A. Complete this table by filling in the correct forms.

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Verb	Noun
to change
to amend
	alteration
	risk
to consolidate
to sign
	mergers
to apply
	acquisition
to cancel
to confirm
to absorb
	liquidation
	submission
to purchase
to administer
	competition
	security
	winding-up

b. Add the prefixes in-, ir-, un-, dis-, anti- to each of these words to form its opposite.

1) solvent 2) competitive 3) written 4) changed 5) appear 6) trust 7) effective 8) dependent

close relevant fairly voluntary available charge secured

Match the columns.

1. to sign 2. to grant 3. to cancel 4. to submit 5. to issue 6. to re-negotiate 7. to consolidate 8. to realize 9. to discharge 10. to disclose 11. to gain 12. to borrow 13. to increase 14. to initiate 15. to purchase 16. to subdivide 17. to accept

a. resolution b. debt c. shares d. assets e. money f. a certificate g. power h. an offer i. dealings j. liabilities k. action l. control

1. minority 2. acquiring 3. preferential 4. general 5. secured 6. controlling 7. compulsory 8. outstanding 9. voluntary 10. available 11. competition 12. hostile 13. special 14. market 15. statutory 16. unanimous 17. takeover 18. constitutional

a. shareholders b. shares c. liquidation d. authorities e. company f. meeting g. cash h. creditors i. regulations j. bid k. amendments l. resolution m. winding-up n. takeovers o. price p. approval

Fill in the gaps with prepositions if necessary.

1) In case of insolvency the rights of creditors and minority shareholders may be _____ risk and are subject _____ special statutory regulations.

2) A change of name was made by special resolution ____ a general meeting.

3) A signed copy of the resolution was submitted ___ the Registrar of Companies.

4) Alteration ____ capital structure may entail such things as an increase ___ share capital.

5) The court may ___ its discretion set aside a resolution of a general meeting.

6) The company sold its stock ____ a price below the market price.

7) Disciplinary action may result _____ certain breaches of the code.

8) We are to decide ____ the merits of an acquisition.

9) The life of the company was brought ____ an end.

10) The debts of the company exceed ______its available cash.

11) The legislation imposes obligations ____ company officers in relation ____ the interests of creditors.

Read the text and decide whether the statements are true (T) or false (F).

1) If a company changes its structure it is an administrative change.

2) Fundamental changes in the company’s structure are regulated by law.

3) A company may change its name by special resolution of the Board of Directors.

4) The power to change the capital structure of a company is provided by the Articles of Association.

5) A company may reduce its share capital only if there is a court decision.

6) In the result of a merger only one company will continue its life.

7) If a company decides to buy all of the other company’s assets, the management of the company must approve it.

8) By a takeover bid one company may gain control of another company.

9) The process of takeovers is controlled by the Boards of Directors.

10) After winding-up a company no longer exists.

11) If a company is insolvent it cannot pay its debts.

12) Unsecured creditors will never achieve repayment.

Chose the phrase which best completes each statement. Sometimes more than one variant is possible.

1. The main examples of fundamental changes in the company include….

a. liquidation.

b. dismissal of the senior officers.

c. sale of substantially all assets.

d. acquisition of controlling shares.

2. Constitutional alterations in a company are connected with ….

a. change of the company’s name.

b. change of the company’s objects.

c. alteration of capital.

d. alteration of conduct of annual general meetings.

3. Alteration of capital structure requires ….

a. increase in the number of shareholders.

b. increase in share capital.

c. consolidation or division of shares.

d. cancellation of shares.

4. The process when two companies join into one is called …

a. merger.

b. liquidation.

c. consolidation.

d. winding-up.

5. A company may achieve control over another company by …

a. buying substantially all of the other company’s assets.

b. appointing new directors.

c. changing the objects of the company.

d. increasing share capital.

6. When a company makes a public offer to shareholders of another company to sell their shares …

a. consolidation.

b. winding-up.

c. merger.

d. takeover bid.

7. When a company faces liquidation it may ….

a. borrow more money from a bank.

b. sue the creditors.

c. increase liabilities.

d. re-negotiate debts.

ADDITIONAL READING

Text 1

A LECTURE ON LEGAL ASPECTS OF ACQUISITION

…I would like to start with a few comments on how to decide if your business is ready to undertake an acquisition. Then I’ll deal with the issue of making the right choice, that is, choosing a target. After that, I’ll discuss the process of assessing the target business, which involves gathering financial information, like looking at trends in sale and profit margins, for example.

