THE CATHOLIC UNIVERSITY OF AMERICA
COLUMBUS SCHOOL OF LAW
CORPORATIONS
SPRING 2011 SYLLABUS
LAW 451 Professor Raymond J. Wyrsch
Monday & Wednesday, 10:10 a.m.-12:00 p.m. (202) 319-6604
Office Hours: Monday & Wednesday, 12:30-2:00 p.m.
Appointments are always welcome
Course Approach:
This course focuses on the legal, policy and practical aspects of conducting business as a corporation, with special emphasis being placed on the role and context of attorneys providing advice to corporate clients. The course will address the nature, purpose, types and historical development of corporations, also distinguishing corporations from other forms of business organizations such as partnerships. We will also study the formation, operation and management of corporations, including the respective roles, powers, rights and responsibilities of share-holders, directors and officers. The corporate financial structure and applicable accounting/ finance issues will be addressed, including an introduction to the federal regulation of corporations issuing securities. Both the merging and termination of corporations will also be studied. All of these topics will be studied in the context of a closely-held versus publicly-held corporation. Current events, recent developments and news stories also will be discussed.
Required:
1. Textbook: Bauman, Corporations Law and Policy, Materials and Problems, 7th Ed., West-American Casebook Series (2010).
2. Statutes: O’Kelley and Thompson, Corporations and Other Business Associations,
Selected Statutes, Rules and Forms, Aspen (2010 Ed.).
3. Course Materials Manual: Corporations Law, Prof. Raymond J. Wyrsch (Copy Room)
4. Handout: Assigned Outside Cases (to be distributed in class)
Recommended Guides: 1. Palmiter, Corporations, Examples and Explanations,
Aspen Law and Business ( 6th Ed. 2009).
2. Pinto and Branson, Understanding Corporate Law,
LexisNexis (3rd Ed. 2009).
Other interesting and 1. Macey, Editor, The Iconic Cases in Corporate Law,
relevant readings ThomsonWest, American Case Book Materrials (2008).
2. Ramseyer, Editors, Corporate Law Stories,
Foundation Press (2009).
CLASS ASSIGNMENTS
A. INTRODUCTION AND BACKGROUND (Chapter 2)*
Basic Features and Types
Governing law
Basic Framework and Major Players
Accountability vs. Protection
Read: Statutes Book: See: Model Business Corporation Act
(Table of Contents) Delaware General Corporation Law
(See Statutes Book pp. 3 and 203)
Textbook: pp. 16-24, 33-38
CMM: Course Syllabus: pp. 1-14
Other Intro Materials: pp. 15-24, 103
Exclude: Bayer case (p. 25)
Equitable Limitations on Corporate Actions (pp. 30-33)
*Students are not responsible for Chapter 1 (Economics of the Firm)
B. CORPORATE FEDERALISM (Chapter 3)
Nature, Background and History
Read: Textbook: pp. 39-40
TWEN: History of Corporations
Internal Affairs Doctrine
Read: Textbook: pp. 41-45
CMM: p. 23
Exclude: Anti-Takeover Statutes (pp. 45-62)
State Competition
Read: Textbook: pp. 62-74
C. THE CORPORATION AND SOCIETY (Chapter 4)
A Corporation's Role in Society: Social Responsibility vs. Profit-Making?
