4. Bankruptcy

The bankruptcy of a corporation does not in itself cause dissolution. However, the bankruptcy proceeding typically leaves the corporation without assets with which to do business. In addition, some state statutes provide that when a corporation is insolvent, its creditors may force dissolution.

5. Court Order

In some states, if a corporation's assets are seriously threatened with irreparable harm because an internal dispute cannot be resolved by the board or the shareholders, a court can order dissolution if interested parties petition for dissolution.

Answer the questions:

1. What is a consolidation?

2. What is a merger?

3. What is the forfeiture of the charter of a corporation?

Task 1

Express your opinion:

• Why do you think 90 percent of all business in the United States is done by corporations?

• Do you own stock in a corporation? If so, what is the name of the corporation in which you own stock?

• Can you explain the difference between public and private corporations?

PRACTICE AND COMPREHENTION

Match the following:

1. confess judgment

2. dissolution

3. dormant partner

4. general partners

5. general partnership

6. joint venture

7. limited partner

8. limited partnership

9. nominal partner

10. nontrading partnership

11. partnership agreement

12. trading partnership

13. partnership at will

14. partnership

15. secret partner

16. silent partner

17. sole proprietorship

18. special partnership

19. tenancy in partnership

20. termination

21. winding-up period

b. actual legal ending of a partnership

c. co-ownership of firm's property by partner

d. association of two or more persons to carry on, as coowners, a business for profit

e. time during which all business affairs of a partnership are concluded

f. business which is owned and controlled by one person

g. partnership formed to buy and to sell commercially

h. partnership in which a partner may withdraw at any time without liability

i. to allow a plaintiff to obtain a judgment without a trial.

j. partner who may be known to the public but is not active in management

k. partner who is not known to the public but is active in management

1. when any partner ceases association in carrying on the business

m. partnership in which certain partners have limited 'liability

n. partner who is not active in management and who has limited liability

o. association of two or more firms or persons to do a single

project

p. partnership formed for a professional and noncommercial purpose

q. persons associated as co-owners to carry on a business

for profit, and who are liable for all firm debts

r. partnership in which all partners are fully liable;

also, a partnership formed to conduct a general business

s. person who is held out as a partner but is not one

t. partner who is neither known to the public nor active in management

u. document containing the terms and conditions of the

partnership

Match the following:

1. bonds

2. bylaws

3. closely-held corporation,

4. common stock

5. consolidation

6. corporation

7. cumulative stock

8. cumulative voting

9. debentures

10. inside board

11. merger

12. mixed board

13. nonprofit corporation

14. no-par stock

15. outside board

16. par value

17. participating stock

18. perpetual succession

19. preemptive right

20. preferred stock

21. proxy

22. public service corporation

23. shareholder

24. shares of stock

25. stock certificate

a. written authorization designating some person to vote in place of the signer in a corporate election

b. written evidence of ownership and rights in a corporation

с power by which a corporation continues despite changes in its shareholder membership

d. private corporation that provides an essential public service

e. shareholder's right to buy a proportionate number of shares in a new issue of capital stock

f. one who owns corporate stock

g. units of ownership in a corporation

h„ when one corporation absorbs another corporation

i. unsecured bonds

j. board of directors composed of both officers and outsiders

k. share with no face value specified

1. long-term secured notes

m. basic type of stock, with voting right

n. rules for the internal management of a corporation

o. shares where dividends, if not paid, remain due and payable before common shareholders get anything

p. legal entity, created by government grant, existing separate from its owners

q. when a new corporation is formed from two separate corporations

r. board of directors with no corporate officers

s. shares where after regular dividends are received, preferred stockholders share in further distribution of profits with common stockholders

t. face value printed on a stock certificate

u. shares with priority claims to dividends and liquidation funds; usually nonvoting

v. board of directors in which all the directors are officers

w. private corporation organized for a social, charitable, or educational purpose; does not return a financial profit to its members

x. private corporation whose stock is held by one or a few persons

y: plan which gives minority shareholders representation on the board of directors

Translate into Russian:

Reviewing Important Points

1. Sole proprietorships are the simplest and most numerous form of business organization. The owner makes all decisions, keeps all the profits, and is liable without limit for all losses.

2. A partnership is an association of two or more persons to carry on, as co-owners, a business for profit. Profits and losses are shared equally unless otherwise agreed. Every general partner is liable without limit to creditors for debts of the business.

3. Unless otherwise agreed, all partners have a right to participate in management with equal authority.

4. Any partner, acting alone, may normally: make routine business decisions for the firm. A majority must resolve disputes about ordinary matters.

