2018 Stuff Flashcards
Can a history of cooperation, voting agreements and proxies trigger a plausible finding of a potential control group?
Yes. Can be a de facto control group. In re Hansen Medical, Inc. Stockholders Litigation. Defendants invested together in several companies.
What is The Ordinary Business Exclusion?
Rule 14a-8(i)(7) allows companies to exclude shareholder proposals that deal with matters relating to a company’s “ordinary business operations.” Don’t want SH micromanaging company.
What is The Economic Relevance Exclusion?
Rule 14a-8(i)(5) allows companies to exclude shareholder proposals that relate to operations accounting for less than 5 percent of the company’s total assets, net earnings and gross sales, and that are not “otherwise significantly related” to the company’s business.
Effect of 2017 tax reform on use of corps vs LLCs?
The reform’s significant reduction in the corporate tax rate — from 35 percent to 21 percent — many taxpayers that previously would have chosen without hesitation to hold their businesses in pass-through form are now considering incorporating them.
Under tax reform, individuals and other noncorporate taxpayers are generally subject to an effective overall tax rate of ______ percent on income earned through a corporation?
Overall tax rate of 36.8 percent on income earned through a corporation, consisting of (1) at the corporate level, the new 21 percent corporate rate plus (2) at the shareholder level, the favorable 20 percent “qualified dividend” rate on dividends of the corporation’s net (i.e., after-tax) earnings, if and when they are distributed. Less “double taxation.”
Why aren’t more people using corps as holdcos in light of tax reform?
Pass-through remains the more tax-efficient option (at least through 2025) as a result of the new 20 percent deduction for most types of pass-through business income earned by noncorporate taxpayers.
Effect of limited interest deductions on debt in tax reforms?
Some partnerships have found that preferred equity is a better method of capitalization, as coupon payments on a partnership preferred equity instrument are not limited by the rules and have a similar tax profile to interest deductions. And equity capitalization provides more flexibility to retain earnings in advance of a potentially tax-efficient exit.
Why do buyers prefer asset purchases over equity? Why do sellers prefer equity sales?
Buyers typically prefer asset sales in order to obtain a basis step-up, whereas sellers often prefer stock sales so that they do not have to bear the two layers of tax that an asset sale generally triggers.
Effect of tax reform on asset sale vs stock sale?
It has decreased the costs of an asset sale to the seller via the reduction in the corporate rate, and it has increased the benefits of an asset sale to the buyer by significantly expanding the ability of the buyer to deduct immediately its costs of acquiring the assets under the bonus depreciation rules.
Tax reform effect on US-based facilities and jobs?
More US-based facilities/jobs. Reform also incentivizing corporations to increase capital expenditures, likely as a result of the savings from the lower corporate tax rate and the increased ability to immediately deduct capital expenditures under the revised bonus depreciation rules.
Has tax reform caused US corps that inverted to “revert” to US?
No. The impact of the GILTI tax, coupled with the concern that the low rates and incentives under the act may not be permanent, may be the primary causes
Silent on sandbagging in DE law-governed contract means pro-sandbagging or anti-sandbagging default?
Consensus is that silence means you can sandbag. But DE S. Ct wrote “We acknowledge the debate over whether a party can recover on a breach of warranty
claim where the parties know that, at signing, certain of them were not true. [Defendant] argues that reliance
is required, but we have not yet resolved this interesting question.”
Tax reform’s limit on interest deductions?
The Act generally limits a business’s net interest deductions to 30% of the business’s “adjusted taxable income,” and there are no transition rules or grandfathering of existing debt. “Adjusted taxable income” is similar to EBITDA for taxable years beginning before January 1, 2022, and similar to EBIT thereafter.
Stockholders of Parent-Target Entitled to Appraisal Rights in Merger Involving Transfer of Control?
No. In Dr. Pepper/Keurig deal, Because the transaction was structured so that Dr Pepper was not a “constituent corporation” in the merger and the public stockholders would retain their shares, the court found that the transaction did not satisfy the terms of Delaware’s appraisal rights statute.
Deal price reliable indicator of fair value?
Yes, per Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd., court acknowledged deal price is a reliable indicator of fair value in most cases involving an unhindered, informed and competitive sales process. But plaintiffs will attack process.
