Securities Law Commons^™

Megasubsidiaries And Asset Sales Under Section 271: Which Shareholders Must Approve Subsidiary Asset Sales, Yaman Shukairy

Michigan Law Review

Corporate law statutes determine the nature of the relationship between shareholders, the principal owners of the corporation, and the board of directors, those w ho run and operate the corporation. Under the Delaware General Corporation Law ("DGCL"), many of the powers are delegated to the board of directors. More specifically, under section 141, "the business and affairs of every corporation . . . [are] managed by or under the direction of a board of directors . . . ." The Delaware courts have interpreted this provision by deferring to decisions by directors and their designated management under the business judgment …

A Reconsideration Of The Stock Market Exception To The Dissenting Shareholder's Right Of Appraisal, Michigan Law Review

Michigan Law Review

This Note engages in such a reassessment. It contends, first, that appraisal has not been an unreasonable burden on corporations and that adjustments in the appraisal procedure can eliminate remaining inequities. Next, it asserts that the stock market exception inadequately protects the dissenting shareholder, since a market might, for a variety of reasons, price a shareholder's stock at less than its intrinsic value. Finally, this Note concludes that an appraisal procedure with modifications, and not the stock market exception, reflects the appropriate balance of corporate and shareholder interests.

A New Deal For Fiduciaries' Stock Transfers, Alfred F. Conard

Michigan Law Review

For nearly one hundred years, executors and administrators have been struggling with the excessive documentation which corporations demand as a condition of recording stock transfers. For almost as long, legislatures have been passing laws in the hope-generally vain-of alleviating the burden.

In 1957, at least three states (and possibly four) opened a door through which estate representatives can emerge from their long bondage. For the first time, identical acts were passed in different states, and interstate recognition of simplification measures began. For the first time acts were passed which get to the root of the transfer agent's problem.

Corporations - Dividends - New Jersey Dividend Credit For Non-Cumulative Preferred Stock, John A. Beach S.Ed.

Michigan Law Review

Defendant, a New Jersey corporation, paid no dividends on its non-cumulative preferred stock after 1933, although it had annual earnings exceeding the total amount of the preference in each of the years 1941 through 1948, and again in 1951 and 1952. In 1955 defendant had earned surplus exceeding $12,000,000. Plaintiffs, holders of non-cumulative preferred shares, brought this action asking for a declaratory judgment as to the nature of their preference rights over the common holders. On appeal from a summary judgment for defendant, held, affirmed. In the absence of any impending or threatened declaration of dividends to common shareholders, …

Securities - Effect Of Certificate Of Title Acts Of Sales On Encumberd Vehicles To Purchasers In Ordinary Course, Charles G. Williamson, Jr. S.Ed.

Michigan Law Review

The primary purpose of this comment will be to examine the various legislative schemes in use and the bearing of the certificate of title acts on the case of mortgagee v. purchaser in ordinary course.

Corporations - Stockholders - Effect Of State Constitutional Provisions On Liabilty To Creditors For Unpaid Subscriptions, Douglas Peck S.Ed.

Michigan Law Review

Basset and Company, an Oklahoma corporation, issued stock to defendant for which defendant never paid. The sum due was carried on the corporate books as "subscriptions receivable." The corporation became bankrupt and the trustee brought suit in the federal district court to recover the amount due on the subscriptions. Held, judgment for the defendant. Under the Oklahoma Constitution, where stock is issued for consideration which is less than par value, the issue is void. The stock certificate cannot serve as a consideration to support the would-be stockholder's promise to pay for the stock, and no liability attaches to the …

Corporations--Shareholders-Effect On Voting Trust Agreement Of Inability To Transfer Shares To The Voting Trustees, Peter Van Domelen

Michigan Law Review

Plaintiff filed a petition in equity attacking his removal as a director and president of the defendant corporation on the grounds that such removal was brought about through the exercise of an alleged invalid voting trust agreement The plaintiff and another shareholder, each owning fifty per cent of the stock in the defendant corporation, had entered into a voting trust agreement by which they appointed themselves and a third party as voting trustees. At the time the trust agreement was executed, all of the stock was on deposit with an escrow agent subject to an existing escrow contract. Plaintiff challenged …

Personal Property-United States Savings Bonds--Effect Of Registration In Co-Ownership Or Beneficiary Form As A Transfer Of A Property Interest Therein, Walter L. Dean

Michigan Law Review

In two recent cases, decedents purchased United States Savings Bonds registered in the name of the purchaser and another person which were never delivered to the named co-owner but remained in the possession of the purchaser until his death. In the first case, on appeal from an order of the district court refusing to impose an inheritance tax on the bonds after the death of the purchaser, held, reversed. Mere purchase of the bonds and their registration in the names of the co-owners without delivery transferred no interest to the co-owners during the life of the purchaser and is …

Corporations-Blue Sky Laws-Liability Of Officers And Directors Of Corporation For Violation, L. W. Larson, Jr.

