BusOrg Outline 1

8/13/2019 BusOrg Outline 1

1/31

Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINEBUSINESS ORGANIZATIONS

OUTLINEI. AGENCY:

A. Parties

!. A Principal

". An Agent

B. Deiniti!n #$!.%! Re&tatement T'ird - A(enc) Dra*t "%%%+

!. A(enc) i& a *iduciar) relation&'ip ari&in( w'en a principal

a+ ,ani*e&t& to an a(ent t'at t'e a(ent &'all act on t'e principal& e'al*/ AND

+ T'e a(ent con&ent& to do &o.

". ,ani*e&tation $!.%0

a+ B) written word/ OR

+ B) &po1en word or ot'er conduct I"t'e per&on 'a& notice t'at t'e ot'er ma) in*er con&ent or

intention *rom &uc' word& or conduct.

0. A#t$!rit% ! t$e agent is create& '% t$e Principal .

2. A#t$!rit%o* t'e A(ent

!. E(press A#t$!rit%

a+ Aut'orit) 3rincipal intentionall) con*er& to a(ent ) mani*e&tation& to 'im.

+ In e**ect i* t'e a(ent at t'e time rea&onal) elie4e& t'at 'e i& actin( a& t'e principal wi&'e&.#R.0d $".%!+

c+ I)plie&

#!+A(ent& aut'orit) w'ic' come& in con*ormit) wit' t'e law or (eneral u&ine&& cu&tom& o* aparticular trade.

#"+A(ent 'a& implied aut'orit) to per*orm t'e u&ual and nece&&ar) act& e&&ential to carr)in(out t'e e5pre&&ed aut'orit).

". A#t$!rit% B% la* an& E+#it%: e&tali&'ed ) 3rincipal.

a+ Apparent A#t$!rit% R.0d $".%0

#!+A(ent& aut'orit) to oli(ate a principal to a t'ird part) w'en

#a+ T'e t'ird part) rea&onal) elie4e& t'e a(ent 'a& &uc' aut'orit)/ AND

#+ T'e elie* can e traced ac1 to mani*e&tation& o* t'e principal.

#"+ T'at aut'orit) t'at a principal eit'er

#a+ 'old& 'i& a(ent out a& 'a4in(/ OR

#+ permit& 'i& a(ent to repre&ent t'at 'e po&&e&&.

#0+ For a t'ird part) to win a &uit a(ain&t a 3rincipal a&ed on an a(ent& action&/ t'e t'ird part),UST pro4e t'ere wa& a

#a+A repre&entation #o6ecti4e criteria 7 action& &pea1 loudl)+

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE

#+ r!) t$e Principal/

#c+ t! t$e t$ir& part%.

#d+ T'ird part) act& on repre&entation.

#e+ T'e action mu&t e rea&onale #o6ecti4e &tandard+

#8+ Fait'le&& a(ent

#a+ I* t'e 3rincipal i& etra)ed ) a(ent& u&e o* apparent aut'orit)/ liailit) ma) e impo&edon t'e 3rincipal to an innocent 0d3.

#+ T'e liailit) o* t'e a(ent to t'e 3rincipal can e terminated i* t'e 3rincipal *ail& tomiti(ate9 3rincipal 'a& a dut) to minimi:e dama(e. #E.(./ 3rincipal mu&t act promptl)upon di&co4er) o* an unaut'ori:ed contract.+

+ In$erent.

#!+ T'e aut'orit) o* a 3artner in a partner&'ip. Goe& e)ond apparent aut'orit).

#"+ I* t'e 3artner& do not &et limit& to t'eir aut'orit)/ t'en it de*ault& to t'e U3A e;ual power toall partner&.

#0+ I* 6u&t two partner&/ one cannot cur t'e aut'orit) o* t'e ot'er.

c+ Est!ppel

#!+ Se;uence

#a+A(ent create& an unaut'ori:ed tran&action #contract+.

#+ 3rincipal carele&&l) permitted 0d3 to erroneou&l) elie4e a(ent& aut'orit) to e5i&t/ ut3rincipal doe& not ta1e timel) action to noti*) t'e 0d3 o* t'e error in elie*.

#c+ 2on&e;uentl) 0d3 c'an(e& po&ition a&ed on t'e elie* in a(ent& aut'orit).

#"+ T'e 0r3 ma) &ee1 e;uitale reparation& *rom 3rincipal. #i.e. e;uit) to re&tore 0d3 to

po&ition prior to c'an(e in po&ition.+

#0+ T'e contract i& NOT in place.

0. Ratiicati!n a#t$!rit%

a+ De*ined

#!+ 3rincipal accepts an agent,s #na#t$!ri-e& transacti!na& 4alid an&

#"+ Esta'lis$es ac!#rse ! acti!ncon&i&tent wit' acceptance9

3rincipal 'a& retroacti4el) e5pre&&ed a mani*e&tation o* aut'orit) to t'e a(ent #e4en t'ou(' t'ea(ent ma) 'a4e etra)ed or e5ceeded 'i& ori(inal e5pre&&ed aut'orit)+.

a+ One action i& not enou('/ mu&t esta'lis$ a c!#rse ! acti!n.+ 3rincipal UST 'e a*aret'at 'e i& recei4in( ene*it *rom a unaut'ori:ed contract.

c+ Rati*ication put& t'e contract in e**ect.

d+ To pre4ail in a &uit a(ain&t t'e 3rincipal/ a 0d 3 mu&t e ale to &'ow t'at t'e 3rincipalene*ited *rom a contract t'at t'e Principal /ne* t! 'e #na#t$!ri-e&.

D. T%pes ! Agenc% Base& !n Discl!s#re

!. "#ll% Discl!se& All partie& 1now 3rincipal& identit) and limit& o* A(ent& aut'orit).

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3/31

Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE". Partiall% &iscl!se&

a+ Identit) o* 3rincipal ma) e 1nown in (eneral/ ut not &peci*ic.

+ E5ample Stoc1 ro1er &ellin( *rom own port*olio or *or a cu&tomer7 doe&nt di&clo&e w'ic'.

0. Un&iscl!se&

a+ A(ent doe& not di&clo&e identit) o* 3rincipal/ or ma) not di&clo&e t'ere e4en i& a 3rincipal.

+ E5ample T'e a(ent& w'o ou('t t'e land *or Di&ne)/ and no one 1new it wa& Di&ne).

c+ Not ille(al per &e/ ut cann!t 'e acc!)panie& '% )isrepresentati!ns.

E. T%pes ! Agenc% at C!))!n La* Ba&ed on le4el& o* 3rincipal& control. 3er&on& can e more t'anone relation&'ip at t'e &ame time.

!. Ser0ant Agent

a+ A(ent i& ot'

#!+ Directe& in $is assign)ent) a 3rincipal AND

#"+ Under t'e 3rincipal& act#al c!ntr!l ! p$%sical acti0it%in per*ormin( t'e a&&i(nment.

+ E5ample an in-'ou&e le(al coun&el.

c+ aster1Ser0ant Relati!ns$ip

#!+ Greate&t de(ree o* control.

#"+ To &'ow Resp!n&eat S#peri!r/ t'ird part) mu&t demon&trate

#a+ T'e e5i&tence o* a ma&ter)po&

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4/31

Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE!. T'e >ot Do( 4endor&

a+ Fact&

#!+ Dudle) #D+ and Fudruc1er #F+ are &tudent& at Utopia Sc'ool o* Law #USL+.

#"+ Decided to &ell 'otdo(& on campu& and at t'e 1a)a1 *e&ti4al at La1e Utopia to rai&e *und&.#Special cedar wood (rill+

#0+ >ad no up-*ront mone)/ decided to &ee i* t'e) could order 'ot do(& on credit.#8+ D order& ?@ in 'ot do(& *rom Utopia >ot Do(& #U>D+

#@+ DF pic1 t'em up and u&e USL ID card& *or picture ID. D and F e(in &ellin( 'ot do(&.

#C+ T'e) dont pa) t'e ill.

+ U>D &ue& ULS.

c+ In t'i& &cenario/ ULS i& t'e 3rincipal9 DF are t'e a(ent&9 U>D i& t'e 0d3.

d+ Outcome For U>D to pre4ail/ t'e) would 'a4e to &'ow t'at t'ere wa& !+ a repre&entation *romULS "+ to U>D/ 0+ t'at U>D acted upon t'e repre&entation/ and 8+ t'e action wa& rea&onale.T'e onl) ar(ument *or repre&entation wa& t'e ID card&/ ut U>D accepted t'e order e*ore

1nowin( o* t'e card&/ and it wa& not repre&entation to U>D. U>D will not pre4ail.

". >ot Do( 4ariation

a+ Fact&

#!+ U>D illed USL *or ?"%%

#"+ Fir&t ill wa& paid ) USL.

#0+ U>D &ent &econd ill.

#8+ Second ill wa& paid.

#@+ USL accountin( t'en ;ue&tion& pa)ment& and re*u&e& to pa) t'e remainder.

