Quiz 43: Administrative Agencies


Sarbanes-Oxley Act: It may be the case that corporations are being more closely scrutinized for crimes since the passing of the Sarbanes-Oxley Act. It is possible that corporate crimes are committed less because more responsible persons are in supervisory positions. However, soaring penalties for corporate crimes and dilution of the intent requirement may have the paradoxical consequence of creating more corporate crime and not less. In order to avoid liability, a corporation must show that it could not have prevented the act or that there was not authorized consent to, or knowledge of, the act by persons in supervisory positions within the corporation. Additionally, a corporation must be abreast of, and in compliance with current legislation in order to reduce liability. Also, corporations should train their employees to comply with all applicable laws.

Corporation v. Partnership Taxation: The tax responsibilities for corporations and partnerships are listed below in Table 1: Table 1 img

Approaches and their Legal Implications The APC should have to consider the following approaches in order to invest in the restaurants and their implications: a. Nature and quality of stock: The amount of stock and type of stock should be negotiated by the APC which includes determining their ownership share and preferred stock should be the type of stock. b. Stock preference: If the APC will receive the preferred shares then the APC should be given the opportunity to claim priority among shareholder's in case of the restaurant's liquidation. c. Conversion: The preferred share of APC will be convertible to the common stock at the option of APC and APC can restrict to issue the amount of stock that will dilute its share. d. Registration rights: The registration of the share of APC should be made at a later stage or through public offering.

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