %onest an& #o,a# an& u##, reea# a## inormation aout an, +ontra+t ma&e/

- $reormation 9ontra+ts: +orporation is not oun& , an, o t%e promoters; +ontra+ts un#ess ita&opts t%em/ &option o++urs express#, i t%e &ire+tors pass a reso#ution agreeing to e oun& , a +ontra+t/Imp#ie& a&option o++urs i t%e +orporation a++epts t%e eneits o a +ontra+t or makes an, pa,ments +a##e& or

, t%e agreement/- oation: It is a +ontra+t entere& into , t%e neorn +orporation an& t%e parties to t%e +ontra+ts

a&opte& , su+% +orporation4 %o ot% agree to re#ease t%e promoters rom an, #iai#it,/- rti+#es o In+orporation: T%e arti+#es o in+orporation are t%e ritten app#i+ation to t%e state or

permission to in+orporate/ T%is ritten app#i+ation is prepare& , t%e +orporation;s in+orporators/ T%e arti+#es4toget%er it% t%e status o in+orporation4 represent t%e #ega# oun&aries it%in %i+% a +orporation must+on&u+t its usiness/ Some state in+orporation statutes are er, stri+t4 re.uiring &etai#e& inormation in t%earti+#es o in+orporation4 i/e/ t%e +orporation;s name4 t%e &uration4 t%e purposes4 t%e numer an& +#asses os%ares4 t%e s%are%o#&ers; rig%ts in re#ation to s%ares4 +#asses o s%ares4 an& spe+ia# s%ares4 t%e s%are%o#&ers;rig%t to u, ne s%ares4 t%e a&&resses o its origina# registere& oi+e an& its origina# registere& agent4 t%enumer o &ire+tors p#us an& a&&resses o t%e initia# &ire+tors4 ea+% in+orporator;s name an& a&&ress/

- 9orporate ame: +orporate;s name eatures t%e or&s or an areiation o t%e or&s +orporation4+ompan,4 or in+orporate&/ T%e +orporation +annot +%oose a name t%at ou#& +onuse t%e ne +orporation it%one a#rea&, in existen+e/ It is a#so possi#e to resere a name/

- pproa# o arti+#es: ter t%e arti+#es o in+orporation are sumitte& to t%e state4 t%e appropriatestate oi+er4 oten t%e se+retar, o state i## a#so make +ertain t%at a## i##ing ees %ae een pai& an& t%at aregistere& oi+e an& a registere& agent (in&ii&ua# &esignate& to re+eie seri+e o pro+ess %en a #asuit isi#e& against t%e +orporation) %ae een appointe&/ T%e +%arter4 or +ertii+ate o in+orporation4 is t%e+orporation;s oi+ia# aut%orization to &o usiness in t%e state/ it% t%e issue o t%e +%arter4 t%e +orporation

e+omes a u##, an& #ega##, in+orporate& entit,/- 9ommen+ement o usiness: Most state statutes proi&e t%at t%e irst or&er o usiness upon

in+orporation is t%e %o#&ing o an organizationa# meeting/In a&&ition to t%e appointment o t%e irst &ire+tors4 t%e a&option o ,#as (ru#es t%at gui&e t%e

+orporation;s &a,-to-&a, interna# aairs0 t%e, usua##, stipu#ate t%e time an& p#a+e o s%are%o#&ers; an&&ire+tors; meetings4 .uorum re.uirements4 .ua#ii+ations an& &uties o &ire+tors an& oi+ers an& pro+e&uresor i##ing oar& a+an+ies)4 or regu#ations4 a#so o++urs at t%e organizationa# meeting/

' Formation o an LL9: T%e, re.uire at #east to persons/- rti+#es o Organization: T%e, are t%e ritten app#i+ation to t%e state or permission to orm an LL9/

T%ese arti+#es must in+#u&e t%e name o t%e LL94 t%e &uration o t%e LL94 an& t%e a&&ress %ere t%e LL9;soperating agreement an& ,#as are to e kept/ T%e name o t%e LL9 must in+#u&e t%e term Limite& Liai#it,9ompan,/ statutor, agent or t%e seri+e o pro+ess must e name& at t%e time t%at t%e arti+#es are i#e& int%e oi+e o t%e se+retar, o state/ Fi#ing ees must a#so e pai&/

- Operating greement: It esta#is%es t%e ,#as o t%e LL9/ T%e operating agreement in+#u&es t%eormation proisions4 operating proisions4 t%e nature o t%e usiness to e +on&u+te& , t%e LL94 t%e

&istriution o proits an& #osses4 t%e poers o t%e managers4 t%e oting rig%ts o t%e memers4 t%e a&missionan& it%&raa# pro+e&ures4 t%e proisions regar&ing t%e transer o a memer;s interest in t%e LL94 t%e