+ USL did e&tali&' a cour&e o* action in pa)in( t'e two ill&/ ut t'e 3rincipal mu&t al&o e awaret'at 'e i& recei4in( ene*it *rom t'e unaut'ori:ed contract. 2an U>D ar(ue t'at ULS 1new/ or&'ould 'a4e 1nown

0. Irene& Sunda) Sc'ool >)po !

a+ S'e i& a Sunda) &c'ool teac'er *or All Saint&.

+ Goe& to t'e 2'ri&tian oo1 &tore and order& a !"-mont' &erie& o* le&&on& to e &'ipped andpaid *or mont'l).

c+ T'e 4e&tr) 'ad/ 'owe4er/ put a moratorium on new purc'a&e& due to ud(et concern&.

d+ 'en t'e *ir&t ill come& in/ t'e &ecretar) *ile& it to e con&idered t'e ne5t e&tr) meetin(9e*ore time *or t'e meetin(/ t'e *ir&t &'ipment arri4e&.

e+ T'e e&tr) 4eto& t'e purc'a&e/ 'at& t'e outcome

*+ Becau&e t'e c'urc' wa& &low in noti*)in( t'e oo1&tore o* t'e unaut'ori:ed purc'a&e/ t'ec'urc' i& e&topped *rom den)in( re&pon&iilit) *or t'e *ir&t &'ipment. T'e) owe *or t'e *ir&t&'ipment/ ut t'e remainder o* t'e !" mont' contract i& 4oid. E;uitale &olution.

8. Irene& Sunda) Sc'ool "

a+ Same a& e*ore/ e5cept t'e e&tr) loo1& at t'e *ir&t &'ipment and reall) li1e& t'e pro(ram.

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5/31

Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE+ 2'urc' pa)& t'e ill& *or t'e *ir&t t'ree mont'& and 1now& t'e) are recei4in( and ene*itin( *rom

t'e pro(ram.

c+ T'en t'e ud(et crunc' (et& ti('ter/ and t'e) decide to cancel t'e contract *or t'e pro(rama&ed on t'e unaut'ori:ed purc'a&e.

d+ T'e) 'a4e rati*ied t'e contract ) #!+ a cour&e o* action e&tali&'ed ) pa)in( t'e ill&/ and #"+t'eir 1nowled(e o* recei4in( ene*it. 2ontract remain& in *orce

@. Tuition 3a)ment >)po

a+ Fact&

#!+ Uni4er&it) ill& &tudent ?@

#"+ Student pa)& ) c'ec1 at a counter clearl) laeled H2a&'ier

#0+ 2ler1 w'o accept& t'e c'ec1 c'an(e& t'e pa)ee and ca&'e& c'ec1 *or own u&e.

#8+ Uni4er&it) &ue& &tudent *or non-pa)ment

+ ill uni4er&it) win

#!+ Uni4er&it) and cler1 'a4e a ma&ter


6/31


!. Deine& An a&&ociation o* two or more per&on& to carr) on a& c!2!*nerso* a u&ine&& *or pro*it.U3A $C#!+ and $"%"#a+

". A partners$ip is an entit% &istinct r!) its partners. New concept in t'e !KKJ USA $"%!#a+.Not &o in common law or t'e !K!8 U3A.

0. Deter)ining E(istence ! a Partners$ip U3A $J and $"%"#c+

a+ S'arin( o* (ro&& return& doe& not in it&el* e&tali&' a partner&'ip.+ Receipt ) a per&on o* a &'are o* pro*it& i& prima *acia e4idence t'at t'e per&on i& a partner

unle&& t'at &'are i& pa)ment *or

#!+ Emplo)ee wa(e&

#"+ In&tallment& *or a det

#0+Annuit) to a decea&ed partner& &pou&e.

#8+ Intere&t on a loan

#@+ Sale o* (ood will o* u&ine&&.

c+ 2ourt& do not care w'o initiated t'e pro*it &'arin(.

d+ 3roo* o* &'arin( o* pro*it& create& pre&umption o* partner&'ip. T'e part) a&&ertin( t'at t'ere i&NOT a partner&'ip ear& t'e urden o* proo* t'at t'e pro*it &'arin( wa& *or one o* t'e alternati4ein $J#8+


7/31


d+ Di&a(reement *it$int'e !r&inar% !r n!r)al '#sinesso* t'e 3artner&'ip

#!+ I* occur& e*ore oli(atin( to a 0d3/ a ma6orit) 4ote o* t'e partner& decide& t'e i&&ue.

#"+ I* occur& a*ter one partner 'a& oli(ated to a 0d3/ t'e 3artner&'ip i& oli(ated.

e+ 2onductin( u&ine&& and creatin( oli(ation& !#tsi&et'e ordinar) or normal u&ine&& o* t'e3artner&'ip.

#!+ Re;uire& a(reement o* !%% o* t'e partner&. U3A $!M#'+ and $8%!#6+

#"+ I* liailit) 'a& een created/ *all& onl) to t'e t'o&e 3artner& w'o 4oted in *a4or.

8. D#rati!n ! t$e Partners$ip

a+ At will.

a+ For a term.

#!+ E5pre&& T'e actual period o* time i& &tipulated in t'e a(reement.

#"+ Implied T'e duration i& implied #written or 4eral+ )

#a+ 2reatin( t'e partner&'ip *or a &peci*ic ta&1 #w'ic' implie& t'e time it ta1e& to completet'e ta&1+

#+ T'e partner&'ip enterin( an oli(ation #lea&e/ mort(a(e/ etc.+ w'ic' implie& t'e timere;uired to &ati&*) t'o&e oli(ation&..

". "ra#&

a+ I* one partner *raudulentl) enter& a contract

+ relatin( to t'e ordinar) u&ine&& o* t'e partner&'ip/

c+ t'en all partner& will e ound and are re&pon&ile *or in6ur) to an innocent 0d3.

0. I 5#st t*! partners..

a+ $!M#'+ 7 ta1e& a ma6orit)/ and t'ere are onl) two.

8. 6!ting Unle&& t'ere i& a(reement to t'e contrar)/ eac' partner ca&t& an e;ual 4ote re(ardle&& o*e;uitale intere&t.

@. "iciar% resp!nsi'ilit%

a+ 3artner& owe eac' ot'er t'e 'i('e&t lo)alt) #2ardo:a+.+ To *orce an accountin( *or reac' o* *iduciar) per $"!/ mu&t &'ow

#!+ T'e part) i& a partner

#"+ Tran&action i& one t'e partner&'ip can le(all) act upon

#0+ Tran&action connected wit' t'e *ormation/ conduct/ or li;uidation o* t'e partner&'ip.

#8+ Tran&action i& wit'in t'e &cope o* t'e u&ine&&.

#@+ Tran&action would 'a4e een o* 4alue to t'e partner&'ip

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8/31

Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE#C+ T'e accu&ed partner 'a& &ole 1nowled(e9 ne4er &'ared wit' ot'er partner&.

c+ Good *ait' re;uire& ot'

#!+ No *al&e &tatement& or repre&entation&/ AND

#"+ No *al&e concealment o* competin( intere&t&.

d+ Breac' o* *iduciar) I* a memer o* a partner&'ip a4ail& 'im&el* o* in*ormation otained ) 'im

in t'e cour&e o* a tran&action wit'in t'e &cope o* t'e partner&'ip& u&ine&&/ and t'en applie&t'at in*ormation to 'i& own per&onal (ain wit'out t'e 1nowled(e o* t'e ot'er partner&/ 'e i&accountale to t'em *or an) ene*it 'e ma) 'a4e otained.

e+ I* one a&&i&t& a partner in reac'in( a *iduciar) intere&t/ t'at per&on ma) al&o e liale to t'eremainin( partner&.

*+ I* a partner 'a& a (rie4ance a(ain&t a co-partner *or 4iolation o* t'e partner&'ip a(reement

#!+ Under common law 2ANNOT rin( action *or dama(e& w'ile t'e partner&'ip remain&.

#"+ 2an onl) rin( action a*ter di&&olution/ windin( up/ and &ettlement o* all account&.

#0+ T'e price *or re&ortin( to liti(ation i& de&truction o* t'e partner&'ip.

#8+ E5ception 'ere t'ere are no out&tandin( demand& a(ain&t t'e partner&'ip9 onl) t'in( le*ti& &ettlement amon( partner&.

C. Destr#cti!n an& res#rrecti!n

a+ A partner&'ip i& de&tro)ed upon t'e deat' or departure o* one partner.

+ But/ i* t'e remainin( partner& open *or u&ine&& t'e *ollowin( da)/ t'at action ca&t& t'em in arole a& copartner& *or t'e continuation o* t'e partner&'ip.

c+ I* a partner i& e5pelled 4ia pro4i&ion& o* a partner&'ip a(reement/ t'e partner&'ip under(oe&di&&olution and recon&titution.

J. E(pelling a Partner

a+ Unle&& e5pre&& in an A(reement/ t'ere i& no Hri('t to remain a partner.

