...COMPANY LAW – MINORITY PROTECTION Question: Does company law protect shareholders? Discuss. Answer: Shareholders have ultimate control of a company. However the directors run the company's business and are responsible for its management. In general shareholders cannot interfere, although they can appoint and remove directors. Some constitutional matters, such as changes of the company's name, or to its Memorandum or Articles of Association, or to put it into liquidation (when solvent), require approval by special resolution, i.e. a 75% majority, which can therefore be blocked by shareholders with 25% or more. Other shareholders' resolutions require only a simple majority, i.e. more than 50% voting in favour. But what happens when clouds appear on the horizon, when the majority shareholder sees the company as his own to do with as he likes, or when he wants to eject a director who is also a shareholder? Surely, subject to having sufficient voting power to carry an ordinary or special resolution, the majority rules? Thus, it is the minority shareholders that are always in the conundrum. The Companies act 2006 has bestowed some forms of protection unto these minority shareholders. The statutory derivative action and the unfair prejudice remedy will be examined as to how readily available these remedies are to act as a check on directors and in some cases, majority shareholders in the execution of their duty. It is important to note that as at the time the financial crisis...
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...Foss v. Harbottle 1 Principles and Applications and Exceptions to the Principles INTRODUCTION Basically, both under the general law and under the Companies Acts there are some protections of minority. Example of minority protection is the doctrine under the general law that the majority of the members must not commit a fraud on minority but must act bona fide for the benefit of the company as a whole. Here, the topic that I am about to touch is the rule of Foss v. Harbottle in which there are some exceptions to this particular rule protect the minority. As for the beginning, Foss v. Harbottle was originally a case reported in 1843. The Victoria Park Company was established for the purpose of ‘laying out and maintaining an Ornamental Park within the Township of Rusholme, Charlton-upon Medlock and Moss Side, in the country of Lancaster’. The capital of the company was to be $500,000, divided into 5,000 shares of $100 each. It was to be controlled by five shareholders. The first directors were Thomas Harbottle, Joseph Adshead, Henry Byrom, John Westhead and Richard Bealey. It was provided that three directors should constitute a board and that the acts of three or more should be as effectual as if done by the five. To sum up the feature of the case, two shareholders in the company, Richard Foss and Edward Turton, brought an action against the company’s directors, on behalf of themselves and the other shareholders except the defendants. The defendants were the five directors, a shareholder...
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...SARBANES OXLEY ACT _ FLASH CARDS!!! Inside Directors who are also officers in the corporation, have typically controlled their company's board. Outside directors (also called independent directors) do not work for the company and have traditionally played a lesser role.1 They have been described derisively as "ornaments on a corporate Christmas tree" or "parsley on the fish." Nominated by their friend, the chief executive (CEO), and elected by shareholders without question, these directors could collect handsome paychecks while simply rubber- stamping the CEO's decisions RIGHTS OF SHAREHOLDERS 1. Rights to Information 2. Rights to Vote 3.Right to Dissent 4.Right to Protection from Other Shareholders 5. Right to Monitor 1. Right to Information A company's obligation to provide shareholders with financial information depends on whether it is publicly or privately held. States, which regulate private corporations, generally do not require automatic disclosure of financial information to shareholders. Although the Model Business Corporation Act (Model Act) does require some disclosure, most states do not follow its recommendation. In contrast, the Securities and Exchange Commission (SEC) carefully regulates publicly held corporations and requires them to provide shareholders with extensive financial data. What right do shareholders have under the Model Act shareholders acting in good faith and with a proper purpose have the right to inspect...
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...The Role of Corporate Law in Preventing a Financial Crisis: Reflections on In re Citigroup Inc. Shareholder Derivative Litigation Franklin A. Gevurtz* TABLE OF CONTENTS I. INTRODUCTION .................................................................................................. II. CITIGROUP AS A CASE STUDY IN EXCESSIVE RISK-TAKING .............................. III. TOOLS FOR CURBING EXCESSIVE RISK-TAKING AND THE ROLE OF CORPORATE LAW ............................................................................................... A. The Tools for Curbing Excessive Risk-taking ............................................. 1. Regulation of Business Activities .......................................................... 2. Capital Requirements ........................................................................... 3. Compensation Rules ............................................................................. 4. Liability for Unreasonable Risks .......................................................... 5. Selection of Management (Rules of Corporate Governance) ............... B. Dividing the Tools Between Banking and Corporate Law .......................... IV. WHY IT MATTERS: CITIGROUP AS AN ILLUSTRATION OF THE LIMITATIONS OF STATE CORPORATE LAW ........................................................ A. Citigroup As a Case Study In Weak Corporate Law................................... 1. Overview ..................................................
