Regulation Contracts UCC Flashcards
Private Securities Litigation Reform Act:
Audit must detect material illegal acts, identify related party transactions, and going concern opinion
Estimated Tax Payments
Each installment must be 25% of least of -100% PY tax return -90% current years tax -90% annualized current years’ tax
Penalty imposed if, by quarterly payment date, total amount of estimated payments income tax withheld
Tips
Tips: An employee who receives $20 or more in tips in a month (as a result of working for one employer, and not combined from several jobs) must report the total tips to the employer by the 10th day of the next month. These tips are treated as paid when the report is made to the employer
Sherman Act of 1890
Part I: Illegal to restraint trade Per se violations (price-fixing , division of markets, group boycotts, tying arrangements)
Part 2: Prohibits monopolies
Clayton Act of 1914
Prohibits mergers/stock acquisition to lessen competition/monopolize, Justice dept can prevent mergers before they occur
Mergers:
Horizontal: merger between competitors, closely scrutinized, greatest tendency to lessen competition.
Vertical: Merger between supplier and purchaser
Conglomerate: Companies in different industries or areas of business.
Robinson Patman Act
Amended Clayton Act prohibits price discrimination for both buyers and sellers.
Federal Trade Commission Act of 1914
- Prohibits unfair competition, unfair/deceptive acts in/affecting interstate commerce
- Created the FTC
Exempt Industries
Intrastate commerce, most labor unions. Utility companies, reasonable non-competition clauses, patents, copyrights, financial institutions, transport inductries, MLB, failing companies;.
Assignment
Most contracts can be assigned but CANNOT materially increase the risk or duty of the other party
Revocation
An offeror has the power to revoke (cancel) an offer at any time prior to acceptance.
Exception to this is option contracts
Orders to Pay
These are checks or drafts. They are 3 party instruments that have a drawer who orders a drawee to pay a payee. When you write a check to someone, you are the drawer, and you are ordering the bank (the drawee) to pay the person you wrote the check to (the payee)
A draft is basically a type of check for merchants in a sale of goods agreement
Promises to Pay
- ) These are notes or certificates of deposit These can be installment notes as well.
- These are two party instruments. There is a maker, who promises to pay a payee
Negotiable Instrument Requirements
The instrument must be in writing
The instrument must be signed by the maker or drawer
Must contain an unconditional promise or order to pay
The amount payable must be a certain and definite amount
Payable on demand or at a definite time
Order vs. Bearer
Must contain words of negotiability
- This means it needs to be either payable to order or payable to the bearer
- “order” means it’s specific such as “pay to the order of John Smith”
- “bearer” means the person who has the instrument. Bearer can be a specified person or the bearer, such as “Pay to John Smith or bearer”. Sometimes it will say “pay to cash” which just means pay to the bearer of the instrument
Blank Endorsement
Blank: If you simply signed your name with no other words, that is a blank, nonrestrictive, and unqualified indorsement, and turns the order paper into bearer paper and can be transferred by anyone at anytime simply by having possession of the instrument
Special Endorsement
these specify a person to whom payment is to be made. Example is when a check is written to you, and you add “pay to John Smith” to assign the check to your friend John Smith
Qualified Endorsement
Qualified endprsements: usually includes the words “without recourse” which means the endorser disclaims any liability
Restrictive Endorsement
Conditional: Payment is conditional upon an event
.
Prohibitive: to prohibit the further transfer of the instrument
For deposit or collection: this makes the indorsee bank a collection agent of the indorser
These restrictive indorsements do NOT prevent further negotiation of the instrument
Creating a Security Interest vs Perfecting a Security Interest
The creditor must give value, the debtor must have rights in the collateral (you can’t offer your friend’s car as collateral), and the creditor must take possession of the collateral or obtain an agreement with the debtor
These 3 things CREATE a security interest, and to PERFECT a security interest, a financing statement must be filed
Surety Rules
When two people act as a cosurety, neither can be held liable for an entire debt. Once the debtor defaults, if one cosurety pays more than their share of the debt, they can recover the amount paid in excess of their share from the other cosurety.
If the creditor releases one cosurety without the consent of the debtor or the other cosurety, then the remaining cosurety is only liable for half of the debt
On a “guaranty of collection”, the surety is only liable if collection against the primary debtor fails first
Chapter 7 bankruptcy
-this is a liquidation bankruptcy. It allows voluntary or involuntary petitions. Normally a trustee.
A debtor does NOT need to be insolvent or have a certain number of creditors to file chapter 7. Almost
anyone can file a petition for chapter 7 relief, BUT, there will be the test for “bankruptcy abuse”
If a business is being petitioned into bankruptcy by a creditor, and the business challenges the petition, the challenge will fail if the business has not been paying their bills as they become due
If the debtor fails to attend (unless excused) the creditor’s meeting, it’s considered a failure to co-operate and grounds for denial of the debtor’s discharge
Chapter 11 Bankruptcy
This allows for a reorganization of a debtor to pay their debts. Chapter 11 also allows voluntary and involuntary petitions. There is generally no trustee
Chapter 13
Chapter 13: This type allows for the adjustment of debts of an individual with regular income. Chapter 13 allows only voluntary petitions. There is always a trustee with Chapter 13. A 3-5 year plan is made as a result of the bankruptcy
Order of priority in Bankrupcty liquidation
- Perfected secured parties
- Claims for domestic support: this includes child support AND alimony
- Administration costs: includes costs and expenses related to the bankruptcy proceedings. Includes attorney fees, accounting fees, appraisals, and trustee fees
- Employee wages: employee wages are limited to those earned in within 90 days of the filing up to a maximum of $12,475. Anything above the $12,475 is put in the same category as “general creditors”
- Contributions to employee benefit plans: any claims for contributions to an employee benefit plan from services performed within 180 days before the filing up to $12,475 per employee
- Claims of farm producers and fisherman: up to $6,150 per creditor
- Consumer creditors: up to $2,775 per creditor. Any amount above that is treated as a general creditor claim
- Claims of governmental units for taxes
- Claims for death or personal injury
- All general unsecured creditors
- If anything is left, this goes back to the debtor
Dodd Frank Act
After 2008 crisis
Created FSOC and CFFB
It authorized the PCAOB to regulate accountants who audit non-public broker-dealers
It implemented a major reward system for whistleblowing on financial fraud, and also protection laws for whistleblowers
Rule 506 under Regulation D of the Securities Act of 1933.
The offering may be purchased by an unlimited number of accredited investors. If no general solicitation or advertising is made, up to 35 purchasers who are not accredited investors also may purchase.
Federal Insurance Contributions Act (FICA)
Imposes social security tax on employers, employees, and the self-employed
Under FICA, contingent fees, bonuses, and commissions are all considered wages. Reimbursed travel expenses are NOT considered wages for FICA
If an employer pays both the employer and employee portions of FICA, but fails to collect the employee portion from the employee, the employer has the right to be reimbursed by the employees for the employees’ share
FUTA
These are taxes paid by employers which go into federal and state pools to compensate workers who have lost their jobs and can’t find new ones
Unemployment benefits are given to people who lose their jobs and are not fired for a reason. When a business “down sizes”, the laid off workers will receive unemployment benefits
An employer can take credits against Federal unemployment taxes if they have paid into a state unemployment fund first
Taxes paid to the Federal Unemployment Tax are deductible by the employer as a business expense for federal income taxes