+ E5pul&ion ma) create reac' o* contract and


9/31

Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINEd+ From competin( partner or *ormer partner/ 3artner&'ip ma) &ee1 remed)

#!+ Reco4er t'e proportional &'are o* t'e ro(ue partner& competin( earnin(&/ and


10/31


+ Pr!pert% ac+#ire& *it$ partners$ip #n&s is partners$ip pr!pert%. U3A $M#"+9 U3A $"%8#c+

c+ An% estate in real pr!pert% can 'e ac+#ire& in t$e partners$ip na)e. U3A $M#0+9 $"%8

d+ C!n0e%ance t! a partners$ip c!n0e%s t$e entire estate #nless intent t! t$e c!ntrar%appears. U3A $M#8+

0. 3ropert) rou('t into a partner&'ipa+ I* one partner rin(& propert) into t'e partner&'ip at creation and t'e ot'er contriute& onl)

e5perti&e or laor

#!+ T'e intent o* t'e capital-contriutin( partner determine& i* capital ecome& partner&'ippropert) per $M#!+.

#"+ I* propert) impro4ed ) partner&'ip &upplied *und&/ ta5e& paid ) partner&'ip earnin(&/ etc./t'en court will li1el) 'old it 'a& ecome partner&'ip propert).

#0+ I* propert) maintained &eparate/ apart/ and di&tin(ui&'ale/ t'en court ma) *ind it i& apartner& propert) &impl) ein( u&ed *or partner&'ip purpo&e&.

+ Di**icult &ituation ari&e& w'en partner& ma1e une;ual contriution& o* capital and &er4ice&wit'out con&iderin( 'ow to 'andle a lo&&.

#!+ $!M#a+ - 8%!#a-+ 3artner& are to e reimur&ed t'eir contriution. T'at i& an e5pen&e o**(ro&& re4enue& e*ore computin( pro*it


11/31

Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE+ HInterest in t$e partners$ip t$e partner,s s$are ! t$e pr!its an& s#rpl#s.

c+ Assign)ent ! partner,s interest $"J $@%0

#!+A&&i(nin( an intere&t to a 0d3 a&&i(nee doe& not di&&ol4e t'e partner&'ip.

#"+ T'e a&&i(nee 'a& a ri('t to recei4e t'e partner& &'are o* t'e pro*it&.

#0+A&&i(nee 'a& no ri('t in mana(ement nor a ri('t to in&pect oo1&.

#8+At di&&olution/ a&&i(nee 'a& a ri('t to t'e a&&i(nor partner& intere&t/ and ma) re;uire anaccount/ ut onl) *rom t'e date o* t'e la&t account a(reed to ) t'e partner&.

M. En& ! ter)#i* not e&tali&'ed in written a(reement+

a+ Situation& w'ere one partner 'a& put up t'e capital wit' t'e under&tandin( t'at it e reimur&ed*rom pro*it&/ court& 'a4e 'eld an implied term o* rea&onale len(t' to allow t'e partner&'ip toma1e t'e reimur&ement.

+ 'en a partner&'ip orrow& lar(e &um& wit' t'e under&tandin( t'at it will e repaid *rompartner&'ip earnin(&/ t'en court& ma) 'old t'at t'e partner&'ip i& ound to a term rea&onale toma1e t'e repa)ment.

c+ >owe4er/ 6u&t ecau&e a partner&'ip i& unpro*itale doe& not/ in it&el*/ ind t'e partner& tocontinue t'e partner&'ip until all lo&&e& 'a4e een reco4ered.

d+ A partner at will i& not ound to remain in a partner&'ip/ w'et'er pro*itale or unpro*itale.>owe4er/ a partner ma) not

#!+ Di&&ol4e a partner&'ip to (ain t'e u&ine&& *or 'im&el* unle&& 'e *ull) compen&ate& t'eot'er partner&.

#"+ T'i& i& part o* 'i& *iduciar) dut).

D. Diss!l#ti!n

!. 2'an(e in le(al relation&'ip cau&ed ) an) partner cea&in( to e a&&ociated in t'e carr)in( on o*t'e u&ine&&. $"K -

". NOT relate& t! cl!sing &!*n ! t$e '#siness !r &isp!siti!n ! assets .

0. 3artner& alwa)& 'a4e9

a+ T'e 3OER to cau&e di&&olution/ BUT

+ ,a) not 'a4e t'e le(al ri('t #i.e./ t'e) ma) 'a4e liailit) in law or e;uit)+.

SUARY O" DISSOLUTION SCENARIOS

!. Diss!l#ti!n NOT in 0i!lati!n ! Partners$ip Agree)ent

a+ N!ne ! t$e !r)er partners *is$ t! c!ntin#e t$e '#siness

#!+ 3artner&'ip i& di&&ol4ed ut not terminated9 *irm continue& until t'e windin( up o*partner&'ip a**air& i& completed. $0% - $M%"#a+

#"+ Ri('t to wind up elon(& to &ur4i4in( partner& i* di&&olution re&ult& *rom deat'. $0J

#0+ Eac' partner 'a& ri('t to 'a4e partner&'ip propert) applied to di&c'ar(e liailitie&/ i.e./ to*orce &ale o* partner&'ip a&&et&. $0M#!+

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12/31


#8+ Unle&& a(reement &tate& ot'erwi&e/ t'ird part) creditor& are paid *rom t'e a&&et& w'ic'include partner&'ip propert) and contriution& *rom t'e partner& a& nece&&ar) to ma1e upt'e di**erence. $8%

a+ One !r )!re partners *is$ t! c!ntin#e '#siness

#!+ Ri('t to continue

#a+ 2ontinuation i& at t'e con&ent o* t'e retirin( partner or decea&ed partner&repre&entati4e. T'i& con&ent i& an a&&i(nment o* partner&'ip propert) ri('t&.

#+ I* t'e retirin( partner doe& not con&ent and t'e u&ine&& continue&/ t'en t'e continuationi& wron(*ul. it'drawin( partner can *orce li;uidation/ and i& due a &'are o* t'e pro*it&(enerated.

#"+ Retirin( or decea&ed partner ecome& a creditor wit' $$8%-8"

#a+An immediate claim on t'e 4alue o* 'i& intere&t in t'e partner&'ip #i.e./ pro*it& plu&&urplu&+/ OR

#+A continuin( &tream o* income a&ed on t'e pro*it& *rom u&e o* 'i& ri('t in t'e propert)o* t'e di&&ol4ed partner&'ip *or w'ate4er term &peci*ied. At end o* term/ 'e 'a& a claim*or return o* a&&et& attriutale to 'i& net &'are o* t'e partner&'ip propert).

!. 3r!ng#l &iss!l#ti!n in c!ntra0enti!n ! t$e partners$ip agree)ent

a+ Aggrie0e& partners &! n!t *is$ t! c!ntin#e '#siness

#!+A((rie4ed partner& 'a4e ri('t to wind up u&ine&& and to e5clude *rom t'e proce&& t'epartner#&+ w'o wron(*ull) cau&ed t'e di&&olution.$0J

#"+ Eac' o* t'e a((rie4ed partner& 'a4e ri('t to 'a4e partner&'ip propert) applied to di&c'ar(e0d3 liailitie& and to di&triute &urplu&. $0M#"+#a+.

#0+ I* di&&olution re&ulted in dama(e&/ a((rie4ed partner& 'a4e a cau&e o* action a(ain&tpartner#&+ cau&in( wron(*ul di&&olution.

#8+ 2laim& o* partner& cau&in( wron(*ul di&&olution are/ t'ere*ore/ di&counted ) t'eir dama(eliailit) *rom reac' o* a(reement.

#@+ Unle&& a(reement &tate& ot'erwi&e/ t'ird part) creditor& are paid *rom t'e a&&et& w'ic'include partner&'ip propert) and contriution& *rom t'e partner& a& nece&&ar) to ma1e up

t'e di**erence. $8%

+ Aggrie0e& partners *is$ t! c!ntin#e '#siness

#!+A((rie4ed partner& 'a4e a cau&e o* action a(ain&t t'e partner#&+ cau&in( wron(*uldi&&olution.

#"+A((rie4ed partner& 'a4e ri('t o* dominion o4er partner&'ip propert) #i.e./ wron(*ulpartner#&+ cannot *orce it& li;uidation+/ BUT

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#a+A((rie4ed partner& mu&t eit'er #E4aluation ) a(reement o* t'e partner& - ) w'ate4ermet'od t'e) a(ree to - or ) court order on *air rea&onale 4alue #mar1et 4alue+ #notoo1 4alue+.

#i+ 3a) t'e departin( partner#&+ t'eir partner&'ip intere&t #$"C+ le&& dama(e& plu&intere&t *rom date o* di&&olution/ or

#ii+ Secure court-appro4ed ond to en&ure pa)ment #in w'ic' ca&e 'e i& due intere&ton t'e unpaid pro*it& and &urplu& per $8"+.

#+ Indemni*) t'e wron(*ul partner a(ain&t pre&ent and *uture partner&'ip liailitie&.

