R8 Flashcards
If a voluntary petition is filed –> when will a general discharge in bankruptcy be denied?
If the debtor failed to keep or preserve adequate books and records
who can confirm the reorganization plan?
ONLY THE COURT
What chapter(s) of bankruptcy may a foreign entity file under?
7, 11, and 15
What are 4 types of Social security benefit programs?
- Old age and Survivors Insurance (OASI)
- Disability Insurance (DI)
- Medicare
- Supplemental Security Income
What are the 3 basic types of claimants in a Distribution of debtors estate? (in priority order)
- Secured Claimants
- Priority Claimants
- General creditors who filed their claims on time
What are the 9 types of priority claimants? (SAG WEG CTI)
- Support obligations owed to spouses and Children
- Admin bankruptcy expenses (filing fees, court fees, trustee fees)
- Claims that accrue in ord course of biz AFTER involuntary petition is filed (GAP before order of relief granted)
- Wage claims of employees for sums earned within 180 days of bankruptcy (up to $15,150)
- Sums owed for employee benefits up to whatever of the $15,150 left from above
- Claims of Grain farmers/fishermen
- Consumer deposits
- Tax Claims
- Personal injury claims arising from intoxicated driving
What will pierce the corporate veil?
Corporate veil of limited liability will be pierced when shareholder uses corporates assets for owners personal purpose
What is the one entity that is NOT a “Flow through entity”?
C Corporation
What are the characteristics of a Sole Proprietorship?
Who does the liability fall under?
How long can it last for?
What is the tax treatment?
What is an adv of this?
Liability is 100% on owner
Duration cannot exist beyond the life of the owner/ may be terminated by owner
P&L from biz flow to sole proprietor
ADV for individual wants to form a biz that they will manage and does not want formality
What are the characteristics of a General Partnership:
Formation
How are profit/loss shared
Taxation
Where is the liability?
Distributions to partners before dissolution
Dissolution
Formed when atleast 2+ people intend to carry out biz as coo-wners (no filing with state, no written agreement necessary, can be oral/implied) –> should file in writing if > 1 yr
If no agreement –> split evenly
PShip is NOT taxable since it flows through
Each partner is personal liable for ALL pship obligations (joint and several)
No distributions –> unless agreed upon, no comp for services
Partner gives notice of withdrawal –> partners agree to dissolution OR Court order
What is the difference b/n a joint venture and a general partnership?
Joint venture is formed for a single transaction/project/series of transactions or projects
Partnership will carry out as biz
In a pship - what are the differences of the approval of decisions in the ord course of biz compared to decisions in the outside of ord course of biz?
Decisions in ord course of biz need to be approved by majority vote
decisions OUTSIDE Ord require ALL consent ( admitting new partners, judgement in lawsuit, fundamental change of pship biz -> sale of pship)
What is the result if a partner assigns interest inprofits/surplus to an assignee?
The assignee ONLY receives rights to partners share of the profits and does NOT become a partner bc of this
When a partner dies - where does their share of the partnership go?
share of profits go to heirs
Partners pship rights go back to the surviving partners
What is a dissociation of a partnership, what events may cause this, does the partner have any rights after this, what are they liable for?
Dissociation is change in pship partner (partner leaving)
occurs when partner gives notice, dies, goes bankrupt, expelled
Partners rights in pship cease
Partner still has apparent authority until Third parties are given notice
Partner still is liable for debts incurred by pship prior to dissociation unless released by creditor or novation
Partner can be held liable for up to 2 years of pship unless gives TP notice of dissociation
When a partnership dissolves - how are the distribution of assets treated?
- Creditors (incl partners who are credits) get money first
- return on partners contributions
- IF any money –> split b/n partners at profit/loss ratio
What are the differences b/n GP and LLP? (4)
- Partners are NOT liable for acts of partners
- Personally liable of own negligence and negligence of those under direct control
- Not personally liable for debts of biz
- Must file with state
When filing an LLP - what must be provided in the contents of certificate?(4)
- LLPs name
- name and location of registered office
- number of partners
- description of pship biz
What are the characteristics of a Limited Partnership:
What is ownership?
