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66 Cards in this Set
- Front
- Back
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Name the 5 core characteristic of a company/corporation |
1. Separate legal identity 2. Transferable shares 3. Several owners 4. Limited liability 5. Delegated or centralized management |
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Name the 3 types of comparatists |
1. Practical comparatists 2. Academic comparatists 3. Legislative comparatists |
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Who/what are practical comparatists |
- Legal counsels; - comparing legal systems; - in order to find the best the best approach leading to the best practice. |
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Who/what are academic comparatists |
- Academic researchers; - investigating practical findings leading to authoritative academic sources. |
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Who/what are legislative comparatists |
- Institutions, professional associations; - investigating and comparing corporate laws of different jurisdictions leading to harmonization/stimulation of desired results in corporate law. |
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Name 3 cases about the incorporation theory/real seat theory |
1. Uberseering BV 2. Inspire Art Ltd 3. VALE |
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Can a shareholder ignore the wishes of a CEO? |
Yes, but there is the risk of shareholder activism if a BOD does not respond satisfactorily. |
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Give the definition of shareholder activism |
A way in which SH assert their power as owner of a company to influence behaviour, in a broad spectrum of activities such as press campaigns, blogging, etc. |
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Name the pros and cons of shareholder activism |
Pros: catalyzing change in a collaborative manner, social and political. Cons: continuity risk due to interference, the insecurity on company policies and forced interference. |
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Who empowers the board in the UK? |
The corporate powers are originally vested in shareholders but they have the obligation to distribute powers to management directors. |
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Who empowers the board according to Delaware law? |
A statute empowers the board. |
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Who empowers the board in Germany? |
Statute empowers the board and divides the powers in two: - supervisory board of directors - management board of directors. |
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Name two rights shareholders enjoy |
- The right to receive information on BOD decisions - Approval rights |
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Does a shareholder have the right to interfere in the DM process? |
In principle, no. Unless provided otherwise in the company's constitution |
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A shareholders' approval right is only able to be exercised when it concerns 3 things, what are they? |
1. Company's assets 2. Company's constitution 3. Company's structural integrity |
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Name a German case concerning shareholder approval on the company's assets |
Mactotron case |
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Name a German case concerning shareholder approval on structural integrity |
Holzmuller case |
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What are interests? |
Personal interests of directors v best interests of the company |
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What are the risks of the interests of directors? |
- directors entering into self-dealing agreements - directors exceeding their powers and eventually being removed. |
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Name a way in which a director can represent a company and what kind of aspect this is (internal or external) |
As an agent, internal aspect |
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Name a external aspect of the powers of representation of a director |
The protection of third parties |
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What is self-dealing? (give an example of each) |
1. Personal interest in a transaction - The director is also the counter party in the transaction 2. Competition with a company - Director owns or manages the competing company 3. Obvious appropriation of company's assets - The director "borrow" a company yacht and goes on holidays |
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All three jurisdictions require that directors act with standards of? |
1. Due care 2. Loyalty |
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Name two types of internal governance control and explain them. |
1. Internal: incentives used to align the interests of managers with the interests of the owners. 2. External: private regulation and market powers and public regulations. |
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Name two types of BOD structures and explain them. |
1. Two-tier structure: includes a management board and a supervisory board. 2. One-tier structure: includes only a management board. |
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Name two types of executive compensation and give an example. |
1. Financial remuneration: cash salary 2. Equity compensation: stock awards |
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What is the aim of executive compensation? |
To align interests of SH and Directors |
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What is are the risks of executive compensation? Give one example each |
1. Accounting manipulation - improperly classifying accounting terms 2.Manipulating the value of options - stock options |
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How can you respond to self-dealing? |
1. Disclosure of executive compensation 2. (introduction) of supervisory directors 3. SH say on compensation |
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What is the business judgement rule? Mostly found in which jurisdiction? |
That Courts presume that disinterested directors making business decisions in good faith have met their duty of care if there was no serious mismanagement. (Delaware rule) |
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What are two problems of collective action? |
1. If an individual owner owns 100% of the shares. 2. Dispersed ownership, no shareholder has control. |