#0+ Ri('t o* dominion ) a((rie4ed partner& la&t& *or alance o* t'e term o* t'e partner&'ip #&etterm or ta&1+. P'at i* partner&'ip at willQ

#8+At end o* term/ wron(*ul partner will reco4er 'i& &'are o* partner&'ip propert)/ contriution&/etc. $8%

E. E( partners 'ec!)e cre&it!rs.

!. Durin( t'e time t'e) are partner&/ unlimited liailit).". E5partner&/ no liailit).

F. 8OINT 6ENTURE

A partner&'ip created *or a &peci*ic ta&19 'ence/ 8!int 6ent#re 9 partners$ip !r i)plie& ter).

III. LIITED PARTNERS4IPS

A. A (eneral partner&'ip wit' addition o* one or more limited partner&.

B. Doe& not come into e5i&tence until t'e mandator) &tatutor) re;uirement& 'a4e een met #*ilin(certi*icate&/ u&uall) wit' recorder o* deed& #!K!C+ or &ec o* &tate #!KJC++. Filin( i& a conditionprecedent to creation.

2. Un1nown at common law9 e5clu&i4el) a creature o* &tatute.

D. T'ree a&ic principle& o* modern L3

!. 3otential liailit) o* limited partner& *or ta1in( part in control o* u&ine&& mu&t e re&tricted to t'eamount t'e) 'a4e contriuted or a(reed to contriute.

". Limited partner& do not 'a4e t'e power to wit'draw durin( t'e a(reed term.

0. 2orporation& and ot'er limited liailit) entitie& mu&t e ale to &er4e a& t'e &ole (eneral partner.

E. Uni!r) Li)ite& Partners$ip Act UL3A #!K!C+

!. Ri('t&


14/31

Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE#@+ 3o&&e&& or a&&i(n partner&'ip propert) unle&& in t'e u&ine&& o* t'e partner&'ip.

#C+ 2ontinue u&ine&& upon deat' or incapacit) o* a (eneral partner/ unle&& t'e certi*icate &o&peci*ie&.

". Ri('t& o* a limited partner $!%

a+ Recei4e a &'are o* t'e pro*it& per $!@ !C

+ Same a& (eneral partner to#!+ >a4e oo1& 1ept at principal place o* u&ine&& and to in&pect.

#"+ Demand *ull in*ormation o* t'in(& a**ectin( t'e partner&'ip and an accountin(.

#0+ >a4e di&&olution and windin( up ) court decree.

F. Same per&on can e (eneral and limited partner &imultaneou&l). $!"

G. Re0ise& Uni!r) Li)ite& Partners$ip Act ! ;? A)en&)ents RUL3A #!KJC+

!. Liailit) to t'ird partie& $0%0

a+ General partner& o* an L3 are liale *or L3 oli(ation&.

+ Limited partner i& NOT liale *or t'e oli(ation& o* an L3/ UNLESS 'e participate& in t'e controlo* t'e u&ine&&. #>a4in( t'e ri('t to participate written into t'e A(reement doe& NOT con&tituteparticipation in mana(ement unle&& t'e limited partner e5erci&e& t'at ri('t.

c+ I* t'e limited partner doe& participate in t'e control o* t'e u&ine&&/ 'e i& liale on to per&on&w'o tran&act u&ine&& wit' t'e L3 rea&onal) elie4in( t'e limited partner wa& a (eneralpartner due to t'e limited partner& conduct.

d+ Action& o* a limited partner t'at do not con&titute Hcontrol o* u&ine&&.

#!+ Ser4in( a& a contractor/ a(ent/ or emplo)ee o* t'e L3 or o* a (eneral partner/ or ein( ano**icer/ director/ or &'are'older o* a (eneral partner w'o i& a corporation.

#"+ 2on&ultin( wit' or ad4i&in( a (eneral partner in t'e runnin( o* t'e u&ine&&.

#0+A&&umin( one or more &peci*ic oli(ation& o* t'e L3

#8+ Re;ue&tin( or attendin( partner&'ip meetin(&.

#@+ Ta1in( action re;uired or permitted ) law to pur&ue a deri4ati4e action in t'e ri('t o* t'epartner&'ip.

#C+ 3ropo&in(/ appro4in(/ or di&appro4in( ) 4otin( on 4ariou& u&ine&& i&&ue&.

#J+ indin( up t'e L3

". General 3artner& 'a4e t'e power to wit'draw at an) time ) (i4in( written notice to t'e ot'erpartner&. 'et'er t'e (eneral partner 'a& t'e ri('t to wit'draw wit'out incurrin( dama(e liailit) i&

determined ) t'e pro4i&ion& o* t'e A(reement. $C%"0. Limited 3artner& DO NOT 'a4e t'e power to wit'draw or cau&e di&&olution at an) time durin( t'e

term o* t'e partner&'ip. $C%0

a+ ,a) wit'draw at time& or e4ent& &peci*ied in t'e A(reement.

+ I* not &peci*ied in t'e A(reement/ t'e) ma) wit'draw upon C-mont'& notice.

c+ 'ile a limited partner ma) e allowed to &ell 'i& intere&t to a 0d3/ 'i& capital in4e&ted remain&in t'e L3 *or t'e *ull term.

>. Dierences in t$e ;= an& ;;< ULPA

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE!. Filin(&

a+ Good *ait' re;uirement in *ilin( certi*icate

#!+ !K!C included

#"+ !KKJ none

+ Detail& o* limited partner& liailit)

#!+ !K!C re;uire& it to e complete &pelled out in *ilin(

#"+ !KJC doe& not

c+ 3rotection created ) t'e ao4e

#!+ !K!C i& con&tructed to protect a 0d3 *rom t'e out&ide loo1in( in.

#"+ !KJC i& con&tructed to protect t'e limited partner.

#0+ T'e *ilin( protect& t'e 0d39 t'e A(reement deal& wit' t'e relation&'ip amon( t'e G3& andL3&.

I. LP *it$ a C!rp!rate General Partner

!. 2orporate partner under t'e control o* ot'er& #a& oppo&ed to a indi4idual (eneral partner+.Deci&ion-ma1er in t'e corporation ma) e un1nown to t'e limited partner&. On w'om doe& t'e*iduciar) land

". Indi4idual partner& ma) e re&tricted *rom tran&*errin( partner&'ip intere&t&/ ut a corporation ma)e purc'a&ed or &old wit'out c'an(in( t'e corporate entit) w'ic' i& t'e (eneral partner.

0. T'e corporate (eneral partner ma) 'a4e *ew a&&et&. Breac' o* *iduciar) ma) lea4e t'e limitedpartner& wit' little ailit) to reco4er.

8. E4en i* initiall) capitali:ed/ corporate a&&et& ma) e depleted wit'out con&ent o* t'e limitedpartner&9 'ence/ t'e &ituation o* 0 ao4e.

@. 2on*lict o* *iduciar) intere&t&.

a+ O**icer& and director& o* corporation owe *iduciar) to &'are'older&.

+ 2orporation a& (eneral partner owe& *iduciar) to t'e limited partner&.

C. La* c!nsi&ers t$e c!rp!rate general partner t! 'e a tr#stee ! t$e LP

a+ Oicer,s an& Direct!r,s iciar% e(ten& t! t$e 'eneiciaries ! t$e tr#st7 i.e. t! t$e li)ite&partners.

J. Sale o* control o* t'e corporate (eneral partner.

a+ 2orporation owe& t'e limited partner& t'e &ame dutie& a& i* t'e) were minorit) &'are'older& int'e corporation.

+ 2ourt mu&t t'ere*ore loo1 at t'e &ale o* control and t'e intent o* t'o&e ac;uirin( control *or t'eintere&t& o* t'e limited partner&.

. aster Li)ite& Partners$ips

!. Lar(e partner&'ip& w'o&e owner&'ip intere&t& are *re;uentl) traded.

". IRS will treat an ,3 a& a ta5ale a&&ociation i* it more clo&el) re&emle& a corporation t'an apartner&'ip.

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE0. I* t'e ,3 pro4ide& t'at t'e partner&'ip i& di&&ol4ed upon t'e deat' or an1ruptc) o* t'e (eneral

partner/ t'en t'at de&tro)& t'e continuit) o* li*e e&&ential to a corporation and preclude& corporate-li1e ta5ation.

. @C$ec/ t$e B!( Reg#lati!ns.

!. Allow& unincorporated u&ine&&e& to elect to e ta5ed under Suc'apter / Suc'apter S/ orSuc'apter 2 wit'out re(ard to t'e t)pe o* unincorporated u&ine&& *orm &elected.

". I* t'e entit) i& created under a &tatute t'at de&crie& or re*er& to t'e entit) a& a corporation/incorporated/ od) corporate/ od) politic/ 6oint-&toc1 compan)/ or 6oint-&toc1 a&&ociation/ t'en itwill e ta5ed a& a corporation under Su 2 or Su S #i* ;uali*ie&+.

0. I* entit) not cla&&i*ied a& a corporation and 'a& at lea&t two memer& can elect 'ow to e ta5ed att'e time o* *ilin( it& *ir&t ta5 return. I* it doe& not elect a corporate ta5 &tatu&/ it will e ta5ed a& apartner&'ip.

