solicitation itself, rather than the particular defect in the materials, was an essential link in the accomplishment of the transaction. Otherwise, court would be determining fairness they – just care about disclosure. Here, essential link was that though M had 54% shares in E, a 2/3 vote was required, so they couldn’t have done it themselves. Does that make the need to solicit proxies in and of itself the essential link? Yes VA Bank Shares. (1991) pg 697 Virginia Bank Shares Scott- terrible case SC failed to establish that the proxy was an essential link – π – their votes weren’t needed This basically denies standing to SH whose votes aren’t required (Is the Essential Link the only way to show causation?) (5) Remedy Varies. Can be damages, or invalidating proxies, resolicitation and Close Corporations Traits of a CC Small number of SH Owner-managers almost all owners are managers – Desirable to customize the management structure and corp governance rules (due to corp size or owner/manager overlap) standard structure not as – appropriate. Lack of liquidity no public market for shares – Results in difficult valuation. Restrictions on transferability Whereas public corps are generally freely trade-able. Care very much who SH are. Why do we treat CC differently? Our system is one where SH’s major concern is to effectively monitor management and its treatment of SH money ownership is separated from – control. CC, problems are different. Control/ownership overlap less of a need for costly oversight – mechanisms. Compliance statutes can be traps for CC don’t have the resources to be as – informed. Very much resemble partnerships, and may be run like one.
solicitation itself, rather than the particular defect in the materials, was an essential link in the accomplishment of the transaction. Otherwise, court would be determining fairness – they just care about disclosure. Here, essential link was that though M had 54% shares in E, a 2/3 vote was required, so they couldn’t have done it themselves. Does that make the need to solicit proxies in and of itself the essential link? Yes VA Bank Shares. Virginia Bank Shares (1991) pg 697 Scott- terrible case SC – π failed to establish that the proxy was an essential link – their votes weren’t needed This basically denies standing to SH whose votes aren’t required (Is the Essential Link the only way to show causation?) (5) Remedy Varies. Can be damages, or invalidating proxies, resolicitation and Close Corporations Traits of a CC Small number of SH Owner-managers – almost all owners are managers Desirable to customize the management structure and corp governance rules (due to corp size or owner/manager overlap) – standard structure not as appropriate. Lack of liquidity – no public market for shares Results in difficult valuation. Restrictions on transferability Whereas public corps are generally freely trade-able. Care very much who SH are. Why do we treat CC differently? Our system is one where SH’s major concern is to effectively monitor management and its treatment of SH money – ownership is separated from control. CC, problems are different. Control/ownership overlap – less of a need for costly oversight mechanisms. Compliance statutes can be traps for CC – don’t have the resources to be as informed. Very much resemble partnerships, and may be run like one.
Corporations_Outline_Scott_2010.docx