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...Professor William Stone Law, Ethics and Corporate Governance – LEG-500 March 18, 2014 Abstract The PharmaCARE scenario is a case study based on a real life tragedy. Corporate corruption is alive and well and, as this case proves, unethical corporations will break the law for extra profit. Utilitarian ethics should be considered when in the business of providing consumable products to the public. Unfortunately, there are pharmaceutical corporations operating in the U.S. who are not abiding by the law and who are endangering public safety. Introduction This case study involves a pharmaceutical company that violated the intellectual property rights of a foreign nation; violated state compounding regulations, and violated product safety laws. The company established a compounding pharmacy to mass-produce a new drug formulation that executives believed would earn huge profits. The most disturbing aspect of this case is that there was a tremendous loss of life as a result of the company’s decisions. The federal government has granted authority to the Food and Drug Administration (FDA) to ensure drugs are safe for human consumption. Today, the FDA faces obstacles relating to lack of oversight control, funding, and human resources needed to provide adequate oversight over compounding pharmacies. This paper covers a broad-brush of ethical and legal issues relating to the PharmaCARE case study. The aspects of this case provide insight into federal and state law, corporate values...
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...BRIEFING PAPER | October 25 2012 | | ARNOLDZIO BUS208 E-COMMERCE & LAW-BASS, FALL | MIRAGE EDITIONS, INC., Jennifer Dumas, and Alfred Van Der Marck Editions, Inc., Plaintiffs-Appellees, v. ALBUQUERQUE A.R.T. CO., Defendant-Appellant. And Annie LEE and Annie Lee & Friends Company, Inc., Plaintiffs, v. DECK THE WALLS, INC. and A.R.T. Company a/k/a Albuquerque A.R.T. Company, Defendants. ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- In this case study, Patrick Nagel an artist who died in 1984, famous for works that appeared in many media including lithographs, posters, serigraphs, and as graphic art in many magazines. Nagel left his wife Jennifer Dumas with the copyrights his artworks that he owned when he passed away. The publishing company Dumas and Mirage also owns the copyrights to many of his artworks. No one else held a copyright in any Nagel's work. Appellee Alfred Van Der Marck Editions, Inc. is the licensee of Dumas and Mirage and the publisher of the commemorative book entitled NAGEL: The Art of Patrick Nagel this book, is a compilation of selected copyrighted individual art works and personal commentaries of Patrick Nagel. Since 1984, the primary business of appellant has been purchasing artworks and transferring the image to ceramic tiles and offering the tile for sale to the retail market I feel as the transferring of the images...
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...Introduction The welfare of a company depends on the shoulders of the directors and the directors are also responsible for the interests of the company as well as shareholders. Directors are basically fiduciary agents and they owe duties to the company, directors' are appointed by the company's shareholders to run the company's affairs for the benefits of the shareholders. Moreover, no company can get success without having the good and honest directors, so company success can only be achieved, if the directors of the company fulfil their duties and complete enforcement of the director's duties. Therefore directors play very significant role in any corporate governance system. Director's general duties are based on the certain common law rules and equitable principles. Lord Judge Bowen explains director's duties in these beautiful words that “directors are described sometimes as agents, sometimes as trustees and sometimes as managing partners. But each of this expression is to be used not as exhaustive of their powers and responsibilities, but indicating useful points of view from which they may for the moment and for the particular purpose be considered.” The Chapter 1 of this paper is amid to critically analyze that what are the duties and responsibilities of directors under Companies Act 2006. The duties of directors alone are of no importance if they cannot be fully enforced, the chapter 2 of this piece of work relates to the system of enforcement which provides the different...
