Paper

Question 1

Closely Held Corp

Definition

Answer 1

1) Small # of Shareholder
2) Substantial # of SH participate in MGT
3) And no real market resale stock

Question 2

Shareholder Derivative Suit

Answer 2

In order to maintain a Shareholder derivative suit in NV:

1) Shareholder must have been a Shareholder at the time the act complained about occurred,
2) Must make a written demand on corporation to take action
3) UNLESS Futile
* If a majority of Directors (but at least 2) who have no personal interest in the controversy in good faith, after reasonable inquiry that suit is not in corporation best interest, the suit may be dismissed.

Question 3

Types of Insider Trading (10b-5)

Answer 3

1) Classic Insider Trading
2) Tipper-tippee Liability
3) Misappropriation theory

Question 4

Types of Insider Trading

1) Classic Insider Trading

Answer 4

(Cody Roberts Duty)

• The existence of that duty depends on whether the trader owes a fiduciary duty to the company
• A person that has abstain-disclosed duty when they have a relationship to the subject company that gives them access to material, nonpublic info that is intended to be used only for Company purposes
• The person who has the EE/OR relationship with company are insider who may not trade company secrets on the basis of material non public information

Question 5

Types of Insider Trading

2) Tipper-tippee Liability

Answer 5

Tipper:

• Is someone who
  1) Passes material, non public information to a 3rd party in breach of a duty of trust and confidence to the shareholders of the subject corporation, and2) Gain some benefit from doing so.
  = Need not be monetary, can be reputation or a gift.

Tippee

1) You must have a tipper,
2) Tippee know or should know that tipper has made improper tip (Acts on tip)
3) By buying and selling a security on the basis of material non public information.

Question 6

Types of Insider Trading

3) Misappropriation theory

Answer 6

Trades on the basis of confidential information in breach of a duty of trust or confidence owed to the source of the information
* if the fiduciary discloses to the source that he plans to trade on non public information, there is no deceptive, and no violation.