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what is the role of shareholder meetings? |
1. primary body for collective action 2. to ensure the control over DM by directors |
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What is a proxy and what is it used for? |
A proxy is a third party with a special purpose authorization to perform a specific task on someone else's behalf during a specified period of time and it is used for voting in SH meetings. |
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Name two types of proxies and explain them |
Specific: vote yes or no General: vote wisely |
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Difference between transferring voting rights in GER and US |
In Germany it is seen as an offence, misdemeanor and thus forbidden. In the US you can do whatever you want with your voting right. |
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SH meetings UK: When, who how? |
When: during the first 6 months after its accounting reference date Who: all shareholders and directors How: due notice to be provided within the prescribed time in the form of hard copies, electronic communications, etc |
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SH meetings US: When, who how? |
When: once a year, within 13 months of the last AGM Who: all shareholders How: due notice to be provided within the prescribed time in the form of hard copies, electronic communications, etc |
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SH meetings GER: When, who how? |
When: once a year, within 8 months of the accounting year Who: all shareholders How: due notice to be provided within the prescribed time in the form of hard copies, electronic communications, etc |
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What are majority shareholders? |
Shareholders constituting at least a majority of the total voting rights |
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What are minority shareholders? |
pro rata owners |
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What is share capital? |
- Contributions of SH to the company in exchange for their shares. - Part of the company's assets - Need it to set up a public company in all three jurisdictions |
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What is the function of share capital? |
to ensure equal treatment of SH of the same class. |
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How much should the initial SH pay for a share? |
The (nominal) par value of a share |
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How is the market price of a share determined? |
Depends on real value of the company once it is in business |
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What options are associated with the increase of funds for the company? |
- Internal financing - External financing - Increase of capital via issuing and sale of new shares |
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Name two ways to increase a company's capital through the issue and share of capital. |
1. Nominal capital increase: shares issued to existing SH 2. Effective capital increase: shares issued to new SH |
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What are SH pre-emption/pre-emptive rights? |
The right to firstly buy in proportion to current shareholding on the same or more favourable terms. |
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What is the function of pre-emption/pre-emptive rights? |
To maintain current voting power and prevent their position from being watered down. |
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Who convenes a GMS |
BOD in principle |
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Who makes the agenda for a GMS |
BOD in principle |
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Who pays the costs of a GMS |
The company |
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Potential issues with GMS |
1. Directors not calling for extra GMS 2. Difficulty of exercising SH rights if so ^ |
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What is a merger? |
One entity merges with another or two entities merge into a third entity |
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What is acquisition? |
Directly purchasing of assets, enough assets to have control over the owner. |
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What is the role of the BOD and what is the role of the SH when purchasing assets? |
BOD: management board negotiation sale SH: may have the right to vote on transactions |
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What is the role of the BOD and what is the role of the SH when purchasing shares? |
BOD: can adopt defensive measures SH: have absolute discretion over the sale |
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Name the two main types of mergers and explain them. |
1. Horizontal: - in the same industry - at the same stage of production 2. Vertically: - differ based on the stage of production |
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What is a statutory merger? |
A merger that takes effect when appearing in a official register |
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Name two types of triangular mergers |
1. forward 2. reverse |
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Name the techniques to protect a deal |
1. confidentiality agreement 2. duty of good faith negotiation 3. no talk, no shop agreements 4. termination fee 5. fiduciary out clause |
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Name the three stages in the formation of a company |
1. drafting articles of association (CBF) 2. filing application for registration 3. Registration (company incorporated) |
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What are promoters? |
One who undertakes to form a company with reference to a certain project and to set it going, and who takes the necessary steps to accomplish that purpose. |
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What are pre-incorporation contract? |
They are contracts for persons to act on behalf of a company before that company is incorporated. |
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Can a company contract before it is incorporated (UK)? |
In principle, no because it does not have a legal personality but; kelner v baxter and after accession EU yes. |
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Can a company contract before it is incorporated (GER)? |
Yes |
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Can a company contract before it is incorporated (US)? |
No |