8. I* entit) 'a& onl) one memer/ it ma) elect to e ta5ed a& a corporation9 ot'erwi&e/ it i& not ta5ed&eparate *rom it& owner.

@. 2annot c'an(e cla&&i*ication& *or *i4e )ear&.

L. >)po H,ore Re((ae Sea*ood

!. Fact&

a+ ER decide& to &et up a limited partner&'ip.

+ ,N #attorne)+ draw& up a detailed L3 a(reement.

c+ Two more limited partner& #Fiona Fudruc1er and Ton) Bland+ 6oin wit' liailit) &et at ?!%%eac'.

d+ Need at lea&t on (eneral partner F 6oin& a& t'e (eneral partner.

e+ All &i(n A(reement.

*+ ,N ne4er *iled t'e re;uired &tate certi*icate

". Limited partner& lea4e on a trip9 t'e (eneral partner operate& t'e u&ine&& and run& up ?"/@ mil indet& wit' Utopia Sea*ood.

0. Since t'e certi*icate wa& ne4er &i(ned/ a limited partner&'ip NEER e5i&ted. >owe4er/ t'ea(reement and t'eir action& con*irm t'e) entered a partner&'ip. Utopia can &ue one or all a&(eneral partner&.

8. To a4oid trial/ ER paid t'e entire ?".@ mil. S'e can now &ue t'e ot'er partner& *or t'eir &'are pert'e A(reement. Alt'ou(' t'e L3 wa& ne4er *ormed #due to *ailure to *ile+/ t'e A(reement &tillcon&titute& a contract to w'ic' t'e) all a(reed.

,. Disciplining t$e General Partner

!. Relation&'ip o* t'e (eneral to limited partner& 'a& t'ree *actor&a+ ,andator) &ettlement impo&ed ) &tatute

+ Term& o* &peci*ic partner&'ip a(reement

c+ *iduciar) &tandard

". 3ower not &peci*icall) dele(ated in t'e A(reement i& Hwit''eld.

0. G3 owe& a *iduciar) to t'e limited partner&9 'a& a dut) o* utmo&t (ood *ait'/ *airne&& and lo)alt) notunli1e corporate director&.

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE8. A G3 cannot e 'eld liale *or mi&ta1e& made or lo&&e& incurred in t'e (ood *ait' e5erci&e o*

rea&onale u&ine&& 6ud(ment.

@. Limited partner ma) not rin( &uit *or 'im&el* and in 'i& own ri('t on a cau&e o* action elon(in( tot'e L3.

C. RUL3A allow& a deri4ati4e action ) a limited partner.

J. For a (eneral partner& reac' o* *iduciar)/ A limited partner& remed) i& at a minimum/ t'e reco4er)

o* 'i& contriution/ ut i& not re&tricted to t'at.

N. General Partner a C!rp!rati!n !*ne& '% t$e Li)ite& Partners

!. rin1le to allow ltd partner& to e5erci&e control ut retain t'eir liailit) protection.

". B) U3LA !KJC $ 0%0#+#!+/ Limited partner doe& n!t(i4e up liailit) protection ) &er4in( a& a&'are'older/ director/ o**icer/ emplo)ee o* t'e G3 corporation.

0. Not all 6uri&diction& *ollow $ 0%0 on t'i&. I* G3 corporation *ormed *or t'e &ole purpo&e o* allowin(limited partner& to mana(e t'e L3/ &ome 6uri&diction& #e.(./ T+ will nonet'ele&& drop t'e indi4iduallimited partner&3O

a+ ,. Noot/ E. Ri()/ and . Fit:(erald *ormed UB 2orp to run t'e limited partner&'ip&. T'e)are t'e &ole &'are'older& and o**icer&


18/31

Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE". Eac' partner retain& liailit) *or 'i& own pro*e&&ional wor1/ ut not *or t'e pro*e&&ional wor1 o* t'e

ot'er&.

0. All partner& 'a4e unlimited liailit) *or t'e (eneral partner&'ip det&.

8. E.(./ t'e partner& all &'are 6oint and &e4eral unlimited liailit) *or an unpaid o**ice &uppl) &tore ill/ut eac' retain& 'i& own unlimited liailit) *or 'i& own pro*e&&ional wor1..

2. Li)ite& Lia'ilit% C!)pan%

!. Uninc!rp!rate&entit) t'at pr!0i&es li)ite& lia'ilit%*or all it& memer& and i& ta(e& as apartners$ip.

". LL2& can adopt a mana(ement &tructure re&emlin( a corporation or L3.

a+ ,ana(er& can ma1e deci&ion& indin( t'e LL2.

+ ,a) adopt Hc'ec1 t'e o5 ta5ation li1e a partner&'ip or S corp

0. ,o&t &tate& allow &in(le-memer LL2& #S,LL2+.

8. 2orporate 4eil piercin( principle& (enerall) pertain to LL2&.

@. 2ourt& wre&tle wit' &tatu&

a+ >a4e 'eld t'at LL2& are arti*icial entitie&/ not natural per&on& #li1e partner&'ip& are (enerall)con&idered+.

+ T'e liailit) limitation ma1e& LL2 4a&tl) di**erent *rom partner&'ip& w'en i&&ue& o*accountailit) come into pla).

6. "ORATION O" A CLOSELY 4ELD CORPORATION

A. 'ere to Incorporate

!. Anal)&i& o* co&t& 4er&u& ad4anta(e&.

". I* u&ine&& to e lar(el) conducted in a &in(le &tate/ t'en incorporation t'ere i& pre*erred.

0. Article& o* incorporation are deli4ered to t'e &ec o* &tate.a+ ,inimal mandator) pro4i&ion& ".%"#a+.

+ 2an &et *ort' more detail e.(./ can limit purpo&e o* t'e corp.

8. 2orporation

a+ come& into e5i&tence w'en article& are *iled.

+ 2orporation i& a per&on. Born w'en &ec &tate *ile& article&.

c+ Once orn/ t'en corp cannot *unction until it 'a& Director& #!%% o* corporate power& &'all ee5erci&ed ) or under t'e Board+.

#!+Article& o* incorporation are analo(ou& to t'e 2on&titution o* USA.#"+ Incorporator& elect t'e initial oard i* not &peci*ied in t'e Article& o* Incorporation.

d+ 2an en(a(e in an) law*ul operation #unle&& limited ) Article&+

e+ ,odel Bu&ine&& 2orp Act i& an empowerin( Act.

@. O**icer&

a+ Need &ecretar) immediatel)9 mu&t 1eep minute& o* or(ani:ational meetin(.

C. B)-Law&

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINEa+ Su&er4ient to t'e Article& o* Incorporation.

B. Ultra 6ires Out&ide t'e &cope o* t'e Article& o* Incorporation.

!. alidit) o* corporate action ma) not e c'allen(ed ) 0d3 on t'e (round& o* ultra 4ire&. 0d3 ma)rel) on action& wit' t'e corp.

". alidit) ma) e c'allen(ed )

a+ S'are'older a(ain&t t'e corp *or in6unction a(ain&t t'e act.,u&t mo4e wit' &peed ecau&e e;uitale remed) i& di&cretionar)9 can loo&e it.

a+ B) t'e corp #directl) or deri4ati4el)+ a(ain&t director&.

". T'e corp ,A do t'o&e t'in(& under 0.%" unle&& &peci*icall) denied in t'e Article& o* Incorporation.#e.(. ma1in( c'aritale contriution.+

2. Pre)at#re c!))ence)ent ! '#siness

!. 3romoter

a+ 3er&on actin( alone or in concert wit' ot'er& re&pon&ile *or or(ani:in( and *oundin( t'eu&ine&&.

+ 3romoter& 'a4e *iduciar) dut) to ot'er participant&.

c+ >i(' dut) o* (ood *ait' and *ran1 di&clo&ure.

". 3romoter& liailit)

a+ 2an e 'eld per&onall) liale *or tran&action& prior to corporate creation.

+ E5ception i& i* 0d3 a(ree& to loo1 to corp and not t'e promoter&.

0. 2orporation ma) rin( &uit a(ain&t t'e promoter.

a+ 2orp t'en under control o* &u&e;uent in4e&tor&.

+ But mu&t &'ow t'at promoter#&+ reac'ed a *iduciar) to t'e t'en &'are'older&. Immaterial t'atlater in4e&tor& are added9 te&t i& t'e *iduciar) t'at e5i&ted at t'e time.

c+ BUT/ i* t'e promoter& in4ite t'e pulic to u) in/ t'e) &till ma) e liale *or Hwron(& a(ain&t t'ecorp.

8. 'en promoter ma1e& an a(reement wit' 0d3 on e'al* o* a corp )et to e *ormed/ intent o* partie&ma) e one o* t'e *ollowin( alternati4e&

a+ 0dp i& ma1in( a re4ocale o**er to t'e none5i&tent corp w'ic' will re&ult in a contract IF #andonl) i*+ t'e corp i& *ormed and accept& t'e o**er.

