What are some advantages of preferred stock over common stock?
Dividend preference, liquidation preference, cumulative dividend right, right to participate in profits, conversion rights, redeemable rights.
Name the types of debt securities. Debentures, bonds, notes
Are common stocks considered debt securities or equity securities? Equity securities.
Exon-Florio Law
Mandates the President to suspend, prohibit, or dismantle the acquisition of U.S. businesses by foreign investors if there is credible evidence that the foreign investor might take action that threatens to impair the "national security"
CORPORATIONS
BEFORE ORGANIZING DETERMINE:
1. Where
2. Type
a. Closed (<25 shareholders in ND)
b. C corp
c. S corp
3. Type of offerings to be made
(financing)
a. commonstock
b. preferred stock
c. debt securities -debenture, bonds, notes
4. Stock Offerings to outside parties
a. Must be registered with the SEC unless exempted.
b. Must be registered with the state unless exempted.
ORGANIZING:
1. Select Name
2. File Articles of Incorporation
a. required by state statute
b. determine voting method
(cumulative or noncumulative)
c. Preemptive rights (new stock issuance)
3. Draw up Bylaws
a. annual shareholder meetings, when and where
b. meetings of the board of directors
DISSOLUTION:
1. Methods
a. By incorporators (voluntary, no shares issued)
b. By shareholders (voluntary)
c. By order of the court (involuntary)
2. Procedure by Incorporators:
a. articles of dissolution signed by all the incorporators must be
filed with the secretary of state and contain:
(1) The name of the corporation.
(2) The date of incorporation.
(3) Statement that shares not issued.
(4) Statement that consideration received from subscribers for shares less organizational expenses, has been returned to the subscribers.
2. Procedure by Shareholders:
a. Notice to all shareholders of meeting to vote on dissolution.
b. Vote by majority of holders with voting power.
c. Notice must be filed with the
secretary of state and contain:
(1) Name of the corporation
(2) Date & place of the meeting at which the resolution was passed.
(3) Statement that the requisite vote of the shareholders was received.
3. In either voluntary procedure the notice of dissolution must contain either one of the following:
a. If all debts owed to the corporation have been collected and all debts the corporation owes have been paid, then a statement to that effect must be included.
b. If all debts have not been collected or debts owed payed, dissolution notice must contain statement that notice has been given to creditors and claimants.
STOCK SALES EXEMPT FROM REGISTRATION IN NORTH DAKOTA
10-04-06 § 9
a. Offer to not more than 25 persons except offers to a bank, investment company, pension or profit-sharing trust or other financial institution or institutional buyer, if the these conditions are met:
(1) Seller reasonably believes that all buyers in this state are purchasing for investment.
(2) No commission or other remuneration is paid for soliciting prospective buyers.
(3) The offeror gets approval from the commissioner prior to making any offers in this state.
b. Sales during any period of twelve consecutive months, if the following conditions are met:
(1) The issuer reasonably believes that all the buyers in this state, are purchasing for investment.
(2) No commission or other remuneration is paid for soliciting any prospective buyer in this state.
(3) Issuer is organized under the laws of this state and has its principal place of business in this state.
(4) No public advertising except tombstone advertisements.
(5) At least 80% of the net proceeds from the sale of the securities must be used in connection with the operations of the insurer in this state.
(6) An offering disclosure document in the form approved by the commissioner must be delivered to each offeree no less than 72 hours prior to the sale of the security.
(7) The gross proceeds of the offering may not exceed $500,000.
(8) Before making any offer or sale the issuer must file an application for approval with the commissioner and provide any information or documents the commissioner may require.
(9) All funds raised in the offering must be placed in an escrow account until the total offering has been sold.
STOCK OFFERINGS FILING WITH THE SEC NOT REQUIRED pages 554 & 555
A. Intrastate: No limit on the dollar amount of capital that can be raised. Securities cannot be resold to nonresidents for a period of nine months.
Requirements:
1. Issuer must be a resident of the state for which the exemption is claimed.
2. The issuer must be doing business in that state. 80% of the issuer's assets are located in the state,80% of its gross revenues are derived from the state,its principal office is located in the state, and 80% of the proceeds of the offering will be used in the state.
3. Purchasers of the securities all must be residents of that state.
B. Private Placements: Capital can be raised from an unlimited number of accredited investors or nor more than 35 nonaccredited investors. No dollar limit on the amount of securities that can be sold pursuant to this exemption. Advertising the stock to the public is not allowed.