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...ASSIGNMENT 4 BUSINESS LAW AND BANKRUPTCY Facts Aquaman is president of a marine research company called "Underwater Leagues, Inc." On April 1, the research director of Underwater Leagues tells Aquaman that they've come up with "Oxygum," a means of breathing underwater by chewing a special kind of gum. Aquaman knows a great product when he hears it. He delays announcing the invention to the public so that he can buy all the stock he can get his hands on. He buys 50,000 shares of Underwater Leagues, at $10 apiece. After the announcement, the share price skyrockets to $50 per share. Issue If the shareholders bring a derivative action against Aquaman, what federal law should they accuse Aquaman of having violated? Did he violate this statute? What remedy would the shareholders be able to seek (i.e. how much money would Aquaman be liable for)? Rule The Security Exchange Act of 1934, and more specifically, 17 C.F.R. 240. 10b-5 (15 U.S.C. 78j(b)) regarding manipulative and deceptive devices, prohibit the “purchase or sale of a security of any issuer, on the basis of material nonpublic information about that security or issuer, in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information.” Additionally, under the Security Exchange Act of 1934 15 U.S.C. § 78p(b); 17 C.F.R. 240. 16(b), a corporation or security...
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...Brooklyn College and a JD from Fordham University School of Law. He is the author of the 2009 award-winning article ‘Meet Two-Face: The Dualistic Rule 10b-5 and the Quandary of Offsetting Losses by Gains’. Fordham Law Review 77(6): 3045–3094. Correspondence: Samuel Francis, 321 Roselle Avenue, Cedarhurst, NY 11516, USA E-mail: samfrancis@optonline.net ABSTRACT At the center of the global financial crisis of 2007–2008 was the collapse of American International Group, brought on by extensive unhedged positions in derivatives, such as credit default swaps, and possibly exacerbated by mark-to-market accounting rules. Even though these rules generally produce the most realistic valuations of derivatives, a heated debate broke out over their application in a dislocated market. The foremost concern was that forcing financial institutions to mark down assets to their current market prices actually causes further declines. Regulators largely dismissed such concerns, but acknowledged that the existing standards could use additional clarification and modification. Many scholarly studies have since concurred that the rules should not be replaced, but suggest that additional measures should be taken to avoid their potential procyclical effects. Journal of Derivatives & Hedge Funds (2011) 17, 122–132. doi:10.1057/jdhf.2011.6; published online 9 June 2011 Keywords: mark-to-market; fair value accounting; credit default swaps; derivatives; AIG INTRODUCTION And it came to pass at the end of...
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...million to start a new airline. Joan does the research and finds that Bill has worked as an assistant regional manager for a Midwestern airline for 12 years, and that under Bob’s watch the company increased sales 28%. Joan recommends to the board that they grant Bob the loan in which they do. After 3 years Bob files bankruptcy and the bank can only reclaim $150 million. They shareholders seek to file a derivative law suit against Joan for breach of fiduciary duty of care. The questions here is Joan’s conduct protected by the business judgment rule and if so how likely are the shareholders going to be able to succeed successfully with the law suit. Federal Rule 23.1(a) states that this rule applies when one or more shareholders or members of a corporation or an unincorporated association bring a derivative action to enforce a right that the corporation or association may properly assert but has failed to enforce. The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of shareholders or members who are similarly situated in enforcing the right of the corporation or association. USCS Fed Rules Civ Proc R 23.1 The business judgment rule, a well-established doctrine of corporate law, "bars judicial inquiry into actions of directors taken in good faith and in honest pursuit of the legitimate purposes of the corporation. Abramowitz v. Posner, 513 F. Supp. 120, 125 (S.D.N.Y. 1981) New York's business...
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...North South University LAW 200 Assignment # 2 Prepared for: Barrister A.M. Masum Faculty of Business North South University Prepared by: ID NAME 062 528 030 M.Montasir Imran Khan Section: 02 Page | 1 “A proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company.”- Explain & Illustrate? 1. Introduction: The basic principal relating to the administration of the affairs of a company is that “the will of the majority is supreme”. The general rule is that the decisions of the majority shareholders in a company bind the minority. 1 In a world that recognizes ‘simple majority rules’, minority shareholders of companies are by default vulnerable to oppression, disregard and unfair treatment by majority shareholders who are in control of the company. Majority shareholders also have certain obligations to minority shareholders in their capacity of controlling the corporation. In certain cases this minority shareholder right can be exercised directly against a shareholder, without having to go against a corporation or through the derivatives action process.2 In such case a proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company. The oppression of minority or mismanagement of a company by majority therefore calls for some remedial action. 3 Today’s minority shareholders come to the corporation with varied attitudes and agendas. Although...