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proisions ino#ing t%e termination o t%e LL9/ &&ing a proision to t%e ritten operating agreement t%att%ere +an e no ora# mo&ii+ations to t%at agreement +an preent su+% t%ing rom %appening ina&ertent#,/

' 1ee+tie In+orporation:- 1e Gure 9orporation: +orporation %ose existen+e is t%e resu#t o t%e in+orporators %aing u##, or

sustantia##, +omp#ie& it% t%e re#eant +orporation statutes is a &e


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- 1ii&en&s: 1e+#are& an& pai& out o +urrent +orporate earnings or a++umu#ate& surp#us at regu#arintera#s/ T%e oar& o &ire+tors %as t%e so#e aut%orit, to &etermine t%e amount4 time4 #a+e4 an& manner o&ii&en& pa,ment/ In a e instan+es4 a &istriution o earnings is ma&e in s%ares o +apita# sto+k: sto+k&ii&en&/

- 9ommon sto+k: It is t%e most usua# t,pe o +orporate sto+k/ It +arries it% it a## t%e risks o t%eusiness4 inasmu+% as it &oes not guarantee its %o#&er t%e rig%t to proits/ T%e s%are%o#&er is usua##, entit#e& toone ote or ea+% s%are o sto+k %e#&/ T%e %o#&ers o +ommon sto+k are pai& &ii&en&s %en t%e +orporatione#e+ts to make su+% a &istriution/ @o#&ers o +ommon sto+k risk %ateer t%e, inest/

- $reerre& sto+k: T%e, %ae rig%ts or preeren+es oer ot%er +#asses o sto+ks/ $reeren+es genera##,ino#e t%e pa,ment o &ii&en&s an&Jor t%e &istriution o assets on t%e &isso#ution o t%e +orporation/$reerre& sto+k ma, e +umu#atie (&ii&en&s unpai& one ,ear i## e pai& on t%e o##oing ,ear) ornon+umu#atie (&ii&en&s unpai& one ,ear i## not e pai& aterar&s)/

- Sto+k a#uation: $ar a#ue is t%e a#ue t%at is p#a+e& on t%e s%ares o sto+k at in+orporation/ T%isa#ue is state& on t%e +orporation;s +ertii+ate o in+orporation/ Uninorme& u,ers oten interpret par a#ue

printe& on t%e a+e o t%e +ertii+ate as t%e a+tua# market a#ue o t%e s%ares/ To +orre+t t%is +on&ition4 a##states %ae aut%orize& t%e issuan+e o no par a#ue sto+k (+orporate sto+k t%at is issue& it%out an, state&

pri+e)/

*Unit 38: Corporate Management and Contro#

T%e usiness aairs o a +orporation are manage& , a oar& o &ire+tors e#e+te& , t%e s%are%o#&ers/T%e, are t%e genera# agents o t%e +orporation0 t%e, ma, issue an& se## sto+k0 &e+#are &ii&en&s0 appoint ore#e+t oi+ers to manage t%e usiness o t%e +orporation an& a+t as its agents0 make #oans0 exe+ute mortgageson t%e +orporations propert,0 u, propert, nee&e&0 an& in genera# perorm a## su+% &uties as t%e ,-#as an&+%arter gien , t%e State permit/ T%is in+#u&es not on#, t%ose spe+ii+a##, state& ut t%ose ne+essar, to +arr,out t%e proisions o t%e ,-#as an& +%arter/ T%e &ire+tors an& oi+ers o a +orporation +annot #ega##, engagein u#tra ires a+ts4 t%at is4 a+ts e,on& t%e s+ope o t%e +orporations +%arter poers/

Un#ess pro%iite& , t%e +orporation;s +ertii+ate o in+orporation4 memers%ip on t%e oar& o&ire+tors +an e exten&e& to an,one/ 1ire+tors are e#e+te& at t%e annua# meeting o s%are%o#&ers/ One t%ir& ot%e oar& is e#e+te& annua##,/ K7-s%are%o#&ers +orporations ma, e#iminate t%e oar& o &ire+tors/

I an, &ire+tor is not notiie& o a spe+ia# meeting4 a## a+tions taken at t%e meeting are oi&/ It is a#sone+essar, t%at a .uorum exists0 spe+ia# .uorums (more t%an K7 o t%e tota#) are re.uire& or spe+ia#&e+isions/

Oi+ers o t%e +orporation are appointe& to run aairs o t%e +orporation: presi&ent4 i+epresi&ent4se+retar,4 treasurer/ Oi+ers %ae t%e aut%orit, o genera# agents or t%e operation o t%e norma# usiness ot%e +orporation/