Michigan Law Review

Plaintiff sued a corporation and its president to recover money paid for purchase of stock sold in violation of the ''blue sky" laws of Michigan. The president, through correspondence, had induced plaintiff to complete the purchase. Plaintiff had judgment below against both defendants. The president alone appealed, contending among other things that he was not an "agent" within the meaning of the statute. Held, affirmed. The word "agent" in the Michigan statute1 includes officers and directors of the corporation whether they are authorized "agents" or are holding themselves out as "agents" of the corporation. Cleland v. Smart, 321 …

Municipal Corporations - Bonds Redeemable At Option Of Municipality- Notice To Bondholders Necessary To Stop Running Of Interest, Michigan Law Review

Michigan Law Review

Defendant municipality issued bonds redeemable before maturity at defendant's option. There was no provision for registration, and neither the statute nor the bonds provided for notice of redemption. In May,1938, notice was published in newspapers of general circulation that the bonds were to be redeemed on June 1. Plaintiff, owner of the entire issue, did not know of the redemption until September 27. It sued for interest from June 1 to September 27. Held, notice by publication is sufficient to stop the running of interest, and plaintiff is therefore not entitled to recover. Philadelphia Savings Fund Society v. City …

Federal Courts - Decisions Of State Intermediate Courts As State Law To Be Applied By Federal Courts, Spencer E. Irons

Michigan Law Review

The Circuit Court of Appeals for the Sixth Circuit held that a federal district court in Ohio was not bound by a decision of the Cuyahoga County Court of Appeals to the effect that in a case of wrongful transfer of shares of stock, a demand and refusal was necessary to start the statute of limitations running. On certiorari, held, that, in ascertaining what the state law is, lower state court decisions are data which are not to be disregarded by a federal court, unless it is convinced by other persuasive data that the highest court of the state …

A Warning Signal For Municipal Bondholders: Some Implications Of Erie Railroad V. Tompkins, Irvin Long

Michigan Law Review

That branch of municipal bond litigation in which the character and validity of the obligations is involved has usually been conducted in the federal courts. Bondholders pressing for payment of their defaulted bonds usually are nonresidents of the state where the city, county or other defaulting municipality is located. Varying and contradictory state court decisions taught them that no settled rule of decision in the state courts could be expected. The arguments of their counsel, which many of the earlier volumes of the Supreme Court reports preserve, show that they distrusted a judiciary elected for short terms, as was the …

Corporations - Statutes Declaring Watered Stock Void - Effect Upon The Stockholder's Liability To Creditors

Michigan Law Review

Prior to the present era of "blue sky" laws providing for the careful scrutiny by the state of the issuance of stock, the evil of watered stock was sought to be curbed by constitutional and statutory provisions of a prohibitory and often penal nature. These statutes and constitutional provisions very generally take one of two forms.

The Colorado and the Arizona provisions are typical. In practical effect the two types of provisions are indistinguishable. The phrase "bona fide subscribers" in the Arizona form is construed to mean one who actually turns something of value over to the corporation in lieu …

State "Blue-Sky" Laws And The Federal Securities Acts, Russell A. Smith

Michigan Law Review

With the current revival of business has come increased activity in the securities markets. Corporations are taking advantage of low money rates to refund outstanding issues and, to some extent, to obtain new money for corporate purposes. If the upturn in business proves to be substantial, rather than merely a temporary, government-induced short-time swing, the issuance of securities for the purpose of financing capital improvements will doubtless accelerate. Questions arising under the various laws, federal and state, for the regulation of the sale of securities will become increasingly important. Persons interested in the issuance and disposal of securities desire, of …

Banks And Banking - Liability Of Stockholders For Debts In Insolvencies Occurring After Transfer Of Stock, Warren W. Kennerly

Michigan Law Review

The effect of the holding of the Sanders case is of special interest at the present time because of the large number of recent bank failures. This decision may possibly result in former stockholders of Illinois state banks and the heirs of former stockholders being subjected to an assessment on stock that was disposed of several decades ago. The holding is applicable only to state banks, since national banks are not subject to state regulation. It would not be surprising if this Illinois holding should be followed in Nebraska, since the latter state has already based some of its rulings …

The Ohio "Blue Sky" Cases, Clarence D. Laylin

Michigan Law Review

The ancient notion that private fraud lies beyond the domain of public law did not long survive the statements of it that have been quoted.' Our legislation, expressing always the changing moral standards of the people, has directed the sanctions of the criminal law, step by step, ever against new forms of overreaching and imposition. Numerous illustrations might be cited to show the growing repugnance of the public mind toward frauds and cheats, and the tendency to recognize them as offenses invoking the restraint of public action as well as the redress of private injuries.