Who as liab?
How is it formed?
Allocation of P/L
Termination
Ownership = at least 1 GP (makes biz decisions) and 1 LP (do not participate in mgmt)
Liab –> GP = personally liable for all debts (if loss–> can be held personally liable), LP = limited to their investments
Formed with filed with state by filing certificate of limited partnership
P/L = Share in proportion of contributions of partners
Dissolution (stated in agreement, written consent of all partners, withdrawal/death of GP, judge order)
In an LP - what are the limited partners rights? (5)
- Right to review financial information and tax returns
- can participate in mgmt (AND NOT BE LIABLE)
- may vote on extra ordinary matters (admission of partner dissolution, amendments)
- can assign interest of just profit
- do not owe fiduciary duty
If a new partner is admitted to a LP –> who must approve?
ALL partners
In the event of dissolution in LP - how are distribution of assets handled? (what about if dissolved in loss)
- Creditors (incl partners who are creditors)
- To former partners in satisfaction of liab (that were not paid on their withdrawal
- Partners (first to return contributions, any excess –> distribute profit)
IF LOSS –> only GP are personally liable
What are the characteristics of a Limited Liability Corporation:
What are the owners called?
Where is liab
Taxation
Formation
How many members are needed to form?
Voting strength
How are P/L
Termination
Owners are members
Limited liab where owners are not personally liab
ability to be taxed as pship (flow through entity) or C corp
Must file Articles of org with state
need only 1 member to operate
Voting strength is limited to contribution percentage
P/L is limited to Contributions (unless stated in articles)
Will dissolve - if in articles, consent of ALL members, death/retirement/bankrupt member unless buyout of old partner, judge order
What is the form that is filed with the state for a C Corp vs the form filed with the state for a LLC?
C corp files Articles of Incorporation
LLC files Articles of Organization
What are the contents of an articles of organization for an LLC?
- Statement that entity is an LLC
- Name of LLC
- Street address of LLC’s registered office and name of registered agent
- IF mgmt is to be vested in managers
- names of people that are managers
What is the difference in Member managed LLC compared to a Manager-managed LLC?
Member-manager - If members are managing –> each member is an agent
Manager managed - Certain people are managers that are only agents (not all members)
What are the characteristics of a C Corp:
Who is liable?
Taxation
Who manages?
Formation
financing corp
Termination
Liability = only the corp is liable for corp obligations (shareholders, directors, officers are not UNLESS personally participated in the tort)
Double taxation (taxed as an entity and on profits)
Owned by shareholders BUT corp is run by BOD (elected by shareholders)
File articles of incorporation with state
Financing capital comes from issuance of securities (debt, equity)
Dissolution - requiring director and shareholder approval
OR Court otder
What is the difference b/n taxation of S corp and C Corp
C Corp is double taxed
S corp can elect to be pship
What are promoters of a C Corp and what liability do they have?
Promoters enter into contracts before corp is formed (financing)
Personally liab on contracts they make and not released unless novation
Who files the Articles of incorporation for a C Corp and what is included in it? (4)
Incorporators file with the state
Includes:
1. Name of corporation
2. Names and address of corp registered agent
3. names and addresses of each of incorporators
4. number of shares to be authorized and issued (one or more of shares must have unlimited voting rights)
Under C corp -What is the Ultra vires act?
IF there is a purpose clause stating that the corp can only performs such services –> anything outside of that service is “ultra vires” and whomever approves that act is personally liable
What are bylaws of corp?
Rules for running corp
Not part of the articles of incorporation
not required to be filed with the state
What is Piercing the corporate veil and what are 3 reasons that will trigger this?
