Creditors Flashcards
Modern view of the corporation is that it is simply ____
a nexus of contracts
Under the modern view, corporate law’s goal is to facilitate ____ NOT ___
contractual transactions, defend ostensible ownership rights
DGCL 211 requires that the BOD ___
hold annual SH meetings
SH primacy is the idea that ___
business is organized and carried on primarily for profit of SHs
Under SH primacy, actions for SHs should be limited only by __
boundaries of contracts/regulations
The justification for SH primacy is that SHs have ___ while creditors ___
no legal means beyond fiduciary duties to get $ back, have contractually specified payments
SH primacy is justified on the basis that SHs have no right to __ or to __
dividends, withdraw principal investment
The stakeholder model (in contrast to SH primacy) is the idea that the BOD ___
should and does manage corp for the benefit of all stakeholders
The biggest blow to the Stakeholder Model is __
DGCL 362(a) public benefit corps
DGCL 362(a) suggests that corporations organized for a public benefit are ___
distinct from standard corps under DGCL
DGCL 362(a) strongly suggests that standard DE corps are not ___
to be managed for the public benefit
Stakeholder model advocates that SHs already have strong protection through ____
right to elect the BOD
Stakeholder model advocates argue that debt and equity are ___
equally important sources of funding
In DE, directors ___ fiduciary duties to creditors
DO NOT owe
Chancellor Allen came up with the idea of __
the zone of insolvency
The zone of insolvency idea comes from the fact that ___
SHs are more willing to gamble all of the company’s assets if close to insolvency instead of saving something for creditors
Because most claims ___ ultimately all constituencies become creditors
resolve into damages/financial claims
Gheewalla was ____ cause of action by creditors
direct
Gheewalla held that creditors cannot ___
bring direct claims for breach of fiduciary duties
Gheewalla reasoned that direct claims were prohibited because ___
other sources of law (contracts, bankruptcy) protect creditors
Gheewalla held that creditors MAY ___
bring derivative fiduciary duty claims against BOD of an insolvent corporation
Gheewalla held that until insolvency ___
SH have standing to bring derivative actions
MetLife Main facts
Defendants accepted leveraged buyout that significantly reduced value of plaintiff bonds
The MetLife plaintiffs argued that the company breached ____
implied covenant of good faith and fair dealing