' 9orporate +ontro# t%eor,:- Spe+ia# interest group +ontro#: Man, +orporate &e+isions4 su+% as a &e+ision to open or +#ose a

a+tor,4 ae+t t%e +ommunit, t%roug% its +onsumers4 supp#iers4 emp#o,ees4 an& +ommunit, neig%ors/ ## ot%ese groups an& more s%ou#& e represente& on t%e oar&s o &ire+tors/ O


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- One s%are o +ommon sto+k e.ua#s one ote/

' Hoting met%o&s:- S%are%o#&er $roposa#: S%are%o#&ers +an +ompe# management to in+#u&e t%eir proposa#s in

management;s prox, so#i+itation prior to t%e next s%are%o#&ers meeting/ T%e proposa# s%ou#& e o #ess t%anK77 or&s an& sumitte& 867 &a,s eore t%e meeting/ T%e s%are%o#&er must on at #east 8 per+ent or 84777in market a#ue o t%e oting sto+k/

- 9umu#atie oting: T%is s,stem a##os s%are%o#&ers to mu#tip#, t%e numer o t%eir oting s%ares ,

t%e numer o &ire+tors to e e#e+te&/ T%is pro+e&ure a##os minorit, s%are%o#&ers an opportunit, to erepresente& on t%e oar& o &ire+tors/

- $rox, oting: $rox, so#i+itation (a#so a &o+ument) is t%e pro+ess %ere, one s%are%o#&er asksanot%er or %is oting rig%t/

- Hoting trusts: oting trust is an agreement among s%are%o#&ers to transer t%eir oting rig%ts to atrustee/ On+e a oting trust %as een +reate&4 it +annot e en&e& unti# t%e spe+iie& time perio& %as run its+ourse/

- $oo#ing agreement: Hoting agreement among s%are%o#&ers/ T%e, &ier rom proxies an& otingtrusts e+ause t%e s%are%o#&ers retain +ontro# o t%eir on otes/ I a memer o a poo#ing agreement +%anges%er ote4 %oeer4 t%e ot%er memers ma, ring a #asuit against t%e s%are%o#&er %o roke t%e agreement/

' S%are%o#&er suits:- 1ire+t suits: Broug%t , s%are%o#&ers %o %ae een &eprie& o a rig%t t%at e#ongs to t%em ass%are%o#&ers/- 1eriatie suits: ##os s%are%o#&ers to sue +orporate management on e%a# o t%e +orporation/ T%es%are%o#&ers; rig%t to sue is &erie& rom t%e +orporate in


8/22

Coernment regu#ations on usiness organizations are ase& on t%e goernment;s po#i+e poer4 %i+%is t%e state;s aut%orit, to restri+t priate rig%ts in or&er to promote an& maintain pu#i+ %ea#t%4 saet,4 e#are4an& mora#s (rt/ I4 Se+t/ N4 9#ause ! o t%e US 9onstitution)/ T%is poer +an a#so regu#ate usiness a+tiit,t%at ae+ts interstate +ommer+e/

T%e Se+urities an& Ex+%ange 9ommission (SE9) regu#ates t%e issuan+e o se+urities , +orporation/(Se+urit,: mone, inestment t%at expe+ts a return so#e#, e+ause o anot%er person;s eorts/)

Se+urities +t o 8!!: 5egu#ates t%e issuan+e o ne se+urities , +orporations an& partners%ips/ registration statement (+ontaining &etai#e& inormation aout t%e +orporation0 &esigne& or experts o t%e SE9)

an& a prospe+tus (+ontains same inormation in a simp#iie& orm0 &esigne& or potentia# inestors) must ei#e& it% t%e SE9/

Se+urities Ex+%ange +t o 8!?: 1ea#s it% t%e suse.uent tra&ing in se+urities/ It re.uires perio&i+reports o inan+ia# inormation +on+erning registere& se+urities4 an& it pro%iits manipu#atie an& &e+eptiea+tions in t%e sa#e an& pur+%ase o se+urities/ S%are%o#&ers so#i+it proxies must a#so o##o stri+t reportingre.uirements/

' ntitrust regu#ation: 1is+ourages monopo#ies (%i+% %ae ex+#usie +ontro# o a market) , ausiness enterprise/

- S%erman nti-trust +t: $ro%iits monopo#ization +ontra+ts4 +ominations4 an& +onspira+ies inrestraint o tra&e/

- $er se io#ations (%et%er or not t%e, %arm an,one): @arm is presume& an& t%e pra+ti+e ispro%iite&/

- 5u#e-o-reason stan&ar&: T%e ru#e-o-reason stan&ar& i## stop +ertain pra+ti+es on#, i t%e,are an unreasona#e restri+tion o +ompetition/

- $ost-S%erman ntitrust Legis#ation:- 9#a,ton +t: gainst spe+ii+ usiness pra+ti+es (e/g/: t,ing agreements4 inter#o+king