Piercing is how courts will hold shareholders/officer/directors liab bc conducting biz id being abused
- Shareholder commingle personal funds with corp funds
- corp was inadequately capitalized at time of formation (not enough money at start)
- Corp was formed to commit fraud on existing creditors
What are the Shareholder rights? (5)
- Voting Rights (to elect/remove directors, approve fundamental changes to corp –> dissolution) –> one share, one vote
- Distributions - NOT have right to distribution unless declared by BOD
- Right to inspect books and records (proper purpose)
- Preemptive right - if corp issues additional shares. shareholder purchases additional shares to keep voting strength (can grant shareholders this right)
- Derivative actions - when corporation wont bring out legal action –> shareholder has right to enforce corp rights and lawsuit against
What is the difference b/n Noncum and Cum Preferred shares?
Non cum = if not declared in a particular year –> wont get
Cum = if not declared –> preference accumulates and paid when declared
What is the difference b/n a derivative action vs a direct action?
Derivative action is the shareholder bringing legal action against another party on behalf of the corporation
Direct action is shareholder bringing action against the corporation
What are the duties of the BOD?
Fiduciary - majority should not be employees of comp
- Right to rely - rely on info from officers/employees/accountants
- Duty of loyalty - act in best interest of corporation (cant compete ) have to disclose conflict of interest
- Indemnification - reimburse for legal fees unless acted in bad faith
Who are officers of a corp?
Elected by BOD and conduct day to day business
have actual and apparent authority
can also be BOD
What are fundamental changes (DAMS) and who has to approve?
no unanimous consent but board and shareholder approval
Dissolution
Amendments to article of incorp that materially and adversely affect the shareholders rights
Mergers, consolidations and compulsory share
Sale of substantially all the corp asset outside reg course of biz
What is the procedure of a fundamental change? (5)
- Board resolution: majority of BOD adopt resolution
- Notice - corp notify shareholders even if not voting
- Shareholder approval - must be majority
- Filing articles: let the state know
- Right to dissent/Appraisal right - right to buy out of corp before change
What is a share exchange?
One corp acquires all of o/s shares of one or more classes of stock of another corp
both corp continue to exist as sep entites
What happens in a dissolution of a corporation?
Dissolution need to get approved by director and shareholder
After –> corp continues to exist
Liquidation of collecting corp assets –> Paying expenses involved –> satisfying claims and distribution assets of corp
What types of bankruptcy require a trustee?
7 and 13
11 can be appointed
What types of bankruptcy may a farmer file for and NOT file for?
Can File for: 7,11,13
CANNOT: 9 (muni debt adjustment)
What is needed for a partner to leave the partnership?
IF pship does not specify –> partner can leave at any time (does not need to obtain consent)
What is an automatic stay and how is it invoked?
Automatic stay = stops the enforcement of judgement liens against property in bankruptcy estate
Invoked when filing of involuntary bankruptcy
define a merger
one corporation joining with another
The surviving corporation has liabilities of merged corps - acquiring corp becomes liable for all old debt
Who makes up a creditors committee?
Made up of unsecured creditors
In an LLC - what action requires ALL members to approve?
Transfer of membership in the company
Under Bankruptcy code - what type of property acquired by debtor after filing becomes part of the bankruptcy estate?
Inheritances, interest, property settlement, life insurance interest rec by debtor within 180 days after filing petition
What is a short form merger?
When parent mergers a 90% or more owned sub into part –> ONLY shareholders have rights
What is a shareholders right of appraisal OR dissenting right?
Shareholders who are dissatisfied with terms of merger, consolidation or sale of assets are permitted to compel corrp to buy shares at FMV (get out)
If certain partners are sued in a partnership - what is the order that the plaintiff can recover damages?
First go after all partnership assets and then the selected partners
What is involuntary bankruptcy and what are the requirements for a creditor to go after debtor?
Creditors force the debtor into bankruptcy if amount owed is collectively greater than $18,600 AND Debtor is not paying debts as they come due (equitable insolvency)
IF 12 or more unsecured creditors –> 3 are required to file
IF less than 12 –> only 1