+ 0d3 i& ma1in( a re4ocale o**er *or a limited time. 2on&ideration to 1eep t'e o**er open i& t'epromi&e o* t'e promoter to or(ani:e t'e corp and u&e 'i& e&t e**ort& to cau&e corp to accept.

c+ 0d3 and promoter enter a pre&ent contract wit' a(reement t'at promoter& liailit) terminate& IFt'e corp *ormed and mani*e&t& willin(ne&& to ecome a part). #2orp i& not rati*)in( ecau&e itdid not e5i&t w'en a(reement made.+

d+ 0d3 and promoter enter a pre&ent contract in w'ic' promoter& liailit) continue& e4en i* t'ecorp i& *ormed9 ma) e primaril) or a &uret) *or t'e corp& per*ormance o* oli(ation.

@. 3rior en(a(ement&9

a+ Once *ormed/ corp& are NOT ound ) t'e en(a(ement& made on it& e'al* ) t'e promoter&e*ore it& inception.

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE+ 2orp ,A ma1e t'o&e en(a(ement& it& own contract&/ and t'at it doe& a& it would an) ot'er

contract.

c+ A& wit' ot'er contract&/ acceptance ma) e e5pre&& or ma) e in*erred *rom act& or conduct o*t'e corp.

d+ Adoption o* prior en(a(ement& ) t'e corp i& NOT rati*ication9 t'e corp did not e5i&t at t'e timeo* t'e ori(inal pre-corp a(reement wit' t'e promoter.

C. Newl) *ormed corp cannot decide NOT to pa) t'e attorne) w'o 'andled t'e *ilin(. Li1e a a)decidin( not to pa) t'e doctor w'o deli4ered

D. Deecti0e Inc!rp!rati!n

!. Dela)ed corp

a+ Bu&ine&& e(in& to operate9 Incorporation Article& *iled/ re6ected/ later appro4ed.

+ 'o i& re&pon&ile *or oli(ation& made durin( t'e interim period

". 2orporation& onl) come into e5i&tence w'en t'e certi*icate 'a& een i&&ued.

a+ T'e certi*icate i& t'e cuto** point no corp e*ore9 corp a*ter.

+ Older concept&

#!+A de factocorpe5i&t& e*ore t'e certi*icate i&&ued ut a*ter t'e time w'en it wa& elie4edt'e corp came into e5i&tence. #e.(./ t'ou('t t'e) 'ad *iled t'e document&/ ut t'e attorne)*or(ot.+

#"+ Once certi*icate i&&ued/ de jurecorporation created.

#0+ E&toppel 3er&on& w'o 'a& dealt wit' t'e a&&ociation in a manner t'at ac1nowled(e& it&e5i&tence a& a corporation i& e&topped *rom t'en attemptin( to 'old an a&&ociation o**icerper&onall) liale..

0. I in&i0ials ass#)e t! act as a c!rp!rati!n 'e!re t$e certiicate ! inc!rp!rati!n $as 'eeniss#e&75!int an& se0eral lia'ilit% attac$es.

6I. PIERCING T4E CORPORATE 6EIL

A. C!))!n La*

!. In&icia !r 0eil piercing #No one alone i& li1el) &u**icient+

a+ Fraud or deceit.

+ Failure to o&er4e corporate *ormalitie&/ includin( t'e *inance&

#!+ Undercapitali:ation.

#"+ Non-pa)ment o* di4idend&.

#0+ Sip'onin( o* *und& to t'e dominant &'are'older.#8+ Lac1 o* corporate record&.

c+ Ille(al act&. #T'rou(' &tate& attorne) (eneral&+

d+ Su&tantial owner&'ip o* 4a&t ma6orit) o* &toc1 ) one indi4idual #Alter eg! &!ctrine+. Al&o1now a& Hin&trumentalit)/ i.e./ t'e corp i& u&ed a& an in&trumentalit) to conduct t'e dominantowner& u&ine&&.

e+ Dominant control o* corporation ) dominant &'are'older9 non-*unctionin( o**icer&.

". Factor& t'at are not indicia

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINEa+ 3er&onal (uarantee& ) &'are'older& o* corporate loan&. #2ontractual matter onl)+

+ I* t'ere are &e4eral &'are'older&/ and onl) one 'a& appropriated corporate *und& *or per&onalu&e/ t'en court will NOT pierce 4eil/ ut onl) re;uire t'e one to repa).

0. In (eneral/ piercin( law& o* &tate o* incorporation control.

8. Su&idiar) companie&

a+ Director&/ o**icer&/ emplo)ee& o* parent corp can &'are wit' &u&idiar) wit'out ri&1in( piercin(t'e 4eil.

+ Te&t i& a realit) te&t7 'ow did t'e) actuall) operate.

c+

B. "e&eral1State

!. Fed court loo1& to w'ic' &tate law *or 4eil piercin( State o* incorporation.

2. Re4er&e 3iercin(

6II.S4ARE4OLDER 6OTING AND AGREEENTS

A. Election In&pector

!. Appointed ) t'e c'airman o* t'e &toc1'older& meetin(.

". >a& di&cretionar) aut'orit) to ma1e a preliminar) determination on 4alidit) o* pro5ie& *or purpo&e o*taulatin(/ countin(/ and certi*)in( t'e re&ult&/ ut mu&t &ta) wit'in t'e corporate record& to do &o.

0. Eli(iilit) to 4ote &'are&/ i* &o &tated in ) law&/ i& determined ) t'e corporate oo1&/ and t'e4alidit) o* &'are'older election& cannot e later o4erturned ) di&pute o* ene*icial owner&'ip o*unre(i&tered &'are&.

B. Registere& !ice O**ice in &tate o* incorporation. Record o* &'are'older& mu&t e maintained 'ere.

2. S$are$!l&er T

!. T'e record owner or ene*icial owner to t'e e5tent (i4en ri('t&.". ,a) e an indi4idual or corporate per&on.

D. Rec!r& O*ner ! s$ares 3er&on in w'o&e name t'e &'are& are re(i&tered in t'e corporate oo1&.

E. Beneicial !*ners$ip

!. Actual owner o* t'e &'are&

". 2an *orce record owner

a+ To i&&ue ene*icial owner 4otin( pro5).

+ To turn o4er an) di&triution& *orm t'e compan).

c+ To re-re(i&ter &'are& in name o* ene*icial owner.

0. Bene*icial owner ma) not e allowed to 4ote i* pro5) 'a& not een otained *rom record owner.

F. S$are$!l&ers eetings

!. ,andator) #re(ular+ meetin( at lea&t annuall). - Notice re;uired.

". Special meetin(& called ) Board or !% o* &'are'older& are mandator).

a+ Notice re;uired

+ Stated purpo&e re;uired

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE0. 2ourt ordered meetin(&.

G. B!ar& eetings

!. Re(ular meetin(& No notice re;uired unle&& Article& or )law& &tate ot'erwi&e.

". Special ,eetin(

a+ Notice re;uired #" da)& ad4ance+

+ No purpo&e need e &peci*ied.

>. Tru&tee

!. 2ompan) ! in an1ruptc)9 tru&tee appointed ) court order.

". 2ompan) ! a &'are'older in compan) ".

0. Tru&tee 'a& power to attend #or appoint a &urro(ate to attend+ &'are'older meetin( o* compan) "/in (eneral.

I. Article& o* Incorporation &uper&ede t'e B)-Law&

. S$are$!l&ers Electi!n ! B!ar&

!. Straig$t 6!ting

a+ S'are'older ma) 4ote 'i& numer o* &'are& *or eac' Director candidate. >ence/ t'e ma5imumnumer o* 4ote& ca&t *or eac' candidate i& t'e numer o* &'are&.

+ 3lace& total controllin( power in t'e 'and& o* t'e ma6orit) &'are'older&.

c+ E5ample

#!+ Two &'are'older&/ A!M &'are&9 BM" &'are&

#"+ Fi4e Director& to e elected9 A and B dont a(ree on an) candidate.

#0+A 4ote& !M &'are& *or A& *i4e candidate&9 B 4ote& M" &'are& *or B& *i4e candidate&. All o*B& candidate& win &eat& on t'e Board.

". C#)#lati0e 6!ting

a+ S'are'older& are allowed a total numer o* 4ote& e;ual to t'eir &'are& time& t'e numer o*candidate& *or w'ic' t'e) ma) 4ote.

+ S'are'older ma) t'en di&triute t'eir 4ote& a& t'e) wi&'.

c+ Allow& minorit) &'are'older& to (ain &ome Board repre&entation.

d+ E5ample

#!+ Two &'are'older&/ A!M &'are&9 BM" &'are&

#"+ Fi4e Director& to e elected9 A and B dont a(ree on an) candidate.

#0+A i& allowed @ 5 !M K% 4ote&9 B i& allowed @ 5 M" 8!% 4ote&.

#8+ I* A 4ote& all 'i& K% *or candidate A#!+/ t'en B can onl) capture *our o* t'e Director po&ition&9B#"+ t'rou(' B#@+.

0. Tric1) otin(

a+ I* a ma6orit) &'are'older 4ote& H&trai('t and a minorit) 4ote& cumulati4e/ it i& po&&ile *or t'eminorit) to (ain control o* t'e Board.