Read: Textbook: pp. 75-91
CMM: pp. 25-28
Exogen, Inc. Problem - Part 1: Textbook: pp. 76-77
The Role of the Lawyer:
Read: Textbook: pp 91-101
Exogen, Inc. Problem - Part 2: Textbook: p. 92
Specific Corporate Expenditures: Contributions
Read: Textbook: pp. 75-101; 107-121 See: MBCA Chap 3
CMM: pp. 29-31
Union Airlines Problem: Textbook: p. 108
Exclude: Corporate Political Expenditures (pp. 101-107)
D. THE CHOICE OF ORGANIZATIONAL FORM (Chapter 5)
Factors in Decision: Corporation vs. Partnership vs. Limited Liability Company
Read: Textbook: pp. 122-135 See: Uniform Partnership Act
CMM: pp. 32-38 Uniform Limited Partnership Act
Uniform Limited Liability Company Act
(See Statutes Book pp 557-656)
Precision Tools Problem - Part 1: Textbook: pp. 122-123
E. FORMING THE CORPORATION (Chapter 6)
Process of and Choice of State::
Read: Textbook: pp. 136-139 See: MBCA Chapters 2, 3, 10 and 15 Chapters 10 and 14
CMM: pp. 42-44 Corporation Forms in Statutes Book
(pp. 509-522)
Lawyers’ Role and Responsibilities:
Read: Textbook: pp. 139-159
CMM: pp. 40-41
Problems encountered:
Read: Textbook: pp. 159-163
CMM: pp. 45-46
Coopers & Lybrand case (Handout case)
Precision Tools Problem - Part 2: Textbook: pp. 136-137
F. FINANCIAL ACCOUNTING AND VALUATION (Chapter 7)
Special Handout: Financial Accounting & Valuation (to be provided)
Financial Statements: meaning and importance
Read: Textbook: pp. 164, 167-170 See: MBCA 16.20
CMM: pp. 47-50
Special Handout
Precision Tools Problem - Part 3: Textbook: p. 164
Precision Tools Problem - Part 4: Textbook: p. 188
Major Financial Statements:
-- Balance Sheet
Read: Textbook: pp. 165, 170-180 (but exclude Analysis…., p. 180)
-- Income Statement
Read: Textbook: pp. 166, 181-185
-- Statement of Cash Flows
Read: Textbook: pp. 166, 186-188
-- Valuation of a Business Exclude: pp. 188-196
G. FINANCIAL STRUCTURE OF THE CORPORATION (Chapter 8)
Corporate Securities:
-- Equity vs. Debt Securities (Common & Preferred Stock; Bonds)
Read: Textbook: pp. 199-210
CMM: pp. 58-63
Metropolitan Life case (Handout case)
-- Corporation’s vs. Investors’ Interests
Read: Textbook: pp. 211-218 See: MBCA Chapter 6, Subchapters A thru D
CMM: pp. 51-57
-- Precision Tools Problem - Part 5: Textbook: pp. 199-200
Regulation of Legal Capital:
-- In general
Read: Textbook: pp. 218-224
CMM: pp. 64-67
Exclude: Precision Tools Problem - Part 6 (p. 219)
-- Issuance of Stock
Read: Textbook: pp. 220-226
CMM: pp. 68-69
-- Declaration of Dividends
Read: Textbook: pp. 226-232
CMM: pp. 70-73
Exclude: Klang case (p. 228)
Corporate Dividend Policy:
Read: Textbook: pp. 232-234
CMM: pp. 74-75
Exclude: Kamin case (p. 236)
H. THE REGULATION OF SECURITIES ISSUANCE (Chapter 9)
Background and Objective
Read: Textbook: pp. 239-241 See: Securities Act of 1933 and SEC Rules
CMM: pp. 77, 79-80 (Statutes Book pp. 707 & 733)
Precision Tools Problem - Part 7: Textbook: p. 240
Meaning of a “Security”
Read: CMM: p. 78
Life Partners case (Handout 78)
Registration Process:
Read: Textbook: pp. 241-244
CMM: pp. 81-83
Exemptions:
Read: Textbook: pp 244-252
CMM: pp. 84-86
Liability:
Read: Textbook: p. 253
CMM: p. 87
Escott case (Handout case)
I. PIERCING THE CORPORATE VEIL (Chapter 10)
Concept, Justifications and Application:
Read: Textbook: pp. 255-265
CMM: pp. 88-91
Tort Creditors:
Read: Textbook: pp. 265-277
CMM: pp. 92-93
Contract Creditors:
Read: Textbook: pp. 277-287
CMM: p. 94
Exclude: Freeman case (p. 277)
Parent-Subsidiary Corporations
Read: Textbook: pp. 287-293
CMM: pp. 95-99
Alternatives
Read: Textbook: pp. 294-296
CMM: p. 100
Precision Tools Problem - Part 9:
Read: Textbook: pp. 264-265
CMM: p. 101
J. CORPORATE MANAGEMENT-ACTIONS BINDING CORPORATION (Chapter 11)
Officers:
Read: Textbook: pp. 297-313 See: MBCA Chapter 8, Subchapters D
CMM: pp. 103-112
Ripani case (Handout case) Agency Relations Problem: Textbook: p. 297
Exclude: Menard case (p. 307)
Board of Directors:
