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Business Organizations

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Outline

  • Traditional corporate structure / "little republic"
    • specialized functions
    • management role
      • conduct business - MBCA § 8.01
      • control cash flow - MBCA § 6.40
      • initiate fundamental changes
    • shareholder role
      • elect board - MBCA §§ 8.03, 7.28
      • approve fundamental changes
  • Judicial reaction to modified roles
    • shareholder vote-pooling agreements
      • purposes
      • validity
    • management contracts
      • purposes 
      • validity - traditional view:
        • McQuade v. Stoneham (NY 1934)
        • void as contrary to public policy
      • validity - evolving view:
        • Clark v. Dodge (NY 1936)
        • party autonomy + slight deviation
  • Legislative intervention:  statutory validation
    • shareholder vote-pooling agreements
      • formalities / MBCA § 7.31
    • management contracts
      • limits on board discretion - MBCA § 8.01
      • shareholder agreements - MBCA § 7.32
      • compare NC Bus Corp Act § 7.31

Daily Thoughts

The Southerners 10 Commandments

  1. Y'all shalt always remember your manners.
  2. Y'all shalt make no fuss over yourself
  3. Y'all shalt not sass your mama.
  4. Y'all shalt always wonder what your daddy would think.
  5. Y'all shalt always talk the way you grow'ed up.
  6. Y'all shalt tell no whoppers unless when you are expected to.
  7. Y'all shalt demonstrate your great faith by the way you drive.
  8. Y'all shalt always clean your plate.
  9. Y'all shalt hold kinfolk in high regard, whatever you think of 'em.
  10. Y'all shalt always remember where you come from.

Problems

Anna, Bertha and Clara incorporate a business as ABC Corporation.  Each receives 1/3 of shares.  Anna and Bertha sign a shareholders' agreement and promise to "take all steps necessary" to sell the business (in a merger or sale of assets) if they ever receive an offer of more than three times book value.  One day ABC receives an offer of four times book value.  Anna has had a change of heart and now agrees with Clara that ABC should not sell.

Party A (Bertha) Argue Anna must vote for the merger; their agreement is binding under the MBCA.

Party B (Clara) Argue Anna need not vote for the merger; the agreement between Anna and Bertha is invalid under the MBCA.

Readings