Corporate Law And Shareholder Approval

These policies mostly need to involve open communication between the subsidiaries and the parent and can involve something as simple as weekly status reports which would include notification of significant changes or events, if any.

Non-employee family members shouldn’t be represented in this process, because it is a family business and only family members hold share.No sign shows this company wants to go public

As for the combination of cash and new shares, shareholders can take part of their money

* The new investor should leave sufficient liberty for the management to pursue their own strategy

Equitable chose an equity carve-out method for DLJ. This would allow them to retain at least 50% of the equity of the subsidiary, so it could still consolidate its financial statements as well as file a consolidated tax return. An obvious advantage of this method is the parent company doesn’t lose control over its subsidiary. Another advantage of this method and the spin-off method is

• Transaction structures—the takeover could involve a cash offer, a share offer, an asset swap or a combination of these methods. Need to consider legal, taxation and accounting issues.

Section 1.368-2(c) of the Income Tax Regulations provides: In order to qualify as a "reorganization" under section 368(a)(1)(B), the acquisition by the acquiring corporation of stock of another corporation must be in exchange solely for all or a part of the voting stock

e. A parent’s less-than-wholly-owned subsidiary issues its shares in exchange for shares of another subsidiary previously owned by the same parent, and the noncontrolling shareholders are not party to the exchange. That is not a business combination from the perspective of the parent.

The law gives corporate managers a great deal of flexibility in determining their capital and governance structure, relying on the market for capital to create competition that will allow shareholders to "choose" the one they think is best.

Under certain circumstances, ASC 830 obligates that equity must be switched to net income. According to ASC 830-40-1, the circumstances that require this reclassification are “upon sale or upon complete or substantially complete liquidation of an investment in a foreign entity.” Therefore, when dissolving any foreign operation, it is essential to determine if that foreign entity makes up its own foreign entity or is a part of a different overall foreign entity.

Firstly there is a significant Ethical and morale lapse in a share floated company when the CEO engages in related party transactions. The moral issues arise

* The ownership of the partners is dissolved and they become mere employees who are responsible to the shareholders and Board of Directors

o Weakness: there is a societal imbalance in the distribution of resources, and it is virtually impossible for courts/legislatures to make important decisions that do not make someone worse off

An investor determines whether it is a parent by assessing whether it controls one or more investees. An investor considers all relevant facts and circumstances when assessing whether it controls an investee. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. [IFRS 10:5-6; IFRS 10:8].

Corporation origin from the Latin word Corpus which means body. It is formed by a group of people and has separate rights and liability from those individual. In any means, corporation exists independently from its owner and this principle is called the doctrine of separate personality. Doctrine of separate personality is the basic and fundamental principle in a Company Law. This principle outline the legal relationship between company and its members. Company’s assets belong to the company not the shareholders as assets are the equity for creditors. Company must use up all its assets to pay off the creditors if it became insolvent. The same applies to the corporation’s debts. For limited liabilities company, the shareholder liability is limited which means that the shareholder is restricted to the number of shares they paid and not personally liable for the corporation’s debts. If the company does not have enough equity to pay off debts, the creditors cannot come after the shareholders. However, limited liability company can be very powerful when in hands who do fraud and on defeating creditors’ claims. Courts then can ignore the doctrine for exception cases and lifting the corporate veil. Lifting the corporate veil is a situation where courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s debts.