Read: Textbook: pp. 314-318 See: MBCA Chapter 8, Subchapters A, B
CMM: pp. 113-120
Gearing case (Handout case)
Article: The Lawyer-Director (pp 345-348)
Widget Corporation Problem: Textbook: p. 314
Exclude: Legal Opinions (pp. 319-331)
K. THE GOVERNANCE ROLE OF SHAREHOLDERS - IN GENERAL (Chapter 14)
Shareholders(Process):
Read: Textbook: pp. 420-429 See: MBCA Chapter 7, Subchapters A & B
CMM: pp. 121-131
Fabulous Foods Problem: Textbook: p. 421
Shareholders (Inspection Rights)
Read: Textbook: pp. 446-469 See: MBCA Chapter 16
CMM: pp. 134-136
Exclude: Marathon Partners case (p. 459)
Polygon Global Opportunities case (p. 465)
Mergers & Acquisitions: See: MBCA Chapters 11, 12 and 13
Read: Textbook: pp. 430-446
CMM: pp. 137-155
LaFrance Cosmetics Problem - Part 1: Textbook: pp. 431-432
LaFrance Cosmetics Problem - Part 2: Textbook: pp. 441-443
Board of Directors Responses to Shareholder Initiatives
Read: Textbook: pp. 541-551 (last part of Chapter 15)
CMM: pp. 132-133
LaFrance Cosmetics Problem – Part 4: Textbook: p. 541
L. THE CLOSELY HELD CORPORATION: SPECIAL PROBLEMS (Chapters 12 & 13)
Planning (for Special Issues) (Chapter 12)
-- In general: See: MBCA §§ 6.27 and 7.28,
MBCA Chapter 7, Subchapter C
Read: Textbook: pp. 332-335 Maryland Close Corp. Statute
CMM: pp. 157-158
-- Shareholder Voting (for directors and other matters)
Read: Textbook: pp. 336-344
CMM: pp. 159-163
Precision Tools Revisited Problem-Part 1: Textbook: pp. 336-337
Exclude: Article: The Lawyer-Director (pp. 345-348)
-- Restrictions on Board Discretion
Read: Textbook: pp. 348-362
CMM: pp. 164-171
Galler case (CMM: p 169)
Precision Tools Revisited Problem-Part 2: Textbook: pp. 348-350
Exclude: Atlantic Properties case (p. 363)
-- Restrictions on Transfer of Shares:
Read: Textbook: pp. 366-377
CMM: pp. 172-178
Precision Tools Revisited Problem-Part 3: Textbook: pp. 366-367
Oppression: (Chapter 13)
-- Meaning: Dissension, Deadlock, Oppression
Read: Textbook: pp. 378-381
CMM: p. 179
-- Judicial Protection
Read: Textbook: pp. 381-394
CMM: p. 180
Precision Tools Revisited Problem-Part 4: Textbook: p. 378
-- Statutory Protection
Read: Textbook: pp. 394-416 See: MBCA Chapter 14, Subchapter B
CMM: pp. 181-182
Precision Tools Revisited Problem-Part 5: Textbook: pp. 394-395
Exclude: Dissolution of LLCs (pp. 417-419)
M. GOVERANCE ROLE OF PUBLIC SHAREHOLDERS (Chaps 14 & 15)
Background & Theories of the Firm:
Read: Textbook: pp. 484-494
Individual and Institutional Investors:
Read: Textbook: pp. 494-502
CMM: pp. 185-186
Federal Proxy Regulation:
-- Background and Process:
Read: Textbook: pp. 470-483 (last part of Chap 14) See: §14 of SEC 1934 Act
pp. 502-540 SEC Rule 14a
CMM: pp. 188-194
TSC Industries case (p. 557)
Universal Netware Problem - Part 1: Textbook: pp. 476-478
Universal Netware Problem - Part 2: Textbook: pp. 494-495
Overview of Chapter 16: Read: Textbook: pp. 554-560
Exclude: Long Island Lighting case (p.480)
-- Shareholder Proposals
Read: Textbook: pp. 502-519
CMM: pp. 194-200
Universal Netware Problem - Part 3: Textbook: pp. 502-504
-- Shareholder Nomination of Directors and ByLaw Amendments
Read: Textbook: pp. 519-541
N. CORPORATE GOVERNANCE IN THE PUBLIC CORPORATION (Chap 17)
Meaning and Background (including the Enron Scandal)
Read: Textbook: pp. 607-611
CMM: p. 202
Sources of:
Read: Textbook: pp. 614-618
CMM: p. 203
The Board of Directors (Composition, Committees & Structure)
Read: Textbook: pp. 618-633
CMM: pp. 205-211
Fashion Industries Problem - Part 1: Textbook: pp. 611-613
Sarbanes-Oxley Act:
Read: Special Handout
CMM: pp. 213-220
O. THE DUTY OF CARE OF CORPORATE DIRECTORS/OFFICERS (Chap 18)
In general:
Read: Textbook: pp. 634-637 See: MBCA Chapter 8 Subchapters C and E
CMM: pp. 222-227
Decision Making (Business Judgment Rule):
Read: Textbook: pp. 637-644
CMM: p. 229-232
Oversight:
Read: Textbook: pp. 644-674
CMM: pp. 228
Fashion Industries Problem – Part 2: Textbook: p. 634
Exclude: Citigroup case (p. 662)