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...Issues included: Breaking Wisconsin Disclosure Law, Shareholders filed a Derivative Action, and because of certain actions Risk Corp. lost money due to the data breach. There are several relevant laws & principles that pertain to Risk Corporation. The Business Judgement Rule could be used as a defense for Tom Lawless in response to the derivative action. The business judgement rule states that directors and officers are immune from personal liability if their actions are reasonable when made but prove to be detrimental to the corporation. Next, the Duty of Loyalty may have been broken when Lawless didn’t put the corporation's interest ahead of personal interests. This happened when the Risk Corp. didn’t disclose the potential conflict of interests regarding cyber break-ins. The Duty of Care is relevant because the directors and officers have a duty to exercise reasonable care in conducting corporate affairs. And lastly Shareholder litigation is seen here when the shareholders filed a derivative action after the discovery of the data breach and the decline of stock prices of the Risk Corporation. Scenario 2 A shareholder is part owner of a corporation based on the percentage of the corporation's stock the shareholder owns. Shareholders have the right to vote to approve any fundamental corporate changes that the board of directors wishes to implement. Examples of changes are amending the articles of incorporation or its by-laws, merging or dissolving the corporation, increasing...
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...you did. The issue on the fact pattern of the assignment deals with copyright laws of the United States. For purposes of the one-page ruling that you have to write, I am providing you with the legal background and possible arguments in order for you to arrive at your own conclusion and complete the assignment. Summary of the Facts of the Case: Bobby Bandleader has been singing his own version of Happy Birthday To You for over twenty years at his restaurant. In Bobby's version of the song, he uses the same tune, but has different wordings of the song. Bobby's version of singing Happy Birthday To You became very popular and has contributed to the success of his restaurant. Johnny Singstealer is the copyright holder of Happy Birthday To You. The copyright has not expired and is still valid. Johnny discovered the use of his song by Bobby Bandleader and has sued Bobby for copyright infringement. Bobby is seeking $1million for damages and an injunction against any further performances by Bobby. Copyright Laws: The copyright laws of the United States is encoded in Title 17 of the United States Code. The website to access for the copyright laws is: http://www.copyright.gov/title17/ Below are the applicable sections in the code that applies to this case. I am making annotations in blue why I feel the section applies to this case: Section 101 - Definitions A “derivative work” is a work based upon one or more preexisting works, such as a translation, musical...
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...ISO 9000 - Quality management The ISO 9000 family addresses various aspects of quality management and contains some of ISO’s best known standards. The standards provide guidance and tools for companies and organizations who want to ensure that their products and services consistently meet customer’s requirements, and that quality is consistently improved. ISO 9001:2008 ISO 9001:2008 sets out the criteria for a quality management system and is the only standard in the family that can be certified to (although this is not a requirement). It can be used by any organization, large or small, regardless of its field of activity. In fact ISO 9001:2008 is implemented by over one million companies and organizations in over 170 countries. This standard is based on a number of quality management principles including a strong customer focus, the motivation and implication of top management, the process approach and continual improvement. These principles are explained in more detail in the pdf Quality Management Principles. Using ISO 9001:2008 helps ensure that customers get consistent, good quality products and services, which in turn brings many business benefits. Certification to ISO 9001:2008 Checking that the system works is a vital part of ISO 9001:2008. An organization must perform internal audits to check how its quality management system is working. An organization may decide to invite an independent certification body to verify that it is in conformity to the standard, but...
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...The article Wielding Derivatives as a Tool for Deceit by Floyd Norris, a writer for the New York Times, talks about how derivatives can be used as “weapons of mass deception”. Enron is a classic example of this. They used phony accounting methods, including derivatives, to make their financial statements seem stronger and less risky than they actually were. The banks, that were essentially giving them loans, were also involved in this scheme. The latest news of large-scale use of derivatives to deceive is the case of Italy and Greece entering into the Euro. The government received money, which was essentially a loan, but was able to keep it off the balance sheet because of its title. This made the financial statements look better so that the country could join the Euro. The article compared this to a student cheating on entrance exams to be accepted into a better college. This article brings into question the moral and ethical decisions businesses must make regarding their financial actions. Just because something is technically legal to do, does not mean it is ethical. Key individuals, who are in charge of what a business does, need to be involved and knowledgeable enough to understand when something like this is happening. If the business is doing something to deceive others, it is probably something they shouldn’t be doing. June 27, 2013 Wielding Derivatives as a Tool for Deceit By FLOYD NORRIS Derivatives are not always “financial weapons of mass destruction,” as...
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