&ire+torates sering as &ire+tor or to +ompeting +orporations (at #east one o t%e +orporations must %ae anaggregate ort%0 anks an& +ommon +arriers are exempt)) t%at +ou#& e use& to +reate a monopo#,/

- 5oinson $atman +t: $ro%iits a se##er rom +%arging &ierent pri+es to &ierent +ustomers%en su+% &ieren+es mig%t in


9/22

- 9#a,ton +t (Se+tion Seen): Fori&s an, +orporate expansion i t%at expansion sets up a monopo#,or ot%erise %urts +ompetition/

- Expansion attempts (+#ose#, s+rutinize& , t%e FT9):' @orizonta# expansion: eteen +ompanies in t%e same usiness/' Herti+a# expansion: pur+%ase o a +ompan, o anot%er #ink o t%e pro+ess/' 9ong#omerate expansion: Goins to +ompanies t%at ere not in +ompetition it% one anot%er/ T%e,

&ea# &ierent pro&u+ts0 t%e, operate in &ierent geograp%i+a# areas/

- @art-S+ott-5o&ino ntitrust +t: 1esigne& to po#i+e an, expansion attempts t%at mig%t %arm+ompetition in t%e marketp#a+e/ For expansion matters4 a noti+e o expansion attempt is re.uire& , t%e FT94%i+% t%en gets t%e +%an+e to inestigate/

' Energ, 5egu#ation:- Fe&era# Energ, 5egu#ator, 9ommission: It is responsi#e or regu#ating t%e transportation an& t%e

%o#esa#e pri+e o natura# gas an& e#e+tri+it, so#& or use in interstate +ommer+e/ 5ates are +a#+u#ate& to a##o+ompanies a spe+ii+ rate o return on inestments/ Fue# a&


10/22

s%are%o#&ers/ I t%e existing assets +annot meet a## +#aims4 a re+eier (person appointe& , #a to %o#& propert,su


11/22

- on-proit or not or proit: Forme& or purposes ot%er t%an making a proit/

- 9#ose: Its s%ares are %e#& , memers o a ami#, or , re#atie#, e persons/ T%ere is no tra&emarket or its s%ares/ Its management usua##, resem#es t%at o a so#e proprietors%ip or a partners%ip/

- S: 9#ose +orporation meeting t%e .ua#i,ing re.uirements spe+iie& in Su+%apter S o t%e Interna#5eenue 9o&e/ It aoi&s t%e imposition o in+ome taxes at t%e +orporate #ee# %i#e it retains man, o t%ea&antages o a +orporation4 parti+u#ar#, #imite& #iai#it,/

5e.uirements: T%e +orporation must e a &omesti+ +orporation0 it must not e a memer o anai#iate& group o +orporations0 its s%are%o#&ers (%o must not e more t%an seent,-ie or a non-resi&enta#ien) must e in&ii&ua#s4 estates or +ertain trusts/

- $roessiona#: Forme& , proessiona#s to otain t%e a&antages o in+orporation/

*Chapter 38: Corporation ! %irector& 'fficer& and (hareholder "#et$

' 1ire+tors: T%e, orm t%e goernment organ o a +orporation/ T%e, are sometimes inappropriate#,+%ara+terize& as agents e+ause t%e, a+t on e%a# o t%e +orporation/ o in&ii&ua# &ire+tor4 %oeer4 +an a+tas an agent to in& t%e +orporation0 an& as a group4 &ire+tors +o##e+tie#, +ontro# t%e +orporation in a a, t%atno agent is a#e to +ontro# a prin+ipa#/

' T%e numer o &ire+tors is set ort% in t%e +orporation;s arti+#es or ,#as/ T%e irst oar& o&ire+tors is norma##, appointe& , t%e in+orporators on t%e +reation o t%e +orporation4 or e#se t%e, are name&

, t%e +orporation in t%e arti+#es/ Suse.uent &ire+tors are e#e+te& , a ma


12/22

+orporation/ Oi+ers an& &ire+tors +annot +ompete it% t%e +orporation4 usurp its opportunit,4 %ae an interestt%at +on#i+ts it% t%e interest o t%e +orporation4 engage in insi&er training4 aut%orize a +orporate transa+tiont%at is &etrimenta# to minorit, s%are%o#&ers4 or se## +ontro# oer t%e +orporation/

' Liai#it, o 1ire+tors an& Oi+ers: Un&er t%e usiness


13/22

' Ma


14/22

9ompanies (regu#ate& , t%e 9ompanies +t 677") o++up, a spe+ia# p#a+e in #a4 as t%e, are &eeme&to %ae a #ega# persona#it, separate rom t%ose %o inest t%eir +apita# an& #aor to run t%e usiness/ T%egenera# ru#es o +ontra+t4 tort an& un


15/22

' T,pes o +ompanies:- 9orporations aggregate:

