Portfolio 30-3rd: The Pennsylvania Corporation: Legal Aspects of Organization and Operation

I. Introduction
A. Pre-Incorporation Planning
B. Statutes
C. Corporation Service Companies

II. Reasons for Incorporating in Pennsylvania
A. The Pennsylvania Business Corporation Law
B. Incorporation Costs
C. Tax Considerations
1. State corporate net income tax 15
2. Rate and basis of corporate net income tax
3. Capital stock and franchise taxes
4. Corporate loans tax
5. Local taxes
a. Philadelphia
b. Pittsburgh
c. Jurisdictions other than Pittsburgh and Philadelphia
D. Industrial Development Authorities

III. The Incorporation Process
A. Pre-Incorporation Steps
1. Pre-incorporation agreements
2. Selection of corporate name
3. Clearance and reservation of corporate name
4. Pre-incorporation share subscriptions
5. Registered office
6. Business purpose
7. The articles of incorporation
a. Required provisions
b. Optional provisions
8. Docketing statement
9. Incorporators
10. Filing the articles of incorporation
B. Effect of Filing the Articles of Incorporation
C. Advertising the Articles of Incorporation
1. Content of advertisement
2. Effect of failure to advertise
D. Post-Incorporation Steps
1. Drafting the bylaws
2. Drafting certificates representing securities
a. Bond certificates
b. Share certificates
c. Legends on share certificates
3. Ordering corporate materials
4. The organizational meeting
5. Organizational meeting of director(s)
6. Organizational meeting of shareholders
7. Organizational actions without meetings
8. Payment of share subscriptions
9. Issuance of shares
10. Execution of shareholders' agreement
11. Noncorporate law steps
E. Tax Considerations 130
1. S corporation election
a. Time period for making election
b. S corporations in Pennsylvania
2. Internal Revenue Code §1244 stock 142
F. Qualifying Securities for Offer or Sale in Pennsylvania
1. Exemptions from registration
2. Registration
3. Enforcement

IV. Corporate Powers
. Introductory Material
A. General Corporate Powers
B. Specific Corporate Powers
1. Indemnification of directors, officers, employees, and agents
2. Emergency powers
3. Powers in the event of bankruptcy or insolvency
4. Power to purchase or redeem the corporation's own shares
5. Other corporate powers

V. Capital Structure and Corporate Distributions
A. Capital Structure
B. Bonds
C. Shares
1. Authorized shares
2. Terms of shares
a. Par value
b. Basic rights
c. Designations
d. Preferences
e. Other rights and limitations
f. Preferred shares issuable in series
g. Conversion
h. Preemptive rights
3. Share subscriptions
4. Consideration and payment for shares
5. Fractional shares and scrip
6. Stock rights and options
7. Restrictions on stock or securities transfers
D. Distributions
1. Cash or property dividends
2. Stock dividends
3. Liability of directors and shareholders
4. Specific performance
E. Redemption and Acquisition of Stock

VI. Directors' Functions: Powers, Rights, and Liabilities
A. Management Role of Directors and the Business Judgment Rule
B. Qualifications, Election, and Removal of Directors
C. Number of Directors
D. Classification of Directors
E. Meetings of the Board of Directors
1. Notice
2. Quorums
3. Voting powers
F. Unanimous Action by Directors Without a Meeting
G. Board Committees
H. Duties, Rights, and Liabilities of Directors
1. Fiduciary responsibility and corporate opportunities
2. Liability of directors
a. Business judgment rule
b. Improper dividends
3. Reliance on information prepared by others
4. Duty to provide financial statements
5. Conflicts of interest, interlocking directorships, and self-dealing
6. Right to inspect books and records
7. Corporate negligence theory of liability
I. Directors as Fiduciaries
1. Prudent investor rule
2. The Hershey dispute
3. The legislation
4. Key points

VII. Officers' Functions: Powers, Rights, and Liabilities
. Introductory Material
A. Offices
B. Election and Removal of Officers
1. Election and term of office
2. Removal
C. Authority of Officers
1. Apparent authority
2. Office of president
3. Execution of instruments
4. Corporate seal
5. Bylaw restrictions
D. Fiduciary Duties of Officers
E. Indemnification of Officers
F. Liability for Unpaid Wages
G. Post-Employment Restrictive Covenants

VIII. Shareholders' Functions: Powers, Rights, and Liabilities
A. Status as Shareholder
1. Restrictions and preemptive rights
2. Share certificates
B. Shareholders' Voting Rights
1. Cumulative voting
2. Proxies
3. Voting trusts
4. Voting by fiduciaries and pledgees
5. Voting by joint holders of shares
6. Shares held by another corporation
7. Controlled shares
8. Shares subject to redemption
9. Voting lists
10. Election judges
C. Shareholders of Record
1. Rights of shareholders of record
2. Fixing the record date
3. Effect of the Uniform Commercial Code
D. Action by Shareholders
1. Shareholders' meetings
a. Annual meetings
b. Special meetings
c. Adjournments
2. Actions by shareholders without a meeting
a. By unanimous consent
b. Partial written consent
3. Notice of meetings of shareholders
a. Form of notice
b. Waiver of notice
c. Change in the language of a proposed resolution
4. Quorum of and action by shareholders
a. Action by shareholders at a shareholders' meeting
b. Failure to achieve a quorum
5. Appointment of custodian on deadlock
E. Rights of Dissenting Shareholders
1. Events giving rise to dissenters' rights
2. Procedure
3. Limitations on appraisal rights
F. Suits by Shareholders to Enforce a Secondary Right
G. Shareholder's Direct Right of Action
H. Liability of Shareholders
1. Liability of shareholders for improper dividends
2. Other liabilities of subscribers and shareholders
3. Piercing the corporate veil
I. Preemptive Rights
J. Right to Inspect Books and Records
K. Duties of Majority Shareholders