5. In dealings with one another, partners are bound to act with the highest integrity and good faith. They must keep one another informed about the business, maintain accurate records, and take no secret profits.

6. Partners own firm property as tenants in partnership. Each may use the property for company business but not for personal purposes without consent of the other partners.

7. Limited partnership is a special form in which one or more limited partners contribute capital but not managerial services. The financial liability of a limited partner for debts of the firm cannot exceed the amount of capital such a partner-has invested.

8. There must be at least one general partner (with unlimited liability) in a limited partnership.

9. Partnerships may be terminated by:

a. action of the partners,

b. operation of law, or

c. decree of court.

Translate into Russian:

Reviewing Important Points

1. A corporation can be created only by government grant— available routinely under incorporation statutes in all states.

2. In most states, corporate existence begins when properly prepared articles of incorporation are filed in the office of the Secretary of State. (In some states, certificates of incorporation are issued.)

3. Corporations are favored as a form of business organization because of advantages of

a) perpetual life,

b) limited liability,

c) transferability of shares,

d) access to capital, and

e) professional management.

4. Shareholders have a right to:

a. receive a properly executed stock certificate (share),

b. transfer their shares,

c. attend shareholder meetings, and vote if they hold voting stock,

d. maintain their ownership percentage by buying an appropriate portion of new stock issues, if there is a preemptive right,

e. receive a proportionate share of the profits,

f. share in distributions of capital, and

g. inspect the corporate books, subject to reasonable restrictions.

5. Certain classes of shares may be nonvoting. If preferred, they have priority in the distribution of dividends, and capital upon termination.

6. The directors can enter into any contract necessary to promote the business for which the corporation was formed. They are liable only for willful or negligent acts, which injure the corporation. They must act with a high degree of good faith and in the best interests of the corporation.

7. Officers of a corporation must also act with good faith for the best interests of the corporation. They, too, are liable only for willful or negligent acts, which injure the corporation, and are not liable for honest mistakes of judgment.

8. The powers of a corporation include those granted by law, and those incidental to corporate existence, as well as those listed in the articles of incorporation.

9. A corporation's existence may be ended by

a) agreement (i.e., vote) of the shareholders,

b) forfeiture of the charter,

c) consolidation or merger,

d) bankruptcy, or

e) court order.

Read the problems and give your solutions:

PROBLEM 1: Brinkiey, Chapman, and Dodge orally agreed to become partners in a road-paving, company. Nothing was said about profits or losses. Brinkiey contributed $100,000 in working capital. Chapman contributed used construction equipment with a resale, value of $200,000. Dodge, a brilliant civil engineer contributed no capital. By agreement, Brinkiey did no work for the firm, but Chapman and Dodge devoted, full-time to the business.

a) A profit of $120,000 was earned during the; first, year. How-should the profit be divided?

b) After, ten years, business declines and the firm is dissolved. During the winding-up period, all assets are liquidated. Before the return of invested capital ($300,000) there is only $210,000 in cash. How is the $90,000 loss divided?

PROBLEM 2: Freeman and Bingham were partners in a wholesale drug company. Their agreement required arbitration of all disputes between the partners. While Freeman was away on a cruise, Stuart, a creditor of the firm, threatened to sue over a disputed supply contract. To save time and money for all concerned, Stuart proposed to avoid litigation by submitting the claim to arbitration. Can Bingham agree, to arbitrate without Freeman's approval?

PROBLEM 3: Jones and Schmidt entered into a partnership for five years to conduct a catering business. It proved to be very successful. However, after two years, Schmidt's husband was promoted and transferred by his employer to corporate headquarters in Los Angeles, 2,000 miles away. Schmidt therefore wanted to move,

a) Could she sell out to Topper, a trustworthy, well-qualified assistant, transferring all duties and assigning all her rights, title, and interest in the firm?

b) Could she simply assign her interest to Topper?

PROBLEM 4: The written agreement of a professional partnership stated that, during the first year of operations, no partner could draw more than $100 earnings per week, and that no partner could take a vacation. All members would have to rely on personal savings and credit if they needed more funds. The business prospered beyond expectations. After six months, four of the five partners agreed to increase the permitted draw to $200 a week, and three of the five voted to permit up to one week of vacation without pay. Are these modifications legal and binding?