' 9%artere& +ompanies: T%e, are a t,pe o +orporation t%at eo#e& in t%e ear#, mo&ern era inEurope/ T%e, en


16/22

T%ree s%are%o#&ers minimum Fie s%are%o#&ers minimum

T%e, nee& to %ae on#, one &ire+tor T%e, must %ae at #east to &ire+tors

T%e, nee& to %ae on#, one memer T%e, must %ae at #east to memers

T%eir +ompan, se+retar, nee& not %ae are+ognize& proessiona# .ua#ii+ation

T%eir +ompan, se+retar, must %ae are+ognize& proessiona# .ua#ii+ation

T%ere is not a minimum +apita# re.uirement T%e minimum +apita# re.uire& is K74777poun&s4 o %i+% 6K must e pai& eore it+an e in+orporate& an& +ommen+e its

usiness

T%e, +annot seek inan+e rom t%e pu#i+: tooer s%ares or &eentures to t%e pu#i+ is

pro%iite&

T%e, ma, seek inan+e rom t%e pu#i+:unrestri+te& rig%ts to oer s%ares or&eentures to t%e pu#i+

$reemptie rig%ts (8NN +t) $reemptie rig%ts (8NN +t)

Extraor&inar, genera# meetings are notapp#i+a#e

Extraor&inar, genera# meetings are to e+a##e&

T%ere is no su+% a re.uirement or priate+ompanies

Beore t%e, +an pa, a &ii&en&4 t%e, mustensure t%at t%e, %ae tra&ing proits an& t%att%eir +apita# assets are maintaine& in a#ue toat #east t%e a#ue o t%e sus+rie& s%are

+apita# p#us un-&istriuta#e resereT%ere is no su+% a re.uirement or priate+ompanies

T%e, must otain an in&epen&ent expert;sa#uation o a propert, eore t%e, +an issues%ares in ex+%anges or it

T%ere is no su+% a restri+tion or priate+ompanies

T%e, ma, not issue s%ares in ex+%ange oseri+es

T%ere is no su+% a restri+tion or priate+ompanies

T%e, ma, not a##ot s%ares in ex+%ange or a+onsi&eration %i+% in+#u&es an un&ertaking%i+% ma, e perorme& , more t%an ie,ears ater t%e &ate o a##otment

$a,ment , sus+riers ma, e ma&e in +as%or in some ot%er +onsi&eration

Sus+riers to memoran&ums o pu#i++ompanies must pa, t%eir s%ares in +as%

T%e, must %ae an in&epen&ent a++ountantsreport on t%e a#ue o non-+as% assets use& asa +onsi&eration or an issue o s%ares

T%e +omp#etion o an in&epen&ent a++ountantsreport on t%e a#ue o non-+as% assets use& asa +onsi&eration or an issue o s%ares &oes notapp#,

- T%e, +annot a#i, a+.uire non-+as% assetsrom sus+riers to t%e memoran&um in t%eirst ,ears o its existen+e un#ess anin&epen&ent a++ountants report is re+eie&

%ere interim a++ounts (2a#an+esproi&en+e3) are use& to support a propose&&istriution t%ese a++ounts must e i#e& it%

t%e registrar o +ompanies

-

It must +omp#, it% t%e +apita# maintenan+eru#e

T%e, nee& on#, u#i## t%e asi+ re.uirement oproits aai#a#e or &istriution

9annot oer se+urities to t%e pu#i+ 9an oer se+urities to t%e pu#i+

' Unin+orporate& asso+iations: T%e, &o not %ae a #ega# persona#it, &istin+t rom t%e memers o t%easso+iation/ T%e, in+#u&e tra&e unions an& most so+ieties an& +#us/ sso+iations are norma##, treate& asgroups o persons %o are t%us in&ii&ua##, responsi#e or t%e asso+iation;s a+tions/ Ex+eptions to t%is ru#ein+#u&e: %en t%e asso+iation must e represente& in +ourt0 %en t%e asso+iation ants to on #an& (un&er t%eLa o $ropert, +t 86K no more t%an our peop#e +an on #an& toget%er)0 %en t%e asso+iation ants to&e#egate poers to a +ommittee/


17/22

' $ier+ing t%e ei#: Statutor, proisions remoing t%e a&antages o orming a +ompan, or its #imiteiai#it, oering +oer t%e o##oing situations:

(i) I t%e memers%ip o a +ompan, a##s e#o to4 t%en t%e remaining memer s%ou#& ater agra+e perio& o six mont%s e #ia#e or t%e +ompan,;s &ets an& o#igations %ere t%e, kno o t%e situation/

(ii) %ere a pu#i+ +ompan, ai#s to otain a tra&ing +ertii+ate in a&&ition to its +ertii+ate oin+orporation eore tra&ing an& orroing mone,4 t%en4 t%e +ompan,;s &ire+tors are #ia#e or an, o#igationsin+urre&/