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE+ 2on4er&el)/ i* t'e ma6orit) out-*lan1& t'e minorit) in cumulati4e 4otin(/ t'e) can H&teal &ome o*

t'e Director& t'at t'e minorit) could 'a4e 'ad.

8. Formula - minimum cumulati4e 4ote& nece&&ar) to elect a Director

a+ S


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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE+ Go4ern t'e aut'ori:ation to ma1e *inancial di&triution&.

c+ Tran&*er& corporate mana(ement power& to one or more &'are'older&.

d+ Set rule& *or tran&*er o* propert) etween corp and o**icer&


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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE8. Deadloc1 in Board AND irreparale dama(e to corporation. #or ma)e deadloc1 in &'are'older& to

elect oard+

6III. ANAGEENT AND CONTROL

A. Sui Generi& T'eor)

!. Director& are not a(ent&/

". T'e) are *iduciarie& w'o&e dutie& run to t'e corporation.0. But t'eir relation& to t'e corp i& &ui (eneri& #uni;ue+ &ince t'e) are not tru&tee&.

8. Sui Generi&Uni;ue. In a cla&& ) it&el*.

B. ,B2A J.0" allow& &'are'older& to create a(reement& t'at

!. Limit t'e power& o* t'e Board

". Eliminate t'e Board

0. Aut'ori:e& di&triution&

8. E&tali&'e& w'o &'all e director& and *or 'ow lon(.

@. E&tali&' di4i&ion o* 4otin( power amon( &'are'older& and Board.

C. Tran&*er& mana(ement to one or more &'are'older.

2. A&ent a(reement under J.0"/ t'e B!ar& )anages t$e c!rp!rati!n.

!. O**icer& 'a4e no in'erent aut'orit). #,B2A de*ine& &ecretar)& dut) to certi*) Board re&olution&.+

". O**icer& 'a4e onl) t'e aut'orit) 4e&ted upon t'em ) t'e Board.

0. Becau&e o**icer& (enerall) do 'a4e contract aut'orit)/ 0d3 ma) rel) on apparent aut'orit) wit' t'ecorporation w'o i& t'en e&topped to den).

8. Under ,B2A 3re&ident 'a& aut'orit) to ind compan) ) act& ari&in( out o* #s#al an& reg#larc!#rse ! '#siness.

@. A ma6orit) &'are'older 'a& a *iduciar) oli(ation to t'e corp #e4en i* not a director+.

I. STANDARDS O" CONDUCT

A. Direct!rs

!. Dut)

a+ Be&t intere&t o* t'e corporation.

+ Act in (ood *ait'.

c+ Act in e&t intere&t o* corp to Director& rea&onale elie*.

". Standard o* care i& t'at o* a per&on in li1e po&ition under &imilar circum&tance&.

0. Direct entitled to rel) *or in*ormation on

a+ O**icer& or emplo)ee&

+ Le(al coun&el/ 23A& etc.

c+ 2ommittee& o* t'e Board.

8. Liailit)

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINEa+ Not liale *or action& or *ailure to act unle&& c'ar(in( part) can &'ow

#!+ Liailit) not precluded ) Article&

#"+ Breac'e& dut)

#0+ Lac1 o* o6ecti4it)

#8+ Su&tained *ailure to de4ote attention to u&ine&&.

#@+ Unwarranted *inancial ene*it.

@. A director actin( alone 'a& no particular aut'orit) and cannot e5tend apparent aut'orit) a& t'eprincipal.

C. B#siness 8#&g)ent R#le

a+ A& lon( a director& act in (ood *ait' and due care in term& o* t'e proce&& t'e) *ollow to ma1edeci&ion&/ t'e) will incur no liailit) e4en i* t'eir deci&ion wa& not t'at o* t'e ordinar) prudentper&on.

+ No matter 'ow wron( a 6ur) or 6ud(e elie4e& a deci&ion ma) 'a4e een/ t'ere are no (round&*or liailit) i* t'e deci&ion-ma1in( proce&& wa& rational and in (ood *ait'.

J. Lia'ilit% !r ail#re t! )!nit!r c!rp!rati!ns acti0ities

a+ A&ent cau&e *or &u&picion/ t'ere i& no dut) *or director& to *erret out wron(doin( w'ic' t'e)'a4e no rea&on to &u&pect e5i&t&.

+ Director& do need to e attenti4e and 'a4e &)&tem& in place t'at pro4ide rea&onale reportin(&o t'at t'e) can &ta) in*ormed9 t'at i& part o* t'eir dut).

c+ Inattenti4ene&& t'at allow& rampant deceit and imprudence ) o**icer& or e4en ot'er director& i&/'owe4er/ (round& *or liailit).

M. D#t% t! Discl!se

a+ I* &'are'older action re;uired/ director& 'a4e *iduciar) dut) to di&clo&e &u&tanti4e material

in*ormation to t'e &'are'older&.+ Re(ardle&& o* pendin( &'are'older action/ director& reac' *iduciar) i* t'e) di&&eminate *al&e

in*ormation t'at 'arm& t'e corporation.

B. O**icer&

!. Secretar) de*ined in ,2BA a& t'e o**icer wit' power to certi*) t'e Board re&olution&.

". 3re&ident 'a& in'erent aut'orit) *or act& in u&ual cour&e o* u&ine&&. No power e;ui4alent toBoard. #In a &uit/ t'e 0d3 plainti** mu&t pro4e t'e action o* t'e pre&ident wa& wit'in t'e normalcour&e o* u&ine&&. ould e a&ed on t'e 'i&tor) o* prior tran&action& o* &imilar ma(nitude -cour&e o* dealin(&.+

. BOOFS AND RECORDS

A. ini)#) rec!r& re+#ire)ents

!. ,u&t /eeppermanent record& o* deci&ion& made ) director& and &'are'older&. $!C.%!#a+

". ,u&t )aintain appropriate accountin( record& #'ow lon( t'e) are 1ept and e5act nature aredictated ) rule& and procedure& out&ide t'e ,B2A.+ $!C.%!#+

0. ,u&t )aintainrecord& o* &'are'older&. $ !C.%"#c+

B. Inspecti!n ! rec!r&s

!. On principle/ 0d3 'a4e no ri('t& to in&pect corporate document&.3a(e "C o* 0!


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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE". ,u&t 1eep a cop) o* minute& o* deci&ion&/ Article&/ )law&/ recent annual report& #0 )r&+/ and li&t o*

director& at t'e principal o**ice.

0. ,u&t e routinel) a4ailale to an) &'are'older durin( normal u&ine&& 'our&.

8. S$are$!l&er )a% inspect acc!#nting rec!r&s !nl% i

a+ Demand i& in (ood *ait' *or a proper purpo&e.

+ De&crie& in particularit) t'e purpo&e and t'e record& de&ired.c+ T'e record& re;ue&ted relate to t'e purpo&e &tated.

@. "!r p#rp!ses ! rec!r&s inspecti!n7 a s$are$!l&er is

a+ Bene*icial owner i* &'are& 'eld in a 4otin( tru&t or 'eld ) a nominee. #!C.%"#*++

+ Bene*icial owner to e5tent o* ri('t& (ranted ) a nominee certi*icate on *ile wit' corporation#!.8%#""++

c+ >older& in H&treet or *ictitiou& name& 7 ene*icial owner wit' a nominee.

d+ Ot'erwi&e/ record owner.

C. HG!!& ait$ I* t'e procedural demand i& met/ t'en urden to pro4e lac1 o* (ood *ait' &'i*t& to t'ecorporation.

J. HPr!per p#rp!se *or a &'are'older S'are'older& moti4ation i& 1e)

a+ aluation o* &'are'older& &'are& a proper purpo&e

+ aluation o* t'e &'are& o* ot'er& *or t'e purpo&e o* a u)out/ not proper purpo&e.

c+ S'are'older& primar) purpo&e i& critical9 determinin( t'e 4aluation o* t'e &'are'older& &toc1ma) al&o re&ult in determinin( t'e corporation 4aluation a& a w'ole.

d+ For 6u&ti*ication/ &'are'older cannot &impl) ma1e an un*ounded alle(ation o*/ &a) /mi&mana(ement wit'out &ome credile e4idence. 'at i& credile e4idence A**ida4it o*

#!+ 3re&ident #or appropriate corp o**icer+#"+Accountant

M. S$are$!l&er lists

a+ Not a per &e ri('t o* a &'are'older to demand

+ ,u&t meet t'e (ood *ait' and proper purpo&e li&t.

c+ S'are& 'eld in *ictitiou& name& doe& a &'are'older 'a4e a ri('t to demand

#!+ NOBO #non-o6ectin( ene*icial owner&+ &'are'older in &treet name w'o do not o6ect todi&clo&ure o* t'eir name&.

#"+ Implie& t'at t'ere ma) e a (roup w'o DO o6ect.#0+ I* t'e corp doe& not 'a4e t'e li&t o* NOBO/ t'en it doe& not 'a4e to de4elop it *or a &in(le

&'are'older/ and not oli(ation to produce.

