Representing Corporate Officers, Directors, Managers, and Trustees, Second Edition

As a result of numerous recent corporate and accounting scandals, corporate officers, directors, managers, and trustees now face a host of new problems—ranging from a blizzard of new legislation, rules, and responsibilities—to increased SEC oversight, new NYSE and NASDAQ listing standards, new fiduciary and other duties, and crushing new criminal penalties.

Representing Corporate Officers, Directors, Managers, and Trustees tells you what to look for...what to look out for...and what steps to take to protect your corporate clients in today’s harsh regulatory environment. It’s the only up-to-date work of its kind to offer both in-depth analysis and practical guidance on every key aspect of this critically important area.

This completely updated Second Edition thoroughly covers:

Directors’ duty of care— including the different standards which have been imposed on directors regarding the duty of care...the duty of loyalty...the business judgment rule... when directors are entitled to rely on the advice of others...improperly influencing audits under the Sarbanes-Oxley Act... improper distributions...and more.

Conflicts of interest—with examples of conflict of interest transactions, and discussion of loans to or by directors and officers...secret profits...and the duty to safeguard confidential or inside information— plus, how certain transactions considered improper can be ratified and thus become legitimate.

Federal securities laws—including everything from overviews of the laws, the SEC, and securities themselves— to jurisdiction, pleading, remedies, and defenses in securities cases... the new criminal penalties...and attorneys’ responsibilities regarding liability under Sarbanes-Oxley.

Indemnification and insurance— with discussion of mandatory and permissive indemnification and the scope of indemnification in various states... when a director may be indemnified even if not wholly successful in defense of anaction...directors’ and officers’ liability insurance...types and extent of insurance coverage...tax law treatment...and exclusions.

Tender offers—including antitakeover measures, two-tier and squeeze-out mergers, and golden parachute agreements, poison pill plans, and greenmail...potential liability in tender offers...and implementing mergers and acquisitions, with securities law, antitrust, tax, accounting, and labor law considerations.

INTRODUCTION

• Recent Major Developments
• International Financial Reporting Standards
• Action by Self Regulatory Organizations
• Shareholder Democracy and Proxy Environment
• Corporate Governance Requirements Under the Troubled Asset Relief Program (TARP)
• Post-Madoff SEC Reforms and Actions

MANAGERIAL STRUCTURE OF A CORPORATION

• Corporate Managerial Structure
• Directors
• Officers
• Committees
• Shareholders

DUTY OF CARE

• State Statutes, Model Statutes, and the Duty of Care
• Prudent Person in a Like Position Standard
• Personal Business Affairs Standard
• Reasonable
• The Rule of Common Law and Statutory Presumption
• Checklist: A Risk Reduction Program
• The Duty to Disclose
• The Business Judgment Rule
• Reliance on the Advice of Counsel
• Reliance on Advice of Corporate Employees and Experts
• Reliance on Reports Issued by the Board
• Checklist: Reliance Defense
• Delegation of Committees
• Reliance on Corporate Books and Records
• Reliance on Corporate Books and Records: Declaration of Dividends
• Dealing with Accounts
• Improperly Influencing Audits Under Sarbanes-Oxley Act
• Challenging Director’s Decision
• Supervision by Directors and Officers
• Causal Relationship Between Director Breach and Damages
• Director Expertise
• Fiduciary Duties During Insolvency
• Prospective Concerns: The Impact of Sarbanes-Oxley in State Courts

CONFLICTS OF INTEREST AND GENERAL LOYALTY CONSIDERATIONS

• The Duty of Good Faith
• Competition by a Fiduciary
• Examples of Conflict of Interest Transactions
• Loans
• Secret Profits
• Voting Considerations
• Minority Shareholder
• Duty to Safeguard Confidential or Inside Information

USURPING CORPORATE OPPORTUNITY

• Guth v. Loft: Line of Business Test
• Interest of Expectancy Test
• Fairness Test
• ALI Recommendations on Corporate Opportunity
• Acquisition of Competitive Interest
• The Corporation’s Rejection of an Opportunity
• Financial Capacity
• Variations in Director Relationships
• Closely Held Corporations
• Pointer for Corporate Planning

SELLING CONTROL

• Corporate Control
• Specific Qualifications to the General Rule
• Fraud Associated with Purchases from Minority Shareholder
• Control and Closely Held Corporations
• Impact of Federal Securities Law

TENDER OFFERS AND TAKEOVERS

• Anti-Takeover Measures
• Two-Tier and Squeeze-Out Mergers
• Perfecting Appraisal Rights
• The Watershed Year
• The Business Judgment Rule in Takeovers: Overview of Enhanced Scrutiny
• The Business Judgment Rule in Takeovers: Developments Post-Revlon
• Pac-Man Defense
• Defensive Anti-Trust Acquisitions
• Golden Parachute Agreement
• Poison Pill Plans
• Greenmail
• § Williams Act
• The General Trends of Defense Against Tender Offers: From Litigation to Planning

IMPLEMENTING MERGERS AND ACQUISITIONS

• Checklist: Steps in a Merger
• Checklist: The Merger Agreement
• Agreement of Merger
• Securities Law Considerations in a Friendly Business Combination
• State Securities
• Anti-Trust
• Tax Considerations
• Accounting Considerations
• Labor Law Considerations
• M&A Activity Involving Closely Held Corporations, Controlling Shareholders and Partnerships
• Contract Right between Stockholders of a Close Corporation to Permit One to Purchase Stock from the Other
• The Standard of Review in M&ATransactions
• A Glossary of Takeover Terms and Tactics

LIABILITY UNDER FEDERAL SECURITIES LAWS

• Overview of Securities Laws and Securities Fraud
• Liability Under the Securities Act
• Liability Under the Exchange Act
• Liability Under the Sarbanes- Oxley Act of 2002
• Federal Laws Affecting Securities Fraud Claims Under State Law

DIVIDENDS AND OTHER CORPORATE DISTRIBUTIONS

• Definition of Dividend
• Form: Provision for Declaration of Dividends
• Funds from Which Dividends May Be Paid
• Cash Dividends
• From: Mandatory Provision for Declaration of Dividends
• Stock Dividends
• Form: Dividend Payment on Jointly Held Stock
• Stock Splits
• Form: Declaration of a Stock Dividend
• Wasting Assets Corporations
• Form: Declaration of Cumulative Preferred Dividend
• Directors’ Discretion and Duty to Pay Dividends
• Form: Time for Declaration of Dividend (Two Classes of Common Stock)
• Directors’ Discretion and Minority Shareholders
• Necessary Dividends
• Directors’ Liability for Improper Dividends
• Director’s Defenses
• Contribution
• Liability of Stockholders

NONPROFIT CORPORATIONS AND HYBRIDS

• Fiduciary Duties of Officers and Directors in Nonprofit Corporations
• Fiduciary Duties of Trustees of Charitable Trusts
• Fiduciary Duties in Hybrid Organizations
• Revised Model Nonprofit Corporation Act; State Statutes
• Penalties under Federal Tax Law
• RS Reporting Requirements
• Accounting Rules Concerning Endowments of Not-For-Profit Organizations

INDEMNIFICATION AND INSURANCE

• Indemnification Statutes – In General
• Specific States
• Indemnification and Contribution under Federal Law
• Directors’ and Officers’ Liability Insurance
• Extent of Coverage
• Sarbanes-Oxley
• TaxLaw Treatment of Indemnification and Insurance

APPENDIXES

TABLE OF CASES

INDEX