(iii) %ere a group o situation exists4 group a++ounts s%ou#& e prepare&/ In assessing

%et%er t%is is t%e +ase4 t%e ei# is +#ear#, eing #ite& to &etermine i t%e %o#&ing +ompan,-susi&iar,+ompan, re#ations%ip exists/

(i) I a +ompan, oi+er ai#s to &es+rie +orre+t#, t%e +ompan, in a #etter4 i##4 inoi+e4 or&er4re+eipt4 or ot%er &o+ument4 t%en t%e oi+er is #ia#e in t%e eent o t%e +ompan, not %onoring t%e o#igation+on+erne&/

() I a &ire+tor %o is &is.ua#iie& +ontinues to a+t4 %e i## e persona##, #ia#e or t%e &etsan& o#igations o t%e +ompan,/

(i) I a &ire+tor or s%a&o &ire+tor oug%t to kno t%at t%e +ompan, is una#e to pa, its &etsas t%e, a## &ue4 %e ma, e %e#& #ia#e to make a +ontriution to t%e +ompan,;s assets %ere t%e +ompan, is

eing oun& up/(ii) For +omating rau&: %eneer a +ompan, is use& to aoi& an existing +ontra+tua#

o#igation/(iii) gen+,: i t%e +ompan, is mere#, an agent o t%e s%are%o#&er4 t%e +ourts ma, %o#& t%em

persona##, #ia#e or t%e +orporate &ets/(ix) Croups: t%e a+t t%at a +ompan, is it%in a group ma, e seen as a reason or i&enti,ing

it it% anot%er +ompan, in a&&ition to t%e statutor, situations %ere t%e ei# is #ite& on t%is asis/(x) Trusts/

' 9ompan,;s +onstitution: 9ompu#sor, +#auses o t%e memoran&um o in+orporation are:- ame/- $u#i+ status (i app#i+a#e)/- O


18/22

Regitration

B, deliver0 of certain document to the Regitrar of Companie: )he memorandum of aociation: stating name4 #o+ation o registere& oi+e4 o


19/22

Raiing capital

T%e #iai#it, o memers o #imite& +ompanies is #imite& to t%e nomina# a#ue o t%eir s%ares/ 9ertain ru#es%e#p to ensure t%at 2+re&itor; guarantee un&3 is not i##usor,/

Rule

ut%orise& minimum o t%e nomina# a#ue o a## issue& s%ares must e pai& up S%ares must not e issue& at a &is+ount/ +ommission ma, e pai& to un&erriters/ S%ares ma, e a##otte& or mone, or mone,;s ort% I a pu#i+ +ompan,;s s%ares are a##otte& or mone,;s ort%4 t%e +onsi&eration must e a#ue& , an

expert4 %ose report must e ma&e to t%e +ompan, an& ma&e aai#a#e to t%e a##ottee/

%ividend

1ii&en&s ma, e &e+#are& as proi&e& , t%e arti+#es4 %i+% genera##, aut%orize t%e &ire+tors to make orre+ommen& &e+#arations/ T%e &ire+tors s%ou#& retain sui+ient proits to ensure t%at t%e +ompan, &oes nottra&e in a risk, as%ion an& %as a&e.uate reseres or usiness/

(hare

person ma, e+ome a s%are%o#&er 60 u6cri6ing to the memorandumand having one or more hareallotted to him4 or 60 having hare tranferred to %im , an existing s%are%o#&er4 or 60 appl0ing forhare and having them allotted to him(genera##, in response to a prospe+tus)/

Companie mut ;eep a regitero t%e +#ass an& extent o memers; s%are%o#&ings %i+% is open toinspe+tion/

- hare i an item of propert0 an& norma##, freel0 tranfera6le/ t give it holder an interet in thecompan0 and entitle him to the right contained in the article)he holding repreent the etent of hilia6ilit0 to creditor

reference hare: +ompan, +an issue a +#ass o hare carr0ing preferential right4 in %i+% +ase apresumption o e.ua#it, app#ies to t%ose aspe+ts %ere t%ere is no preeren+e (e/g/ a rig%t to preerentia#&ii&en& &oes not ex+#u&e t%e rig%t to e.ua# parti+ipation in +apita# on #i.ui&ation/)

