Liability of Shareholders

Duties and Liabilities of Directors and Officer

Duties of directors and officers: Duty of care. Due diligence (do h/w, make best decision for company by director)+Duty of loyalty. You can’t self-deal (director cant do business by yourself). And director must keep secrets of company. +Relationships based on trust, care(in the company best interests)- so they are fiduciary.

Rights of Shareholders

1. Preemptive rights –if I disagree with the price of my share, I go to court. 2) Inspection -look every documents in the company. 3)Transfer shares (unless restricted by articles and noted on the stock certificate)4) Dissolution: Voluntary or Involuntary, 5)To vote; +to purchase newly issued stock 6) To dividends, when declared by board. (Illegal Dividends: shareholder must return if he knew they were illegal. Directors have personally liable) 7)To have a stock certificate;8)To inspect corporate records.

Liability of Shareholders

shareholders lose just what they invested in this company. Stock Subscription Agreements-written irrevocable contracts: Par-value shares: corp. must have a value equal to the total value of the shares.+Watered stock: Shareholder is personally liable for difference. Duties of Majority Shareholders:they actualcontrol over the corporation(have enough shares ).

Merger, Consolidation and Transformation(purchase of assets+ purchase of stock).III- Corporations can grow and expand by

§1: Merger and ConsolidationA+B=A – company b no longer legally exist – merger(is two or more corporations after which only one corporation remains),A+B=C – new corporation – consolidation .

Merger and Consolidation Procedures:Directors must approve the merger plan.+Next shareholders must approve.+Articles filed with Secretary of State consolidated corporation.+ Appraisal right of shareholders. +Appraisal Rights( It's a protection policy for shareholders, preventing corporations involved in the merger from paying less than the company is worth to the shareholders. (Competitions and antitrust law- the same. )

§2: Purchase of Assets-its ownership and control over the physical assets of another company.Potential Liability in Purchase of Assets-is not liable for liabilities of selling corporation unless some excepts.

§ 3: Purchase of Stock-Common alternative to merger or consolidation is the purchase of a controlling interest (up to 51%) of a “target” corporation’s stock giving the purchaser corporation controlling interest in the target.Tender Offers-an offer to buy shares in a corporation (usually above the market price) for cash or securities or both. Target’s Responses-Directors of a corporation may consider the takeover to be friendly or unfriendly to the present management.

§ 4: Termination Dissolution: voluntary (ex, by a unanimous vote to dissolve or Board files dated articles of dissolution etc)OR involuntary(ex, Shareholders can initiate dissolution proceedings if the corp. is deadlocked; state and court can dissolve corporation) and Liquidation: Voluntary.(Board liquidates and acts as trustees of assets. Or Court will appoint) OR Involuntary. (Court appoints receiver.)