Note And Comment, Edson R. Sunderland, Roswell B. O'Hara, Arend V. Dubee, Hollis Harshman

Michigan Law Review

The Proposed Michigan Judicature Act. The Michigan Legislature, at its last session, passed an act (No. 286, Public Acts of 1913) providing for the appointment of a Commission to revise and consolidate the laws of the State relating to procedure. The Governor appointed Alva M. Cummins, J. Clyde Watt, and Mark W. Stevens as members of this commission, and, the result of their labors has just appeared in the form of a proposed bill regulating the entire subject of procedure in all the courts of the State. The bill is a long one, embracing 565 printed pages, but it is …

Note And Comment, Ferris D. Stone, Dan B. Symmons, J. Earl Ogle Jr.

Michigan Law Review

The Execution of the Insured for Crime as a Defense to the Insurer, the Policy Being Silent as to This Contingency; The Power of a Corporation to Hold and Vote Stock of Another Corporation; Effect of an Agreement Not to Compromise Without consent of Attorney Upon Contract for Contingent Fees; The Pennsylvania Supreme Court and The Pennsylvania Railroad Company

Recent Important Decisions, Michigan Law Review

Michigan Law Review

Acknowledgement--Persons Entitled to Take--Officer and Stock-Holder of Corporation; Agency--Brokers--contract of Employment--Middleman--When Commissions are Earned; Bankruptcy--Discharge--Vacation; Bankruptcy--Jurisdiction--Summary Proceeding; Bills and Notes--Liability of Infant on note Given for Necessaries--Misrepresentation of Age; Carriers--Passenger's Signature to Excursion Ticket; Constitutional Law--Eleventh Amendment--Jurisdiction of Federal Circuit Court--Penalty for Disobeying Rate Legislation; Constitutional Law--State Taxation--Property in Transit; Corporations--Franchise and License Distinguished; Damages--Liquidated Damages--Discounts; Death by Wrongful Act--Statute--Construction--Death Outside the State--Right to Sue; Deeds--Adverse Possession--Color of Title; Evidence--Admissions in Pleadings; Evidence--Best Evidence; Evidence--Works on History as Evidence; Extortion--Indictment--Sufficiency; Imprisonment for Debt--Solitary Confinement; Injunction--Scope of Order Restraining Strike; Insane Persons--Conveyances--Avoidance--Ejectment; Insurance--Rescission of Contract--Action for--Interest of Beneficiaries; Interstate Commerce--Regulation of, …

Note And Comment, Horace L. Wilgus, Thomas V. Williams, Fabian B. Dodds, Hugo Sonnenschein

Michigan Law Review

Wilgus: Payment of Dividends Out of Capital of Corporations and the Nature of Treasury Stock; Wilgus: Duty of a Managing Director of a Corporation to an Individual Shareholder; Williams: Impairing Obligation of Contract with Foreign Corporations; Dodds: May a Legislature Pass an Act Allowing Actual Expenses to Circuit Judges Whose Salaries are Fixed by the State Constitution?; Sonnenschein: What Constitutes a Waiver by Implication of the Privilege of Confidential Communications Between Attorney and Client

Note And Comment, Harry B. Hutchins, Ralph W. Aigler, Fabian B. Dodds, Justice Wilson

Michigan Law Review

What is the Practice of Medicine?; A Home Rule Charter and the Constitution; Recent Decisions on Trade-Marks and Unfair Trade; Liability of Anomalous or Irregular Indorser; Treatise Part of the Supreme Law of the Land;

Recent Important Decisions, Michigan Law Review

Michigan Law Review

Attorney--Disbarment--Procedure; Carriers--Injury to Passenger From Strike Sympathizers; Constitutional Law--Reasonable Classification--Regulation of Insurance Companies--Discrimination in Favor of Foreign Corporations; Constitutional law--Use of Trading Stamps--Police Police Power; Contract--Breach--Damages; Corporation--Notes Given in payment for its own Stock--Bankruptcy--Provable Debts; Damages--Measure--Contribution; Deeds--construction--Description of Subject Matter; Easements--Recital in Deed--Injunction; Election--Candidates--Oath--Constitutionality of Primary Law; Equity--Jurisdiction to Restrain Injunction Proceeding Denied; Estates of Decendents--Funeral Expenses of Married Woman--Liability of Surviving Husband; Executor de Son Tort--Right to Equitable Relief; Foreign corporations--doing Business in State--Failure to Comply with State Laws--Validity of Contract; Garnishment--Situs of Debt; Husband and Wife--Separation Agreements--Validity--Defenses; Insurance--Employer's Liability--Notice of Injury; Intoxicating Liquors--License Non-Transferable; Judgments--dormancy--Effect of Special Execution; …

Note And Comment, Michigan Law Review

Michigan Law Review

A National Incorporation Law; The Northern Securities Case; Controversies Between States; Liability of Members of Congress for Bribery; Exempting of Lawyers from Service of Civil Process While Attending Court; Law Governing the Validity of a Note Executed and Delivered in One State, But Payable in Another