(hare certificate

Un&er 9 8NK4 a +ompan, must it%in to mont%s o t%e a##otment o s%ares or &eentures (or transer osu+% se+urities) +omp#ete +ertii+ates un#ess a) Ot%erise proi&e& in t%e origina# issue ) is not entit#e& to a+ertii+ate , irtue o t%e Sto+k Transer +t 8N6/

nider dealing: ">er del apunte$

%e6enture

+ompan, ma, raise inan+e , orroing as e## as , issuing s%ares/ T%is is +ommon#, &one on a #ong-

term asis , means o &eentures4 &o+uments ei&en+ing t%e amount o t%e &ets/ Instea& o a series o&eentures or a numer o separate &ets4 it ma, +reate one un& o &eenture sto+k an& issue +ertii+ates or

parti+u#ar &iisions o t%e un&/ In man, a,s4 a &eenture-%o#&er is as mu+% an inestor as a s%are%o#&er/ Buta s%are%o#&er is a memer o t%e +ompan, %ereas a &eenture-%o#&er is a +re&itor/

Compan0 1a2 in a +uthell

' Intro&u+tionMet%o&s o tra&ing in+#u&e t%e so#e proprietors%ip (eing a so#e tra&er)0 genera# partners%ips0

#imite& partners%ips0 an& +ompanies4 %i+% ma, e orme& , statute4 +%arter4 or registration/


20/22

' $u#i+ an& $riate Limite& 9ompanies9ompanies are +#assiie& into: un#imite& +ompanies4 %i+% a+.uire t%e a&antage o

in+orporation ut %ose memers ma, e %e#& un#imite, #ia#e0 an& #imite& +ompanies4 %i+% are#imite& in #iai#it,/ Limite& +ompanies are &ii&e& into pu#i+ +ompanies4 %i+% ma, e registere&+ompanies or +ompanies #imite& , s%ares or guarantee0 an& priate #imite& +ompanies/

n un#imite& +ompan, ma, re-register as a #imite& +ompan, (an& i+e ersa) an& a pu#i++ompan, ma, re-register as a priate +ompan,/ memer ma, in+ur un#imite& #iai#it, i %is

+ompan, memers%ip a##s e#o to/

' 5egistrationFor t%e registration to e +arrie& out4 &e#ier, o +ertain &o+uments to t%e 5egistrar o

9ompanies is re.uire&0 t%ese in+#u&e: t%e memoran&um o asso+iation (%i+% must in+#u&e t%e nameo t%e +ompan,4 t%e situation o t%e registere& oi+e4 t%e o


21/22

inorme& assessment o t%e present an& anti+ipate& uture rig%ts an& inan+ia# status o t%e se+urities0an& +opies must e sent to t%e 5egistrar/

-Un#iste& Se+urities: 9ompanies t%at are ina&missi#e to t%e Oi+ia# Liste& Market e+auset%e, %ae tra&e& or #ess t%an ie ,ears ma, app#, or a&mission to t%e Un#iste& Se+urities Market (i%aing tra&e& or oer t%ree ,ears)4 or to t%e T%ir& Market (i eing sponsore& , a memer o t%eSto+k Ex+%ange)/

' 5aising an& Maintenan+e o 9apita#-5aising inan+e: +ompan, ma, inan+e its a+tiities , means o: an oer&rat rom its

ank0 a pur+%ase or #ease o e.uipment on %ire-pur+%ase terms0 issuan+e o &eentures or #ong-termorroing an& orroing o sustantia# sums0 issuan+e o s%ares (i/e/ issuan+e o +ertii+ates ooners%ip)/

-9#asses o s%ares: (a) or&inar, s%ares0 () preeren+e s%ares/ Existing s%are%o#&ers %ae pre-emption rig%ts on t%e issue o ne s%ares e#onging to t%eir +#ass o s%are/

-9apita#: T,pes o s%are& +apita# are:(a) omina# +apita#: t%e amount o mone, its memoran&um entit#es a +ompan, to raise

-Issue& s%are +apita#: s%ares a+tua##, pai&/-$ai& up +apita#: t%e mone, a+tua##, re+eie& rom s%are issues/

-Un+a##e& +apita#: t%e amount sti## oe&/-5esere +apita#: un+a##e& +apita# %i+% t%e +ompan, %as reso#e& on#, to +a## up on

#i.ui&ation/*S%ares are issue& at a premium %en t%e, are ort% more t%an t%eir nomina# a#ue/

T%e extra a#ue must e transerre& to a s%are premium a++ount/*5ationa#ization o t%e +ompan,s s%are stru+ture ma, e &one eit%er t%roug% (a)

+apita#ization o t%e s%are premium a++ount an& issuan+e o onus s%ares0 or () a re&u+tion o+apita#/

-5aising 9apita#: T%e #iai#it, o memers o #imite& +ompanies is #imite& to t%e nomina#a#ue o t%eir s%ares/ 9ertain ru#es %e#p to ensure t%at t%at A+re&itor;s guarantee un&A is not i##usor,/

V ut%orize& minimum (+urrent#, K74777 poun&s)/

V 8J? o t%e nomina# a#ue o a## issue& s%ares must e pai& up/V S%ares must not e issue& at a &is+ount/V +ommission ma, e pai& to un&erriters/V S%ares ma, e a##otte& or mone, or mone,;s ort%/V I a pu#i+ +ompan,;s s%ares are a##otte& or mone,;s ort%4 t%e

