Business Associations
Agency, Partnerships, LLCs, and Corporations, 2024 Statutes and Rules
By: Stephen Bainbridge
This edition incorporates recent updates to the Model Business Corporation Act, Delaware General Corporation Law, and the rules under the Securities Exchange Act. Among the most significant changes in this edition are the 2023 amendments to Sections 242 and 272 of the Delaware General Corporation Law. Section 242 governs charter amendments.New Section 242(d) allows corporations with only one class of stock and no series divisions to modify their charters for a forward stock split without needing shareholder approval. Additionally, this section eases the voting requirements for public companies looking to amend their charters for increasing or decreasing authorized shares or for executing a reverse stock split. The amendment must receive more votes in favor than against, and the company must satisfy the post-amendment listing criteria, including the minimum number of shareholders. If the amendment alters the number of authorized shares, a separate vote by each class of shareholders is mandatory, except if the charter waives this need under Section 242(b)(2).Furthermore, Section 242(a)(3) has been updated to specify that stock splits should affect all "issued" shares, encompassing both the shares currently in circulation and those held in the company's treasury.Section 272 has been updated to allow corporations to mortgage or pledge their properties and assets without needing shareholder approval. It includes a new provision creating a safe harbor for secured creditors, enabling them to sell, lease, or exchange mortgaged or pledged assets without shareholder consent. While Section 271 typically mandates shareholder approval for the sale, lease, or exchange of significant corporate assets, the amendment to Section 272 specifies that such approval is not necessary when a secured party exercises their rights under laws like Article 9 of the UCC, even without the corporation's agreement.Furthermore, the new subsection 272(b) states that the board may, without a shareholder vote, approve the sale, lease, or exchange of pledged or mortgaged assets to lessen or clear the corporation's debt to the secured party. This is permissible if the assets' value is equal to or less than the liability being reduced (the Asset Value Test), and if the transaction is legally allowed under the mortgage or pledge laws. Once completed, these transactions are irreversible, even if the Asset Value Test is not met, provided the transferee contributed value and acted in good faith. However, this doesn't prevent lawsuits to stop an ongoing transaction or claims related to fiduciary duties.Lastly, any charter rule enacted after August 1, 2023, requiring shareholder approval for asset transactions won't affect transactions permitted by Section 272(b), unless the rule explicitly states otherwise.
AI Overview
The book "Business Associations, Cases and Materials on Agency, Partnerships, LLCs, and Corporations" by Stephen M. Bainbridge is a comprehensive casebook that provides an in-depth overview of agency, partnership, and corporation law. Here is a detailed overview of the book:
Key Themes
Agency Law: The book covers the fundamental principles of agency law, including the nature and formation of the agency relationship, the fiduciary duties of agents, and the rights and liabilities of principals and agents.
Partnership Law: It delves into partnership law, discussing the formation, operation, and dissolution of partnerships. It also examines the rights and duties of partners, including the role of limited partners and the implications of partnership agreements.
Corporation Law: The book provides a thorough analysis of corporation law, including the formation, governance, and management of corporations. It covers topics such as corporate structure, shareholder rights, and corporate governance, with a focus on Delaware corporate law and the Model Business Corporation Act.
LLCs and Comparative Analysis: The book also includes a comparative analysis of Limited Liability Companies (LLCs) and corporations, discussing their similarities and differences, particularly in terms of liability, management, and governance.
Plot Summary
The book is structured around a series of cases and materials that illustrate key concepts in business associations. It emphasizes five basic editorial principles:
- Concise Case Selection: Cases are edited to produce a readable and concise result, focusing on facts and their potential ambiguity.
- Transactional Orientation: The book uses transactionally-oriented problems to bring a planner’s perspective to the table, helping students understand how legal concepts apply in real-world scenarios.
- Teaching Flexibility: It is designed as a casebook, not a treatise, providing cases and allowing individual teachers to use them as they see fit.
- Engaging Case Selection: The book prioritizes cases with great facts or clever analyses, making them fun to teach and learn from.
Critical Reception
Stephen M. Bainbridge is a well-respected scholar in the field of corporate governance and business associations. His work has been widely adopted in law schools, with the prior edition of this casebook having been adopted at over 100 law schools. The book has received positive reviews for its comprehensive coverage and engaging case selection. It is considered a valuable resource for both students and instructors in the field of business associations.
Recent Editions
The book has been updated to its 12th edition, which includes new materials and revisions to existing sections. The 12th edition continues to emphasize the same editorial principles as previous editions, with additional updates and new problems to enhance teaching and learning.
Author Background
Stephen M. Bainbridge is a professor at the University of California, Los Angeles (UCLA) Law School. He has taught a variety of courses including Business Associations, Advanced Corporation Law, and Corporate Governance. He is a prolific scholar with over 75 law review articles and several books on corporate governance and business associations.