Introduction

Question 1

Originally New York law had a ____ limit for corps but now __

Answer 1

capital limit, can grow indefinitely

Question 2

Originally NY corp law said must be ___ to own shares but now __

Answer 2

natural person, corps can own other corps

Question 3

Originally NY law said must be ____ owning corporation but now__

Answer 3

5+, 1 required

Question 4

You can incorporate in DE without ____ if you ____

Answer 4

doing any business there, pay franchise tax

Question 5

DE has huge effect on corporate law now because of ___

Answer 5

early positioning and now a network effect

Question 6

The most constraining feature of DE law is ___

Answer 6

fiduciary duties

Question 7

Problems with Musk trying to move corporate law to TX

Answer 7

1) jury system for disputes NOT chancellors
2) DE precedent (long built) not binding in TX but still persuasive
3) More legal uncertainty
4) Not a done deal that others will follow
5) difficult to re-create DE legal environment outside

Question 8

Main difference between partners and SHs

Answer 8

all partners must account for debt but SH can be oblivious to each other

Question 9

Who are the losers of limited liability?

Answer 9

tort victims

Question 10

If a subsidiary goes under, tort victims cannot go after parent unless ___

Answer 10

onerous abuse of corporate structure exemption

Question 11

Why might LL be good even if tort victims no redress?

Answer 11

those with most $ may not invest because they would be fleeced first

Question 12

What is one solution to LL but also helping tort victims?

Answer 12

Proportionality (payout relative to number of shares in the company)

Question 13

One advantage of shares over investments like real estate and loans is that they are __

Answer 13

more liquid

Question 14

What is a share exactly?

Answer 14

rights under the law (w/o rights just a piece of paper)

Question 15

SH can fire BOD ___

Answer 15

without cause at any time

Question 16

By default, shares are ___ and are ___

Answer 16

personal property, transferable

Question 17

What is treasury stock?

Answer 17

owned by corp itself, cannot be voted on

Question 18

Types of stock must be ___

Answer 18

clarified in the certificate

Question 19

What to think about when investing

Answer 19

• expected returns
• time value of money
• comparison to govt bonds
• inflation

Question 20

Limited partnership issues equity with ___ but general partnership has ___

Answer 20

LL and no voting rights, unlimited liability and full control

Question 21

___ can be the central partner of an LP

Answer 21

LLC (limited liability on all members)

Question 22

Corporate law is a mix of _____

Answer 22

statutory + equity + increasingly K

Question 23

Minimum statutory requirements of corp

Answer 23

BOD, annual SH meeting, certificate

Question 24

Fiduciary duties are based on the idea that a person with more ____ has a duty to __

Answer 24

de facto power, live up to trust

Question 25

Equity can be used to ____ remedies

Answer 25

create broad

Question 26

Under DGCL 122 section 170 a corp may ___

Answer 26

opt out of duty of loyalty

Question 27

LLC and partnerships can opt out of __

Answer 27

fiduciary duties

Question 28

2024 DE Leg has said that a corporation may opt out of ____ even if ___

Answer 28

fiduciary duties, doesn’t say in the certificate

Question 29

Fiduciary relationship arises when principal ____, subject to ___ and the agent __

Answer 29

manifests assent that agent shall act on principal’s behalf, principal’s control, agent manifests assent or otherwise consents

Question 30

In public corporations, shares are __

Answer 30

dispersed amongst large amount of people/entities

Question 31

Agents owe duty of ___

Answer 31

care, loyalty and obedience

Question 32

Principals are generally not liable for torts committed by corp unless principal was ___

Answer 32

negligent in selecting the contractor

Question 33

SHs won’t invest without some assurance that the investment will __

Answer 33

bear returns OVER the value of keeping money liquid (net present value)

Question 34

To value a claim, start with its ____ and discount to ___ and then subtract ___

Answer 34

expected future cash flow, present value, time value of money and risk premium

Question 35

Time value of money is considering that ))

Answer 35

investing money elsewhere may yield higher return

Question 36

US bond have a ___

Answer 36

100% return rate

Question 37

A risk premium is the ___

Answer 37

cost of systemic risk (undiversifiable because hits all assets at once)

Question 38

The more reliant a firm is on the overall _____ the higher the risk premium

Answer 38

health of the economy

Question 39

If a firm will make 0, 100 or 200 after a year and govt offering 1% on bonds with 10% risk premium what is its present value?

Answer 39

200 +100 + 0 / 3 = 100
100/ (1+.01+.1)= 90.09