IX. Amendments to the Articles
. Introductory Material
A. Authorization to Amend
B. Amendment Procedures
1. Proposal to amend
2. Notice to shareholders
3. Shareholders' meeting
C. Articles of Amendment

X. Mergers, Consolidations, and Asset Acquisitions
. Introductory Material
A. Merger and Consolidation Distinguished
B. Procedure for Merger or Consolidation
C. Short-Form Mergers and Consolidations
D. Foreign Corporations
E. Rights of Dissenting Shareholders: Mergers, Asset Sales, and Tender Offers
F. Asset Acquisitions
1. De facto mergers
2. Successor liability

XI. Corporate Division
A. Authorization
B. Plan of Division
C. Proposal and Adoption
D. Division Without Shareholder Approval
E. Articles of Division
F. Overall Effect of Division

XII. Dissolution
A. Nonjudicial Dissolution
1. Prior to commencement of business
2. Upon the expiration of the charter
3. After commencement of business
a. Preliminary steps
b. Final step
B. Judicial Dissolution
1. Voluntary proceedings
2. Involuntary proceedings
a. Instituted by a shareholder or director
b. Instituted by a creditor
C. Survival of Remedies and Rights After Dissolution
1. Post-dissolution claims
2. Remedies against the corporation after dissolution
3. Rights of the corporation after dissolution
D. Out-of-Existence Procedure

XIII. Receivership and Custodianship
A. Appointment of a Receiver
B. Powers of a Receiver
C. Custodianship

XIV. Tender Offers and the Anti-Takeover Legislation
A. Application and Effect
B. Control-Share Transactions
1. Scope of statute
a. Covered registered corporations
b. Covered individuals and groups
2. Operation of the control-share transaction subchapter
a. Notice requirement
b. Fair valuation of shares
C. Control-Share Acquisitions
1. Covered acquisitions
2. Covered shareholders
3. Operation of the control-share acquisition subchapter
D. Disgorgement by Certain Controlling Shareholders
1. Legislative purpose
2. Covered registered corporations
3. Covered shareholders
4. Operation of disgorgement subchapter
5. Constitutionality
E. Severance Compensation for Certain Employees
F. Business Combination Transactions—Labor Contracts
G. Directors' Duties in a Takeover Context
1. Directors' fiduciary duties in general
2. Standards for directors' actions in a takeover context
a. Enhanced protection for the board under §1715
b. Standard protection for the board under §1716
c. Procedure for opting out of §1715
H. Personal Liability of Directors

XV. Pennsylvania Professional Corporations
A. Scope of the Professional Corporation Law
B. Incorporation Requirements and Limitations
1. Corporate purposes
2. Name selection
C. Share Ownership and Transfer Restrictions
1. ‘Licensed person' defined
2. Persons licensed in other jurisdictions
3. Transfer of shares
D. Directors and Officers
E. Other Considerations
F. Termination

XVI. Close Corporations
. Introductory Material
A. Formation and Articles of Incorporation
1. Optional provisions in the articles
2. Conversion to close corporation status
3. Limitations on amendments to the articles
4. Termination of status
B. Restrictions on Close Corporations
C. Advantages of Close Corporation Status
1. Operation as a partnership
2. Preemptive rights
3. Other relevant provisions

XVII. Registered Corporations
A. Registered Corporation Status
B. Termination of Status
C. Powers of Registered Corporations
D. Duties of Registered Corporations
E. Shareholders

XVIII. Nonstock Corporations
A. Formation
B. Termination and Dissolution
C. Powers and Duties
D. Effect of Other Statutory Provisions

XIX. Management Corporations
A. In General
B. Powers and Governance

XX. Doing Business as a Foreign Corporation
. Introductory Material
A. Activities Not Constituting ‘Doing Business'
B. Certificates of Authority
1. Effect of the issuance of a certificate
2. Failure to obtain a certificate
3. Revocation of a certificate
4. Withdrawal from doing business in Pennsylvania
C. Domestication of a Foreign Business Corporation

XXI. Jurisdiction and Service of Process on Corporations
A. Subject-Matter Jurisdiction
B. Jurisdiction Over Corporations
1. General in personam jurisdiction
2. Long-arm jurisdiction
C. Service of Process
1. Within Pennsylvania
2. Outside Pennsylvania
D. Venue
E. In Rem Jurisdiction

XXII. Pennsylvania Courts
A. Common Pleas
B. Commonwealth Court
C. Superior Court
D. Supreme Court

XXIII. Limited Liability Companies
A. Introduction
B. Formation and Operation
1. Filing
2. Contributions
3. Operating agreement and management
4. Liability of members or managers
5. Transfer of interests
C. Restricted Professional Limited Liability Companies
D. Merger and Consolidation
E. Division
F. Dissolution
G. Foreign Limited Liability Companies