+onsi&eration must e a#ue& , an expert4 %ose report must e ma&e to t%e +ompan, an& ma&eaai#a#e to t%e a##ottee/

-Maintenan+e o +apita#: $rima a+ie4 +apita# +annot e returne& to memers , t%e +ompan,/ +ompan, +annot a+.uire its on s%ares0 %oeer4 it ma, &o so i a##oe& , t%e

arti+#es4 or e#se it +an issue re&eema#e s%ares/

-1ii&en&s: 1ii&en&s ma, e &istriute& as proi&e& , t%e arti+#es (%eneer a +ompan, istra&ing proita#,)4 %i+% genera##, aut%orize t%e &ire+tors to make or re+ommen& &e+#arations/1ire+tors s%ou#& retrain sui+ient proits as reseres/

' S%ares:-Be+oming a s%are%o#&er: person ma, e+ome a s%are%o#&er ,:(a) sus+riing to t%e memoran&um an& %aing s%ares a##otte& to %im0() %aing s%ares transerre& to %im , an existing s%are%o#&er0 O5(+) app#,ing or s%ares (in response to a prope+tus)

n a##ottee %as t%e rig%t to e registere& as su+%/-5egistration: 9ompanies must keep a register o t%e +#ass an& extent o memers

s%are%o#&ings4 %i+% register &oes not in+#u&e %o#&ings o s%are arrants/


22/22

-Ee+ts o s%are%o#&ing: s%are gies its s%are%o#&er an interest in t%e +ompan, measure& ,a sum o mone,/ Its a#ue is genera##, its market pri+e/

- +ompan, +an issue a +#ass o s%ares +arr,ing preerentia# rig%ts4 in %i+% +ase apresumption o e.ua#it, app#ies to t%ose aspe+ts %ere t%ere is no preeren+e (e/g/ a rig%t topreerentia# &ii&en& &oes not ex+#u&e t%e rig%t to e.ua# parti+ipation in +apita# on #i.ui&ation)/

-S%are +ertii+ates: Un&er 9 8NK4 a +ompan, must4 it%in to mont%s o t%e a##otment os%ares or &eentures (or transer o su+% se+urities)4 +omp#ete +ertii+ates un#ess ot%erise proi&e&

in t%e origina# issue4 or un#ess it is not entit#e& to a +ertii+ate , irtue o t%e Sto+k Transer +t8N6/

s%are +ertii+ate is prima a+ie ei&en+e t%at t%e person t%erein name& is a s%are%o#&er an&is registere& as su+% an& t%e +ompan, is estoppe& rom &en,ing its statement as against a personre#,ing on it (A5e Ba%ia 5ai#a,3)/

' Insi&er 1ea#ing:-T%e pro#em: orma##, i##ega# s%are &ea#ings , emp#o,ees o a +ompan, %ere t%e, %ae

use& +oni&entia# pri+e-sensitie inormation or t%eir on gain or t%e gain o t%eir asso+iates/ T%einsi&e &ea#er &oes not %ae to ork or t%e +ompan, or %is &ea#ing to e an oen+e/ So asto+kroker4 or mer+%ant anker4 %o knos aout an impen&ing takeoer oer %o u,s s%ares in

t%e target +ompan, it% t%e intention o making a proit4 is gui#t,/ I %e gets a rien& to u, t%es%ares4 %e is sti## gui#t,/

' Borroing: 1eentures an& 9%arges:-1eentures: &eenture is a &o+ument ei&en+ing t%e amount o a &et , means o %i+% a

+ompan, ma, inan+e itse#/ &eenture-%o#&er is a +re&itor o t%e +ompan,/ 1eentures ma, etranserre& as a %o#e an& are genera##, transera#e it%out #imitations/

-5ig%ts o &eenture-%o#&ers: T%ese are ixe& , t%e +ontra+t o #oan/ I t%e +ompan, a#terst%e +ontra+t4 it is in rea+% o +ontra+t/

' 9orporate persona#it,:

-Separate #ega# persona#it,: registere& #imite& #iai#it, +ompan, is re+ognize& in #a as aperson/ T%e #ea&ing +ase in t%is matter is ASa#omon Sa#omonA/

-&antages: ei# ma, e sai& to e &ran eteen persons &ea#ing it% a +ompan, an& itsmemers4 so t%at &ire+t pro+ee&ings ma, not genera##, e taken against t%e memers t%emse#es/

-1isa&antages: memer +annot insure t%e +ompan,s propert, against &estru+tion as it isnot %is propert,4 ut %e ma, %ae an insura#e interest in t%e enture in %i+% t%e +ompan, isengage&/

-Ma

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