PROBLEM 5: Hull organized a corporation to manufacture antibiotics for cattle. She owned most of the capital stock. All went well until a faulty batch of drugs caused the serious illness or death of more than 3,000 cows. After a series of lawsuits, the corporation was forced into bankruptcy with some $200.000 in debts unpaid. Could Hull be held personally liable for these debts?

PROBLEM 6: In a discussion with friends, Forsythe insisted that a director of a corporation could not also serve as an officer because this would be “a conflict of interest”. “Directors select officers,” she argued, “and could keep themselves on the payroll as officers this way.” Was Forsythe right?

PROBLEM 7: Plush Play Products, Ltd., produced toy animals and dolls. A new doll called “Tootsie Twins” proved to be so popular that the factory could not meet the demand. The dolls were commanding premium prices in toy stores. Shortly before Christmas, the board of directors of Plush Play Products voted a dividend which was to include one pair of the “Twins” — valued at the low $10 cost of production — for each stockholder. All shareholders with more than one share would receive the balance of their dividends in cash. Lane, a stockholder, sued the directors to prohibit the doll distribution. He claimed that the corporation could earn more by selling the dolls. Should the injunction be issued?

PROBLEM 8: Cox and Cook had an idea for a natural aqua park. They planned to build a small dam and then to release water for the slide as needed. Keeping their plans secret to be certain that the needed stream would be available, they bought a 2,000-acre tract of land for their corporation soon to be formed,

a. At this time, are Cox and Cook liable on the contract?

b. Two months later they organized the corporation. Is the corporation now liable on the contract?

PROBLEM 9: Simon wants to open a sporting goods' store. She hesitates because she thinks the expenses would be prohibitive. She lists the costs of renting or buying a store, hiring help, buying a computer to keep records, buying a large inventory, obtaining a charter from the state, and paying for licenses and legal fees. Are her fears justified?

PROBLEM 10: Ward and Chang organized and operated the Cinema Theater. They agreed to share profits and losses equally after paying all expenses. The land was leased from Alien for rent which was to be 6 percent of the gross revenue. Chalmer was hired as manager for $1,000 a month plus 3 percent of the net profits. Are all four partners in the business?

PROBLEM 11: Avery invested $100,000 as a limited partner in a partnership organized to operate an amusement park. On opening day, an accident severely injured 17 people. The damages awarded to the accident victims totaled nearly $7 million. That amount far exceeded the value of the partnership's assets and insurance coverage. Will Avery be held liable for unpaid liability claims against the partnership?

PROBLEM 12: Palm, a partner in the Bobbin Cork Bait Shops, normally purchased the inventory for the business. Unknown to her, the other three partners voted to no longer deal with Trout Attractions, Inc., one of their main suppliers. Before finding out about their decision, Palm contracted for $1,000 worth of lures from Trout. Is the partnership bound by the contract?

PROBLEM 13: Adams, Starnes, and Williams were partners in a burglar and fire alarm service. Adams would mount his own camper cabin on the back of one of the company's pickup trucks every weekend and drive it into the country on overnight fishing trips. Starnes would take the company's computer home every weekend to work on her «novel» On weekends Williams used the company's Xerox to make copies of the weekly bulletins for his church. No partner was aware of any other partner’s action. Did each have a legal right to borrow the firm’s equipment?

PROBLEM 14: Aki, Degas, and Kline were partners in an air-conditioning business. They obtained a $275,000 contract to install units in a candy factory. Long before the job was finished, Kline accepted the final payment of $100,000 and absconded with the money. Must Aki and Degas absorb the loss and complete the job for the $175,000 already paid to them, without being paid an additional $100,000 by the candy factory?

PROBLEM 15: Parnell and Cotter were in the business of buying and selling used farm equipment. They had privately agreed that Cotter would do all the buying because he was a better judge of value. Nevertheless, one day Parnell had a golden opportunity to buy all the equipment of an elderly farmer who was retiring. Parnell and the farmer agreed on, a price and completed the sale. Is the firm bound?

ЛІТЕРАТУРА:

1. Gillian D. Brown, Sally Rice. Professional English in Use. Law. Cambridge University Press, 2007.-128p.

2. Gordon W. Brown, Paul A. Sukys. Understanding Business and Personal Law. McGraw-Hill Companies, Inc. 2006. – 849p.

3. Business law—2nd ed— Cavendish Publishing Limited, 2002 -147p. .

4. William R. McKay, Helen E. Charlton. Legal English. How to understand and master legal terms. Pearson Education Limited, 2005. – 188p.

5. Джерело в Інтернет-мережі: ubpl.glencoe.com Understanding Business and Personal Law.