Personal Reflection:

-Bankruptcy
-Business Entities
-Mortgage
-type 5 pages

Pierce the Corporate Vail:

-Thin capital
-Lack of formality
-must be meet quarterly
-mission statement/strategic plan
-Co-mingle bank accounts
-Personal use of assets
-Criminal purpose

Fiduciary: owners, employees, executives, agents, and vendors

Fiduciary Duty: acting in the interest of the organization, unidirectional, must be
transparent
Examples of breaching fiduciary duty:
-solely buying from a family member

Chapter 42: Securities

Securities- most do not need to be registered federally because they do not meet the
dollar threshold
Registering
State and federal law heavily protect the investor
Civil and criminal penalties

Is this a security?
Yes?
 Is it exempt from federal registration? Do not memorize pg 820
o Under Reg D Section 504, Under $3 million
o Rule 506
o Railroad
o State or federal agency
Yes? Blue Sky Laws
 Check for possible state registration
No?
 1933 Securities Act: IPO
 1934 Securities Act: secondary market
o Insider trading

Insider Trading
-employee calls broker calls person
-employee: Tiper
Person= tipee
Broker= both
All liable for insider trading
Burden of proof on insider trading: scienter

Ultramares:
-In contract
-in privity
Louisiana and most states uses restatement of torts:
-can sue if named in contract or a known class of users
Some states use foreseeable users rule

Contract Theory:

Tort Theory:
 Reasonable?
o Yes, no case
o Executives Business Judgment rule: make mistakes
 Negligent?
o Yes, no case
o EBJ
 Gross Negligence?
o Yes, state law = case
 Scienter
o Federal standard
 Criminal Mansraya

When companies begin selling securities, the scienter goes away.

Chapter 42 and 47:

-plain negligence is not enough for a case
-business judgment rule: it is okay to make ordinary mistakes
-used for reasonable and negligent stair step
Burden of proof:
State level: grossly negligent and above
Federal level: scienter (knowingly) ignoring critical things, reckless, and above
*You can insure all this risk up until Scienter
Review for Test 2:

Ch 29 and 30 Debtors & Creditors

Attach debt to Asset

 Mortgage
 Surety
o Can be written or verbal and primary
 Guaranty
o Must be written and is secondary
 UCC-9
o Collateralize anything besides real estate

Sue:
 Writ of Attachment
o Subordinate to mortgage in house case
 Lien
o Priority over any asset
 Garnishment
o Take wages

Requirements to create UCC-9:

1. Financing Statement
2. Security agreement
a. At least verbal

Exceptions
1. Creditor in Possession “Pawn” = verbal
2. Purchase Money Secturity Interest= best puts you first
a. Must be done in 20 days
3. Retail = no filing required, once SA is done and loan is made, you are secured
and perfected
4. Liens > All UCC-9

CH 31Bankrupcy= federal law

Benefits:
 Stop trying to get money from debtor = Stay order
 Centralized = discharge debt

Non-Dischargeable Debt: pg 607
 Intentional Tort (regular torts are dischargeable)
 Fraud
  Fines/Penalties
 Crimes
 Embezzlement
 Back taxes
 Student loan debt
 Cash advances past $925
You get even when bankrupt- exempt assets:
 Reasonable personal items
o Home =some
o Car =some
o Medical Items
 Alimony
 Child support
 Retirement = all
Federal Code Chapter:
7= liquidation
9= Municipal
11= Reorganization
12=Farmers
13= Personal

Debtors can voluntary file for bankruptcy if they qualify or 3 creditors can force them
into it

Trustee can go back 2 years for fraudulent transfer

90 days= preferential transfers: unfairly paid one creditor full amount other creditors can
recover pro rata amount.

Diagram who gets paid?

-Lien
-SP
-SUP
-unsecured

Agency law:
Not authorized:
Nonapparent= completely unreasonable
Apparent = seems reasonable, 3rd party cannot have knowledge, created by principal

Authorized:
Disclosed: tell its for the company = principal liability
NonDisclosed: both are liable

Foreign corrupt practice act: federal law that bares some (not all) types of bribing of
foreign officials
50 questions
Debtor Creditor Relationships
-how to seek recovery
-how to prevent
-mortagae on anything immobile
-secrurity agreements attach asset to debt
-must say if you don’t pay, the moveable can be sold
-rankings
Agency
-use tree
-principal creates power
EXEMPT ASSETS
-CAP NO CAP
bandrupcy
-
contractural CPA liability