Business Law II - Professor Sharma (Lecture 7, Chapter 37 - 04.04.2015)

Business Law II: Professor Sharma Lecture #7, Chapter 37 Chapter 37: Corporate Governance and the Sarbanes-Oxley Act Date: April 4, 2015 Please visit our website at http://raw.rutgers.edu Time Stamps: 0:15 Shareholders 2:14 Shareholder Meetings 4:52 Notice of a Shareholder's Meeting 6:39 Voting Requirements 9:12 Voting for Election of Directors 12:09 Supramajority Voting Requirement 12:53 Voting Agreements 13:24 Restrictions on the Sale of Shares 18:01 Preemptive Rights 20:45 Dividends 22:14 Derivative Lawsuits 27:24 Piercing the Corporate Veil 28:22 Case 37.1: Piercing the Corporate Veil 31:40 Board of Directors 33:29 Exhibit 37.2: Board of Directors 33:58 Selecting Directors 37:39 Meetings of the Board of Directors 39:26 Corporate Officers 41:29 Exhibit 37.3: Corporate Officers 41:40 Fiduciary Duty 42:43 Duty of Obedience 46:45 Duty of Care 48:00 Business Judgment Rule 50:44 Duty of Loyalty 52:18 Case 37.2: Fiduciary Duties of Corporate Directors and Officers 56:08 Sarbanes-Oxley Act Summary of Lecture: Shareholders own the corporation, and have the right to vote on fundamental changes in the corporation. Annual shareholders' meetings are held by the corporation to elect directors and to vote on other matters, whereas special shareholders' meetings may be called to consider and vote on important or emergency issues, such as proposed merger or amending the articles of incorporation. A corporation is required to give the shareholders written notice of the place, day, and time of annual and special meetings; a proxy may be authorized to vote on a shareholder's behalf or may be directed exactly how to vote the shares. Shareholders who own stock as of a set date are allowed to vote at a shareholders' meeting. Quorum to hold a meeting of the shareholders is the required number of shares that must be represented in person or by proxy to hold a shareholders' meeting. Straight coming is a system in which each shareholder votes the number of shares he or she owns on candidates for each of the positions open whereas cumulative voting is a system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates. Voting trusts is an arrangement in which the shareholders transfer their stock certificates to a trustee who is empowered to vote the shares. The right of first refusal is an agreement that requires a selling shareholder to offer his or her shares for sale to the other parties to the agreement before selling them to anyone else. A buy-and-sell agreement is an agreement that requires selling shareholders to sell their shares to the other shareholders or to the corporation at the price specified in the agreement. Preemptive rights are rights that give existing shareholders the option of subscribing to new shares being issued in proportion to their current ownership interests. Dividends are the distribution of profits of the corporation to shareholders. A derivative lawsuit is a lawsuit a shareholder brings against an offending party on behalf of a corporation when the corporation fails to bring the lawsuit. Piercing the corporate veil occurs if a shareholder dominates a corporation and uses it for improper purposes, a court can disregard the corporate entity and hold the shareholder personally liable for the corporation's debts and obligations. Board of Directors are a panel of decision makes who are elected by the shareholders and generally compensated for service. The quorum of the board of directors is the number of directors necessary to hold a board meeting or transact business of the board. Corporate officers are employees of a corporation who are appointed by the board of directors. The agency authority of officers possess authority that may be provided in the bylaws, or as determined by resolution of the board of directors. Fiduciary duties are the duties of obedience, care, and loyalty owed by directors and officers to their corporation and its shareholders. Duty of obedience is the duty that directors and officers of a corporation have to act within the authority given to them by state corporation codes, the articles of incorporation, the corporate bylaws, and the resolutions adopted by the board of directors. Duty of care is a duty of corporate directors and officers to use proper care when acting on behalf of the corporation. It requires corporate directors and officers to use care and diligence when acting on behalf of the corporation. Business judgment rule is a rule that says directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment. Duty of loyalty is a duty that directors and officers have not to act adversely to the interests of the corporation. Please subscribe to our channel to get the latest updates on the RU Digital Library.