Selling securities to your employees

We looked at the Ralston Purina case last semester (and every fall semester for the past 16 years) where the SEC slapped Ralston Purina around for selling unregistered securities to its own employees.  Here is a nice summary of how to accomplish that goal and keep the SEC happy.

https://www.lexology.com/library/detail.aspx?g=cb1ccb8e-62cf-495c-883a-18ad40cebcd4&utm_source=lexology+daily+newsfeed&utm_medium=html+email+-+body+-+general+section&utm_campaign=calbar+business+section+subscriber+daily+feed&utm_content=lexology+daily+newsfeed+2019-03-06&utm_term=

Can a corp file a chapter 7 bankruptcy petition without approval of the shareholders?

This is an update to the prior post.  My bankruptcy colleague posted:

Dear Colleagues,

A corporation filed for Chapter 7 protection.  However, the 80% shareholder, who is neither an officer, nor a director, did not sign anything authorizing the filing.  Can the case be dismissed based on the failure of the Board to have the 80% shareholder sign the corporate resolution authorizing the filing?

I suspect that the answer to my question is, “Look at the articles of incorporation and the by-laws,” but I thought I’d see if there is a general principle I can use here.

All the best, Nick

Someone asked him for more details and he responded: Continue reading

Question from a bankruptcy list serve

See how much you have learned?  Each of you can answer this question I’m sure.  The question was posted by a very knowledgeable and good bankruptcy lawyer.

Dear Colleagues,

A corporation filed for Chapter 7 protection.  However, the 80% shareholder, who is neither an officer, nor a director, did not sign anything authorizing the filing.  Can the case be dismissed based on the failure of the Board to have the 80% shareholder sign the corporate resolution authorizing the filing?

I suspect that the answer to my question is, “Look at the articles of incorporation and the by-laws,” but I thought I’d see if there is a general principle I can use here.

All the best,

Nick

Stockholder’s Demand for Books and Records

Nice discussion of a shareholder’s rights to review a corporation’s books and records, by K&L Gates.    The article is here.  The basic rule is that a shareholder may review books and records if he has a “proper purpose.”  The article discusses the recent case of Haque v. Tesla Motors, Inc., C.A. No. 12651-VCS (Feb. 2, 2017) where the Delaware Court refused to order Tesla to turnover certain records saying :

The Court acknowledged that use of corporate records to investigate potential wrongdoing or mismanagement at a company is a proper purpose under Section 220.  However, before compelling production of records in such cases, the Plaintiff must present evidence to establish a “credible basis” from which the Court can infer that mismanagement, waste, or wrongdoing may have occurred.

The opinion is here.