Directors’ Criminal Liability:
Read: Textbook: pp. 674-676
Duty to Become Informed and related topics:
Read: Textbook: pp. 676-702
CMM: pp. 233-234
Fashion Industries Problem – Part 3: Textbook: pp. 676-677
Rebutting the Business Judgment Rule
Read: Textbook: pp. 703-704
Avoidance of Liability:
Read: Textbook: pp. 705-7-718 See: MBCA §2.02(b)(4) and (5)
CMM: pp. 235-237 MBCA Chapter 8, Subchapter E
Exclude: Fashion Industries Problem - Part 4 (p. 705)
P. THE DUTY OF LOYALTY TO THE CORPORATION (Chap 19)
In General:
Read: Textbook: p. 719
CMM: p. 239
Director Self-Dealing
Read: Textbook: pp. 722-753 See: MBCA Chapter 8, Subchapter F and G
CMM: pp. 240-253
-- Substantive Fairness
Read: Textbook: pp. 736-738
-- Procedural Fairness
Read: Textbook: pp. 739-752
Exclude: Harbor Finance case (p. 746)
Gantler case (p. 750)
-- The Independent Director
Read: Textbook: pp. 752-781
Exclude: The Oracle Story (pp. 769-777)
-- Read: Starcrest Problem - Part 1: Textbook: pp. 702-721
The Evolution of Good Faith
Read: Textbook: pp. 781-800
Exclude: ATR-Kim ENG Financial case (p. 792)
The Corporate Opportunity Doctrine
Read: Textbook: pp. 800-819
CMM: pp. 254-255
Starcrest Problem - Part 2: Textbook: pp. 801-802
Exclude: Burg case (p. 811)
Q. EXECUTIVE COMPENSATION (Chap 20)
Forms and Process:
Read: Textbook: pp. 820-829, (+ p. 210 for Stock Options)
CMM: pp. 257
Federal Law:
Read: Textbook: pp. 829-832
CMM: pp. 258, 264
State Law:
Read: Textbook: pp. 832-848
CMM: pp. 259, 263, 265
Stock Options and Backdating
Read: Textbook: pp. 848-857
CMM: pp. 260-262
Exclude: Tyson Foods case (p. 857)
R. REGULATION OF SECURITIES TRADING (Chap 23)
Background:
Read: Textbook: pp. 1004-1016
CMM: pp. 267-268
Insider Trading - State Law
Read: Textbook: pp. 1016-1027
Exclude: Diamond case (p. 1021)
Insider Trading - Federal Law See: Securities Exchange Act of 1934 &
SEC Rules
Read: Textbook: pp. 1030-1076
CMM: pp. 269-275
Texas Gulf Sulfur case (Handout)
Standard Electronics Corp. Problem: Textbook: pp. 1012-1016
S. SHAREHOLDER LITIGATION (DERIVATIVE SUITS) (Chap 22)
Nature of: Direct vs. Derivative:
Read: Textbook: pp. 942-950 See: MBCA Chap 7, Subchapter D
Procedural Requirements and related matters:
Read: Textbook: pp. 950-985
Class Actions:
Read: Textbook: pp. 985-1003
Exclude: Cavanaugh case (p. 986)
T. PROTECTING AND SELLING CONTROL OF A CORPORATION (Chap 24)
Proxy Contests - Tender Offers - Defensive Tactics - Management's Role/Duty
Read: Textbook: pp. 552-606 See: SEC 1934 Act
SEC Rule 14D
OTHER PERTINENT COURSE INFO
I. RELATION OF CORPORATIONS, AGENCY LAW & UBO COURSES
II. TWEN WEBSITE: Students need to register on the TWEN website asap, since I frequently use this site to provide weekly assignments and other messages, together with posting other pertinent course information (e.g., a special handout, citations to cases or articles).
III. ASSIGNMENTS, CLASS PARTICIPATION: Students are expected to read all textual materials assigned, including cases, notes and other discussions. There will be frequent reference to the corporate statutes and other materials in the above-required Statutes Book. Students should read over the applicable portions of the Statutes Book with respect to each reading assignment.
Special emphasis will be placed on the Problem Situations that appear in each chapter, focusing on giving advice to clients. Outside cases, articles and other materials will be distributed throughout the semester. Class attendance and participation is strongly recommended and may be used for grading purposes. Persistent absences may lead to exclusion from the course. Of course there may be legitimate reasons for not attending a particular class (e.g., family, sick, work, job interview), in which case you need to email me.
III. LAPTOP USAGE: Students may use their laptops in class, provided they are using the laptops for course purposes and the laptops are not distracting them from our class discussions.