Biz Orgs Cases

To be exempt from SEC filing requirments when making offers of shares to employees as compensation, the employees must have asscess to sufficient information to make an informed decision

A soliciation is an investment K if (1) it is an investment of $ (2) regarding a common enterprise (3) where the profits come solely from teh efforts of others

There is liablity to the directors for bad/stupid/erroneous decision made if the directors acted in good faith and took reasonable steps to implement a rational process (doctors)

A shareholder must first make a demand on the board of directors prior to filing a derivative action unless he can show that the board is not independent/disinterested and making a demand would be futile (retiring director receiving employment K for 10 years)

A deriviative action may be dimissed by a disinterested board of 2+ that determines after a reasonable investigation that the suit is not in the best interests of the company (Independent Committee)

• You may not bring a derivative suit solely on the breach of Good Faith; you must first prove breach of loyalty or care
• Bank had to pay 50 million in fines for not compling with filing requirements

• Executive compensation will not be deemed excessive as waste where it was approved by a disinterested board unless:
• (1) there was no reliance on an expert
• (2) there is no reasonable belief that the advice was rendered with reasonable care
• (3) The cost of the package was so material and available that the failure not to consider it is grossly negligent
• (4) The decision was unconscionable

• Interlocking directors owe a fiduciary duty to both corporations
• Cash merger ($24 v. $21)

• Intrinsic Fairness Test standard
• Applies where there is a shareholder ratification requirement or if a disinterested vote is unavailable
• Must then look at the motivations of the directors and the effect on the corporation
• (N & M 50/50; N made loan to the company)

Opportunity that comes to an officer or director must first be offered to the corp if its in the line of business, corp would be interested in the opportunity, or the opportunity was presented to the officer in his capacity

Private planitiffs must prove intent under a 10(b)(5) action

Only the SEC may bring an action for aiding and abetting

Directors or officers in reciept of non-public information have an affirmative duty to refrain from trading on it or disclosing it

• A private action may be brough against primary violators (read: secondary actors who help perpetuate the fraud like Ponzis)
• Receipt of payments for services regarding the fraud is sufficient scienter

• A tippee who receives confidential information without deceit and does not use it for a personal benefit (AND who has no duty to the corp) is not liable under 10(b)(5)
• Analyst/WSJ case

A corp may properly refuse to include a proxy proposal regarding the election of a specific director

Materiality for a proxy statement means that there is a substantial likelihood that reasonable shareholders would attach importance to the material when deciding how to vote

• Shareholders have the right to inspect the books upon the proper showing of purpose
• The court has wide discretion to set the parameters of what a proper purpose/showing are