Business Associations - Essay Rules Flashcards
AGENCY
Director and Officer Authority
Authority
[X’s] authority to [facts] arose from her role as [Company] (1) [director] or (2) [officer title]
Director
A board of directors may act by (1) meeting or (2) unanimous written consent.
Here, [X] were [Company] directors. Since [Director] was not the only director, [Director] could not make decisions on [Director’s] own in the director role. The board of members did not hold a meeting or execute a unanimous written consent to [facts]. Thus, the authority for [_] did not come from [Director’s] director role.
[Officer’s Title: President, Secretary]
The authority the prinicipal delegates to the agent determines an agent’s ability to bind a principal: (1) actual, (2) apparent, or (3) ratification.
Actual Authority may be (1) express or (2) implied
Express
… manifests from (1) oral and written words, (2) direct and defiite language, or (3) specific instructions. Corporate bylaws, articles of incorp, or the board of directors define actual express authority for an officer. H,T
Implied
… allows an agent to take actions necessary to achieve the principal’s objectives based on the agent’s reas u/stanidng of the objectives. An officer has implied authority to perform tasks necessary to carry out the officer’s duties by virtue of the position. H,T
Apparent
An agent derives apparent authority from a principal’s manifestations which cause a 3P to reas believe the agent has authority even though the agent has beither express nor implied authority. An officer has … if the corp holds the officer out to 3Ps as having authority to bind the corp. H,T
Ratification
A principal can ratify (approve) an unauthorized act (no actual or apparent authority) an agent performed, and agree to be bound, as if the agent performed with authhority. H,T
In conclusion,
AGENCY
Partner Authority
Partner Authority
Each partner has equal rights in the mgt and conduct of the p/ship. A partner is an agent of a p/ship for the purpose of its bus and can bind the p/ship whn the partner acts with (1) actual or (2) apparent authority.
Actual Authority may be (1) express or (2) implied
Express
EA manifests from (1) a p/ship a/ment, (2) an auth of the partners, or (3) a s/ment of authority filed with the Secretary of State. H,T
Implied
IA is based on a partner’s reas belief that an action is nec to carry out an express authority. H,T
Apparent Authority
An unauthorized partner’s act may bind the p/ship if the act is performed in the ordinary course of apparently carrying on (1) the p/ship bus or (2) bus of a kind carried on by the p/ship. A 3P cannot hold a p/ship liable where the person knows or receives notice a partner lacks authority. H,T
[Ratification]
A principal can ratify (approve) an unauthorized act an agent performed, and agree to be bound, as if the agent performed with authority. H,T
PARTNERSHIP
Partnership (what is it)
Types
A p/ship is two or more persons associating as business co-owners for profit. A written a/ment is not nec to form a p/ship. H,T
[Ltd P/ship] A LP forms when (1) two or more persons, at least one general partner and at least one ltd partner, (2) file a ltd p/ship certificate with the SofS. A ltd partner’s liability for p/ship debts is ltd to the amount of the capital contribution to the p/ship. H,T
Failure to File LP Certificate
A person, who contributes to a purported LP and believes in GF s/he is a ltd partner, may be personally liable to a 3P who transacts with the purported LP, where a LP certificate is not filed with the SofS. H,T
[LLP] A LLP is a p/ship in which a partner’s personal liability for p/ship obligations is eliminated. To enjoy LLP status, a s/ment of qualification is mst be filed with the SofS. The registration notifies 3Ps their sources for recovery of lossess is limited. H,T
General P/ship
An entity that does not qualify as a [LP] [LLP] transforms into a general p/ship. H,T
PATNERSHIP
Liability to 3Ps
LP
LLP
General Partnership
Liability to 3Ps
[LP]
A general partner is personally, jointly, and severally liable for all p/ship debts/ A ltd partner in a LP is personally liable when a 3P actually believes in good faith the person is a general partner at the time of a transaction. H,T
[LLP]
A LLP eliminates a partners’ persona liability for p/ship debts, which are solely the p/ship’s obligation. A ltd partner in a LLP is personally liable for his/her own misconduct. H,T
[General Partnership]
General partners are pers, jointly, and sev liable to 3Ps for all p/ship debts.
[Third Parties]’s Theories of Liability
[3P] could base liability on (1) [Theory 1] or (2) [Theory 2].
… insert Tort action or Contracts action (*only do 2! Finish exam, then if time permits come back and add more)
In conclusion,
PARTNERSHIP
Profits
Sharing Business Profits
Fiduciary Duties
Partner Fiduciary Duties
Dissolution
Assets Distribution at Dissolution
Sharing Business Profits… for rent does not create a rebuttable presumption that the arrangement is a p/ship and recipients are partners. H,T
Partner Fiduciary Duties A p/ship may maintain an action against a partner for the violation of a duty to the p/ship. When a partner violates a duty, the partner is liable to the p/ship for the resulting loss.
Duty of Loyalty U/ the DofL, a partner is to refrain from (1) competing with the p/ship, (2) advancing an interest adverse to the p/ship, or (3) usurping a p/ship opportunity, using p/ship prop, or conducting a p/ship bus to derive a personal benefit, unless the partner accounts to the p/ship for such benefit. H,T
Duty of Care Each partner is to refrain from engaging in grossly neg, reckless, or knowing unlawful acts, or intentional misconduct. H,T
Assets Distribution at Dissolution Upon dissolution, p/ship assets are distributed in this order (1) creditors, (2) partners and former parts for accrued unpaid distributions, (3) partners for contributions return, and (4) partners in the proportion in which they share distributions. H,T
BUSINESS ASSOCIATIONS
ISSUES CHECKLIST
Corporations
CORPORATIONS
Formation:
- De facto and de jure corp
- Piercing the corporate veil
- Ultra vires acts
- Promotor liability
Corp. Management, Directors and Officers
- Duty of care (BJR)
- Duty of loyalty
Shareholders
- Rights (Mtgs and elections, voting, inspection, dividend distribution)
- Shareholder agreements
- Shareholder derivative suits
Federal Securities Laws
- 16(b)
- 10b-5 (Fraudulent statements, insider trading)
- Sarbanes-Oxley
Fundamental Changes
- Dissolution
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BUSINESS ASSOCIATIONS
ISSUES CHECKLIST
Agency
AGENCY
- Formation
- Principal’s duties and remedies
- Agent’s duties and remedies
- Principal’s liability for Agent’s contracts (authority)
- Principal’s liability for Agent’s torts (scope)
BUSINESS ASSOCIATIONS
ISSUES CHECKLIST
Partnership
PARTNERSHIP
General Partnerships
- Formation
- Partnership assets
- Partner rights and duties
- Relations of partner to 3Ps
- Partner liability
- Dissociation / Dissolution / Winding up
For each Limited Partnerships, LLP, and LLC:
- Formation
- [Ltd partner] [LL Partner] [LLC Member] Rights and duties
- [Ltd partner] [LL Partner] [LLC Member] liability
- Dissociation / Dissolution / Winding up
CORPS
Piercing the Corporate Veil
Gnrly, s/holders are not liable for corp debts. Cts or creditors may disregard the corp entitle and pierce the corp veil by holding active s/holders personally liable for the corp debts when u/ the (1) totality of the circs, (2) LL is unfair. H