I. DERI6ATI6E SUITS

A. S$are$!l&ers

!. S'are'older i& rin(in( action in e'al* o* corporation/ not to protect 'i& particular intere&t&.

". S'are'older &tandin(

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINEa+ ,u&t e a &'are'older at time o* act t'at prompted t'e &uit.

+ 2an 'e dump 'i& &toc1 e*ore t'e deri4ati4e &uit completed Find an&wer #urden ma) pa&& totran&*eree o* &toc1+

0. S'are'older mu&t &'ow

a+ Ille(alit)

+ Fraudc+ Breac' o* *iduciar) dut).

B. T$e c!rp!rati!n

!. 2orporation ,UST e a part) #deri4ati4e i& in e'al* o* t'e corp.+

". Be*ore 2orporation ecome& a plainti** t'ere mu&t e a oard re&olution. T'ere*ore/ c!rp!rati!n'ec!)es a &een&antalon( wit' Board or o**icer&.

2. Initiall)

!. 2orp recei4e& demand letter/

". 2all& &pecial Board meetin( to deal wit' it.0. Generall) re6ect&

8. S'are'older t'en *ile& &uit.

D. Se;uence

!. S'are'older *ile& deri4ati4e &uit ma1in( a demand on t'e corp.

a+ I* t'ere i& no demand/ di&mi&&ed wit'out pre6udice.

+ I* t'ere i& a demand 7 2annot commence proceedin(

#!+ until a written demand (i4e to corp AND

#"+ K% da)& 'a4e e5pired wit'out corp re&pondin( to di&mi&&.

c+ S'are'older ma) proceed wit' &uit

#!+A(ain&t t'e Board indi4iduall) #&u&tanti4e de*endant&+ AND

#"+A(ain&t t'e corporation #not &u&tanti4e de*endant+

". Board will li1el) 4ote to di&mi&&.

a+ T'e Board& deci&ion i&/ o* cour&e/ t'e corporation& deci&ion.

+ ,otion to court to di&mi&&.

c+ Board acti4ate& t'e u&ine&& 6ud(ment rule to ud(e #BR+.

0. Burden now &'i*t& ac1 to &'are'older to &'ow one o* t'e BR element& 'a& not een met

a+ Fraud

+ Breac' o* *iduciar)

c+ Ille(alit)

8. Board appoint committee o* two or more

a+ 2'ar(e t'e committee to in4e&ti(ate t'e alle(ation

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE+ 2ommittee mu&t 'a4e

#!+ inte(rit)

#"+ u&ine&& e5perti&e

#0+ o6ecti4it)

#8+ independence

c+ I* t'at committee come& to a *indin( t'at t'e alle(ation 'a& no merit/ t'en t'e Board i& ol&tered

@. T'e court

a+ 2ourt ma) well accept an independent committee& *indin(& and di&mi&& t'e &uit #in &ome&tate&+.

+ OR court it&el* ma) ma1e it& own deci&ion on it& own u&ine&& 6ud(ment rule.

II.B!ar& Lia'ilit%:

A. Board memer liailit) *or ad deci&ion& at Board meetin(&

!. A H)e& 4ote carrie& liailit) to t'e indi4idual oard memer

". A Hno 4ote carrie& no liailit) &o lon( a& di&&ent &tatement in minute&.

0. An a&tention i* in t'e minute& i& not deemed appro4al BUT

a+ I* director participated and ac;uie&ced/ liailit) ma) attac'.

+ I* director i& &ilent/ liailit) ma) attac'.

c+ I* di&&ented/ liailit) will li1el) NOT attac'.

B. Dut) o* oard

!. ,u&t e in*ormed

". Rel) on independent e5pert& *or ad4ice.

2. 'ere director& dealin( directl) wit' &'are'older& #e.(./ &endin( out *inancial in*ormation to&'are'older&+

!. I* Hmaterial in*ormation #in*ormation a rea&onale &'are'older would con&ider important.+

". S'are'older& ma) &ue director& 7 &'are'older& are t'e in6ured partie&.

0. Award would (o directl) to t'e &'are'older&.

D. Board deci&ion& t'at put compan) out o* u&ine&& #e.(./ mer(er a(reement+

!. Former &'are'older& cannot rin( deri4ati4e &uit &ince t'e corp doe& not e5i&t.

". Former &'are'older& can &ue t'e *ormer director&.

E. B!ar& C!nlict ! Interest

!. 2on*lictin( Intere&t Director 1now& at t'e time o* commitment t'at 'e or related per&on 'a&ene*icial *inancial intere&t &o clo&el) lin1ed to tran&action t'at it would rea&onal) e5pect to e5ertin*luence on Director& 6ud(ment i* 'e were called upon to 4ote.

". I* tran&action i& underta1en ) a ma6orit) o* di&intere&ted director&/ wit'out participation and ur(in(o* intere&ted director/ or ) ma6orit) o* di&intere&ted &'are'older& action/ t'en court will not &et t'eaction a&ide.

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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINEF. Sel Dealing Action& o* t'e Board/ or t'rou(' a controlled &u&idiar)/ in w'ic' t'e Director& #or parent

compan)+ are on ot' &ide& o* t'e tran&action/ and t'e director& #parent+ ene*it& at t'e e5pen&e o* t'edi&intere&ted partie&.

!. Sel* dealin( tri((er& t'e Hintrin&ic *airne&& rule I& t'e tran&action o6ecti4el) *air to all partie&.

". E4er)t'in( el&e tri((er& t'e Hu&ine&& 6ud(ment rule Director mu&t act in (ood *ait' and due care/e4en i* deci&ion wa& not t'at o* an ordinar) prudent per&on.

G. Intrinsic "airness I& t'e tran&action o6ecti4el) *air to all partie& Greater urden to pro4e t'anu&ine&& 6ud(ment rule. In *act 'i('e&t te&t in corporate law.

>. 2our&e o* action

!. Action o* ma6orit) o* t'e Board tri((er& u&ine&& 6ud(ment rulepre&umpti4el) 4alid

". But i* Board i& controlled ) a parent/ and parent reac'ed contract wit' &u&idiar)/ and Board*ailed to &ue parent.

0. S'are'older deri4ati4e *ind& no ille(alit)/ no *raud/ ut reac' o* *iduciar) to corpto !%% o*&'are'older&.

8. 2on&titute& &el* dealin(

tri((er& intrin&ic *airne&& e4aluation.

I. Board meetin( called/ ut no ma6orit) deci&ion

!. Bu&ine&& 6ud(ment rule NOT tri((ered.

". Sel* dealin( and *airne&& to corporation control&.

. C!rp!rate Opp!rt#nit% D!ctrine

!. A corporate director or o**icer cannot &ei:e a u&ine&& opportunit) *or 'im&el* IF

a+ Opportunit) i& in t'e line o* u&ine&& o* t'e corporation.

+ 2orporation i& *inanciall) ale to a4ail it&el* o* t'e opportunit).

c+ 2orporation 'a& an intere&t or e5pectanc) in t'e opportunit)/ or per&on o**erin( opportunit)e5pect& it to e o**ered to t'e corporation/ and

d+ O**icer or director will e rou('t into con*lict wit' t'e intere&t o* t'e corporation.

". ,u&t e *ull di&clo&ure BEFORE t'e director


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Downloaded From OutlineDepot.com BUSINESS ORG - OUTLINE#"+ In an) ot'er capacit)/ did not act a(ain&t intere&t o* corp/ and

c+ >ad not rea&on to elie4e 'i& conduct unlaw*ul #i* criminal proceedin( in4ol4ed+.

". 2orporation ma) indemnit) i* rea&onal) elie4ed t'e intere&t& o* t'e participant& were &er4ed )deci&ion in ca&e o* emplo)ee ene*it plan.

0. Order/ &ettlement/ con4iction/ or nolo contendo plea i& not determinati4e t'e director *ailed 'i&&tandard o* conduct.

B. 2orporation ma) NOT indemni*) a director

!. For a proceedin( rou('t ) t'e corporation/ e5cept *or e5pen&e& i* it i& *ound director did not4iolate 'i& dut)

". For an) 6ud(ment w'ere director *ound to 'a4e *inanciall) ene*ited.

2. ,andator) indemni*ication

!. 2orporation &'all indemni*) director a(ain&t e5pen&e& w'en director &ucce&&*ull) de*ended.

D. Ad4ance *or E5pen&e&!. 2orp ma) ad4ance e5pen&e& to director in a proceedin( ecau&e 'e i& a director i* 'e deli4er& to

corpa+ ritten a**irmation o* (ood *ait' elie* 'e 'a& met &tandard& o* care *or indemni*ication or t'eliailit) eliminated ) Article&/ AND

+ ritten a(reement to repa) ad4ance i* not entitled to mandator) indemni*ication.". Aut'ori:ation )

a+ Board ) ma6orit) o* di&intere&ted director&+ B) ma6orit) o* ;uorum i* le&& t'an two di&intere&ted director&c+ S'are'older& #&'are& o* non-di&intere&ted director& do not count+

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