Unrestricted resale of the stock offerings are not allowed for a period of three years.
Accredited investor:
1. Natural person with a net worth of at least $1 million.
2. Natural person with an annual income of $200,000 for the previous two years and reasonably expects to make $200,000 income in the current year.
3.Corporation, partnership, or business trust with total assets in excess of $5 million.
4. Insiders of the issuers, ie executive officers & directors of corporate issuers and general partners of partnership issuers.
5. Institutional investors, ie registered investment companies, pension plans, universities etc.
Nonaccredited investors - must be sophisticated investors through their own experience and education or through representatives.
Small Offerings: Sale of securities not exceeding $1 million during a 12 month period. Cannot be resold without restrictions for a period of three years.
1. May be sold to an unlimited number of accredited and unaccredited investors, but general selling (advertising) to the public is not permitted.
Chapter 16
CREDIT
Unsecured - no collateral (property) which the creditor can sell if the debtor defaults.
Secured - security interest in collateral - the property may be taken and sold to pay off the outstanding debt.
Perfecting the security interest:
1) real property - file the mortgage (debt instrument) with the county recorder.
2) personal property - file financing statement with the county recorder. In North Dakota the statement must include: a. names of the debtor and secured party. b. signature of the debtor. c. address of the secured party and debtor. d. statement describing the collateral and the county where it can be located. e. social security number or federal tax identification number of the debtor.
Consumer Goods - filing not necessary by the merchant. (NDCC 41-09-41 contains the the form to be used)
Mechanic's Lien - improvements to real estate. File with a legal description of the real estate with the county recorder.
Service Providers' Lien - Allows person providing service to keep the goods subject to the lien until the debt is paid.
Surety - co-signer of a debt instrument which makes the person primarily liable. The creditor does not have to go against the primary debtor first to collect.
Guarantor - person who agrees to pay if the principal debtor does not. Creditor must try to collect from the principal debtor first.
Voidable contracts with the principal debtor can still be enforced against the surety or guarantor.
Describe characteristics of each type of instrument: Drafts, Checks, Promissory Notes, Certificates of Deposit.
NEGOTIABLE INSTRUMENTS:
DRAFTS Orders to pay, 3 party instruments
CHECKS
NOTES Promises to pay, 2 party instruments
CERTIFICATES OF DEPOSIT
To be negotiable:
1 Must be written
2 Unconditional order or promise to pay
3 Signed by the maker or drawer
4 Payable on demand or at a specified time
5 Be made out to order or to bearer
6 State a certain sum of money
Chapter 17
Liability of Principal Can Contract
Agency Agency
Master- Servant
Independent Contractor - A matter of control:
* controls the work
* furnishes the tools
* employed only for the job
* paid by the job
* has own business
Chapter 18
What issues can labor and management negotiate? Wages, hours, terms and conditions of employment, health benefits, retirement plans, safety policies.
If a company forces its applicants to join the union upon employment, it is a . . .Closed shop (it is also illegal).
If a company forces its newly hired employees to join the union within a certain number of days, it is a . . . Union shop.
Chapter 19
Answer each of the following questions
To whom does Title VII apply? What does it prohibit?
Remedies for Violations of Title VII: What can a successful plaintiff recover?
Procedures for bringing Title VII action: Who may first file a complaint?
Title VII Actions: What is the difference between disparate treatment discrimination and disparate impact discrimination?
In the following cases, what (if any) discrimination has been used?
Willie Fixum Computers refuses to hire Protestant employees. Religious discrimination
The chair of the Southern Baptist Convention refuses to hire a vice-chair who is Methodist. None
Kute Kids Daycare Center refuses to hire lesbian daycare workers. None
Who can qualify for protection under the ADA? Americans having or having had physical or mental impairment
What does federal law require of employers to do regarding the disabled? Make reasonable accommodations
What agency administers ADA? Equal Employment Opportunity Commission.
