Business Law: Part 2 Flashcards
when there are fewer than 12 unsecured creditors an involuntary petition for bankruptcy can be filed if a debtor owes more than ___ in unsecured debt to any one creditor and is not paying
16,750
are inheritances, proceeds from life insurance, divorce settlements, rents, interest, dividends included in a bankruptcy estate?
yes, if received within 180 days after the bankruptcy petition is filed
is the commencement of Chapter 11 bankruptcy reorganization proceeding voluntary or involuntary?
can be either or
what type of corporations may not participate in Chapter 11 or Chapter 7?
savings and loan corporations
___ and ___ cannot be petitioned involuntarily into bankruptcy.
farmers and nonprofit charities
does a debtor need to be insolvent to file for Chapter 7?
NO
what groups are specifically excluded from filing for bankruptcy?
stockbrokers and insurance companies
under Chapter 7, what does a discharge do?
discharges most debts of a debtor
what does the filing of a petition in bankruptcy (voluntarily or involuntarily) do?
stops the enforcement of all judgement liens and collection actions against the debtor (called “automatic stay”)
what are the 3 requirements to be successfully petitioned involuntarily into bankruptcy?
debtor must owe at least 16,750 in UNSECURED debt
if 12 or more creditors, at least 3 with unsecured claims aggregating at least 16,750 must join the petition; otherwise 1 or more creditors with at least 16,750 in unsecured claims may file
debtor is unable to pay
is a contemporaneous exchange for new value considered a preference?
NO
how is solvency determined?
FMV of all assets - the value of all liabilities
in what type of bankruptcy is a trustee appointed? How about a creditors’ committee?
Chapter 7
Chapter 11
T or F, an antecedent debt of less than 600 paid within the preference period by an individual whose debts are primarily consumer debts will not be set aside as a preferential transfer.
T
what type of payments within the preference period (90 days, or 12 months for insiders) will not be set aside as a preferential transfer?
payments to fully secured creditors
what priority do employees have for salary claims?
4th. To the extent of 13,650 per claimant with respect to wages earned within 180 days prior to bankruptcy. They are paid after the secured creditors are paid
what 3 elements must a plaintiff prove to recover under Section 11 of the Securities Act of 1933?
plaintiff acquired the stock
registration statement was signed by the CPA and contains either a misrepresentation of material fact or omission of material fact
plaintiff suffered losses
*don’t need to prove reliance or fraud
under the Act of 1933, what must a non well-known seasoned issuers registration statement disclose
description of the security
how the corp will use the proceeds
description of the business and management
financial statements
a prospectus
what are the 3 major types of transactions that are exempt from registering with the SEC?
small offerings
private (transaction that only involve accredited investors)
intrastate offerings
Rule 504 of Regulation D
can raise 5 million in any 12 month period without registration
securities can be sold to anyone
SEC must be notified within 15 days of sale
Rule 506 of Regulation D
no limit on the amount
securities can be sold to unlimited number of accredited investors, but no more than 35 unaccredited investors
SEC must be notified within 15 days of sale
*corp not required to give any specific info to ACCREDITED investors if only accredited investors purchase the securities
what kind of damages can be recovered under Section 11 of the 1933 Act?
only monetary damages
*rescission is available under the 1934 Act
what does Rule 147 state?
that for 6 months after the last sale by the issuer, resales can only be made to residents of the state
under Section 12 of the Securities Exchange Act of 1934, what companies must register (duty to file periodic reports)?
ones that are listed on a nation securities exchange OR ones that have at least 500 shareholders in any outstanding class and has more than 10 million in assets
generally, which type of issuers are permitted to make an offering by using shelf registration?
well-known seasoned issuers
are taxes paid under the Federal Unemployment Tax Act (FUTA) deductible by the employer as a business expense?
YES
*employers have to pay the tax if quarterly payroll is more than 1,500 or they employ at least one person one day a week for twenty weeks in a year
who pays for unemployment compensation insurance and workers’ compensation insurance, employer or employee?
employer
which forms of income are not subject to FICA tax?
interest on municipal bonds
capital gains
dividends
*wages are subject to FICA; remember that wages are compensation for labor
what do social security benefits include?
payments to divorced spouses
payments to disabled children
medicare
*medicaid not included bc medicaid is state run
does an employee receiving disability benefits receive full wages?
NO, only a percentage
unless there is an agreement to the contrary, what is the voting power of members in an LLC based on?
each member’s capital contribution
are partnership agreements normally subject to the statute of frauds?
NO, therefore a written partnership agreement is usually not necessary
under the Revised Uniform Partnership Act, unless agreed otherwise, how do partners share losses?
in the same manner they share profits
when a partnership agreement does not state the duration of the partnership, what is required for a partner to withdraw from the partnership?
nothing, can withdraw at any time
T or F, general partners in a limited partnership are personally liable for all obligations of the partnership.
T
what is a partnership?
an association of two or more persons to carry on as co-owners of a business for profit
are partners co-owners of partnership property?
NO, the partnership owns the property
T or F, partners are jointly and severally liable for obligations of the partnership
T
what does approval of an ordinary management decision in a partnership require?
a majority vote (e.g., 3 out of 4)
how do partners in a general partnership share profits and losses if not otherwise stated?
how about partners in a limited partnership?
equally
based on partners’ contributions
what is a derivative action?
action by a shareholder in the name of the corporation to recover damages or to seek some other remedy on behalf of the corp when the corp does not enforce its own rights
what is an ultra vires act?
an act outside of a director’s or an officer’s scope of authority and thus is a beach of duty to the corporation
what is the only thing that will relieve a promoter of personal liability on pre-incorporation contracts?
novation
*promoter is basically the person who organizes the corporation