EQUAL PAY ACT
COVERS ALL PRIVATE SECTOR EMPLOYEES, STATE & LOCAL GOVERNMENT
(DOES NOT COVER THE FEDERAL GOVERNMENT)
BOTH SEXES MUST BE PAYED THE SAME IF THE JOB REQUIRES:
EQUAL SKILL, EQUAL EFFORT, EQUAL RESPONSIBILITY, EQUAL WORKING CONDITIONS
DEFENSES:
SENIORITY, MERIT, QUALITY/QUANTITY OF PRODUCT FACTORS OTHER THAN SEX
ADA - AMERICANS WITH DISABILITIES ACT
APPLIES TO EMPLOYERS WITH 15 OR MORE EMPLOYEES,EXCEPT THE FEDERAL GOVERNMENT, CORPORATIONS OWNED BY THE FEDERAL GOVERNMENT AND PRIVATE CLUBS.
HAS A PHYSICAL OR MENTAL IMPAIRMENT THAT LIMITS ONE OR MORE OF THEIR MAJOR LIFE ACTIVITIES.
&
HAS A RECORD OF IMPAIRMENT OR IS REGARDED AS HAVING SUCH IMPAIRMENT.
AGE DISCRIMINATION IN EMPLOYMENT ACT COVERS:
EMPLOYERS WITH 20 OR MORE NONSEASONAL EMPLOYEES, UNIONS WITH 25 OR MORE MEMBERS, STATE, LOCAL AND MOST FEDERAL EMPLOYEES
PROTECTS ALL PERSONS 40 AND OLDER
TITLE VII - COVERAGE
COMPANY WITH 15 OR MORE EMPLOYEES, UNION WITH 15 OR MORE MEMBERS, EMPLOYMENT AGENCIES; FEDERAL, STATE & LOCAL GOVERNMENTS & THEIR AGENCIES
NOT INCLUDED:
INDIAN TRIBES; TAX-EXEMPT, PRIVATE CLUBS
Chapter 20
FDA - FEDERAL FOOD, DRUG, & COSMETIC ACT
Food, Drugs and Medicinal devices must receive FDA approval prior to sale to the public.
U.S. Department of Agriculture - inspects and grades meat and poultry.
FDA regulates the labeling and advertising of food, drug and cosmetic products.
Consumer Product Safety Commission - deals with products that pose an unreasonable risk of injury.
* issues product safety standards for designated consumer products.
* Collect safety data on consumer products.
* Require the manufacturer to recall, repair, or replace the product.
* Seek injunctions or seek civil and/or criminal penalties.
Federal Trade Commission (FTC) -
* False and Deceptive Advertising
(1) contains misinformation or omits important information that is likely to mislead a "reasonable consumer".
(2) Makes unsubstantiated claims.
(3) Bait and Switch
Door-to-Door Sales are handled by state law.
Postal Reorganization Act - Unsolicited merchandise can be kept or thrown away without being paid for.
FEDERAL CONSUMER-DEBTOR PROTECTION LAWS
Truth-in-Lending & Regulation Z - requires certain information to be presented to consumers for consumer transactions of $25,000 or less and real estate loans on the debtor's principal dwelling.(page 476)
Consumer-debtors who use their principal dwelling as security can rescind the credit within 3 business days.
Consumer Leasing Act - extends the provisions of the TILA to consumer leases.
Credit Cards:
Fair Credit and Charge Card Disclosure Act of 1988
* No liability for charges made on a lost or stolen cared that was unsolicited unless the person accepts the card.
* The cardholder may withhold payments to the credit card issuers for faulty products.
* Lost or stolen cards - liability is limited to $50 for unauthorized charges made before the issuer is notified. If notified before any charges are made there is no liability to the cardholder.
EQUAL CREDIT OPPORTUNITY ACT
Creditor may not ask an applicant about his or her race, color,national origin, religion, age or marital status (unless the spouses income is to be included).
If credit is denied the creditor must provide a written statement with reasons.
Fair Credit Billing Act:
Debtor must notify the creditor in writing of an alleged error within 60 days. The creditor must notify the debtor of the result of their investigation into the matter within 90 days or two billing cycles whichever is less.
Fair Credit Reporting Act:
* Information from a consumer reporting agency must be accurate. If challenged the agency must investigate.
* Obsolete information must be removed bankruptcies over 14 years old any other information over 7 years old.
* Violation can result in actual damages, court costs, and attorney's fees.
Fair Debt Collection Practices Act:
Prohibited actions by debt collectors (482)
CHAPTER 21
AIR POLLUTION
Stationary Sources:
Control Technology
A. Existing - reasonably available (cost & severity factored in)
B. New - Best available
C. Toxic - Maximum achievable
WATER POLLUTION
Control Technology
A. Point Source Existing - Best practical (cost considered)
B. Point Source New - Best Available (cost not considered)
C. Thermal - forbidden
D. Oil Pollution Act of 1990 - Exxon Valdez - owner-operators must have cleanup contingency plan.
TOXIC SUBTANCES
A. Pesticides - must be registered with the EPA before they can be marketed.
B. Chemical compounds in plastics - Must be tested by manufacturer and results reported to EPA.
SUPERFUND (CERCLA, 1980)
Joint & Several Strict Liability for:
1. Generator - one who deposited the waste.
2. Transporter to waste site.
3. Owner of the site at the time of disposal.
4. Current owner and operator of the site.
5. Law can be applied retroactively.
ENDANGERED SPECIES ACT
Prohibits taking of any endangered species by government or private persons.
NOISE POLLUTION
Authorized the EPA to set noise standards for products sold in the U.S.
CHAPTER 23
SECURITIES REGULATION
DEFINITION OF A SECURITY - A SECURITY EXISTS WHEN ONE
PERSON INVESTS MONEY AND LOOKS TO OTHERS TO MANAGE
THE MONEY FOR PROFIT.
THE COURTS LOOK FOR 3 THINGS
1) IS THE INVESTMENT IN A COMMON BUSINESS ACTIVITY?
2) IS THE INVESTMENT BASED ON A REASONABLE
EXPECTATION OF PROFITS?
3) WILL THESE PROFITS BE EARNED THROUGH THE EFFORTS
OF SOMEONE OTHER THAN THE INVESTOR?
A REGISTRATION STATEMENT - INCLUDES A DETAILED
DISCLOSURE OF FINANCIAL INFORMATION ABOUT THE
ISSUER AND THE CONTROLLING INDIVIDUALS INVOLVED IN
THE OFFERING OF SECURITIES FOR SALE TO THE PUBLIC.
PROSPECTUS - DETAILED FACTS ABOUT THE ISSUER AND
FINANCIAL STATEMENTS, INCLUDING BALANCE SHEETS
AND STATEMENTS OF OPERATIONS OF THE ISSUER.
EXEMPTIONS - SELLING OF SECURITIES TO A PRIVATE
AUDIENCE RATHER THAN TO THE GENERAL PUBLIC.
EXEMPTION BASED ON THE DOLLAR AMOUNT AND THE
SOPHISTICATION OF THE INVESTOR-PURCHASERS.
TYPES: Intrastate Offerings, Small Offerings, Private Placements. (Time restrictions apply, Intrastate 9 months, others 2 years)
COMMERCIAL PAPER SUCH AS CHECKS AND PROMISSORY
NOTES WITH A MATURITY NOT EXCEEDING NINE MONTHS
AND SECURITIES ISSUED BY NOT-FOR-PROFIT
CORPORATIONS.
INTRASTATE - HOWEVER ANY USE OF THE MAIL MAKES ITS
INTERSTATE AND MOST STATES ALSO HAVE SECURITIES
LAWS.
NORTH DAKOTA - ISSUER IS REQUIRED TO CONTACT THE SECURITIES COMMISSIONER AND GET PERMISSION BEFORE OFFERING IN ND. THE ISSUER SHOULD BE PREPARED TO TELL THE COMMISSIONER'S OFFICE WHAT TYPE OF SALE IS INTENDED AND THE COMMISSIONER WILL DECIDE IF REGISTRATIONS IS REQUIRED.
Exemption can be found at NDCC 10-04-06 There are basically two types of transactions:
1. Offer to 25 persons or less, within 12 consecutive months, who are purchasing for investment, no commission is paid and prior written approval is obtained from the commissioner.
2. With in any period of 12 consecutive months: (1) buyers are purchasing for investment. (2) No commission is paid, (3) issuer is organized under the laws of ND and has its principal place of business in ND. (4) No advertising. (5) 80% of the net proceeds from the sale must be used for operations in ND. (6) within 72 hours prior to the sale to an offeree a disclosure document in the form approved by the commissioner must be delivered to the offeree. (7) gross proceeds from the sale cannot exceed $500,000. (8) prior written approval must be obtained from the commissioner. (9) all funds raised must be put in escrow until the total offering has been sold.
.