In this section of my presentation, I’ll be addressing the main legal issues which arise at different stages of the acquisition process, which require separate and sequential treatment. That’s say, they have to be done in the proper order. First, I’ll tell you about the due diligence stage, and then we’ll look at the deal stage.

What is due diligence? Generally this term is used to refer to the careful professional scrutiny of the assets and liabilities of a company, usually in preparation for an acquisition. It is the process of uncovering of all liabilities associated with a firm. It is also the process of checking if the claims made by the seller of the target business are correct. You should know that directors of companies are answerable to shareholders for ensuring that this process is properly carried out.

For legal purpose, there are several things that must be done in the course of due diligence. First, you have to obtain proof that the target business owns the key assets such as property, equipment, intellectual property, copyrights and patents. Another thing that you should do is to get the details of past, current and pending legal cases. Look at the contractual obligations that the business has with its employees (including pension obligation), as well as contractual obligations with customers and suppliers. Here, one has to think about any likely or future obligations. It is also important to consider the impact that a change in the ownership of the business may have on existing contracts. Due diligence is routinely conducted by lawyers.

Now let me move on to the deal stage. When you are considering general terms of a potential deal, you’ll probably look for certain confirmations and commitments from the seller of the target business. These’ll provide the level of comfort about the deal. They’re also indications of the seller’s own confidence in their business.

A written statement from the seller or buyer that provides assurance of a key fact relevant to the deal is known as a warranty. You may require warranties with respect to the business’s assets, the order book, debtors and creditors, employees, legal claims and the business’s audited accounts. A commitment from the seller to reimburse you in full in certain situations is known as an indemnity. You might seek indemnities for unreported tax liabilities, for example.

Do the task.

Decide whether the statements are true (T) or false (F).

1. The speaker’s aim is to inform the business owners what they can expect if they decide to carry out an acquisition.

2. The speaker will touch staffing issues after an acquisition.

3. The important legal steps that must be carried out in the course of the acquisition process can be completed in any sequence.

4. ‘Due diligence’ refers to the process of gathering and analyzing financial information and other relevant information about a business before it is acquired.

5. One aspect of due diligence is verifying ownership of intellectual property.

6. In the course of due diligence, the acquirer should terminate all of the target company’s contracts with suppliers.

7. A warranty is a written statement by a party attesting that a fact relevant to the deal is true.

8. The target may provide indemnities to protect the acquirer against future liabilities.

Text 2

SPIN-OFFS

The term 'spin-off refers to any distribution by a corporation to its shareholders of one of its two or more businesses. Sometimes the spun-off business is transferred first to a newly formed subsidiary corporation. The stock of that subsidiary is then distributed to the shareholders of the distributing corporation. Other times, the stock of a pre-existing subsidiary is distributed.

Spin-offs can include distributions on a proportional basis (i.e. pro rata), in which the receiving shareholders do not give up any of their stock in the distributing corporation when they receive the spun-off stock. Sometimes the distribution only goes to certain shareholders. In this case, the receiving shareholders give up some (or all) of their stock in the distributing corporation in exchange for the stock of the controlled subsidiary, Non-pro-rata spin-offs are sometimes referred to as 'split-offs'. A non-pro-rata spin-off that results in one group of shareholders holding all the stock of the distributing corporation and a second group holding all the stock of the former subsidiary corporation is referred to as a 'split-up'.

A spin-off is used to separate two businesses that have become incompatible. In a case where investors and lenders may want to provide capital to one but not all business operations, a spin-off can be a good solution. Spin-offs are also used to separate businesses where owner-managers have different philosophies. Spin-offs may furthermore be used by publicly held companies when the stock market would value the separate parts more highly than combined operations. The separation of business operations could also lead to a greater entrepreneurial drive for success.

The tax characteristics of a qualifying spin-off under Internal Revenue Code Section 355 make this an attractive tool for solving certain corporate challenges. Without Section 355, the distributing corporation would have to recognize a gain on the stock it distributed as if it had sold that stock. In addition, shareholders receiving the distribution would be taxed on the shares received, either as a dividend or as capital gain. This double tax usually makes spin-offs extremely expensive. Code Section 355 permits a spin-off to be accomplished without tax to either the distributing corporation or to the receiving shareholder. Any gain realized by the shareholder is deferred until the stock is sold.

Do the task.

Answer the questions.

1) What is a spin-off?

2) How do we call a company which distributes its business operations?

3) How do we call a company which is spun-off?

4) Who will receive the stock of a subsidiary company?

5) What are the types of distribution/spin-off?

6) What are the characteristics of a proportional distribution?

7) What are the characteristics of a non-pro-rata spin-off?

8) How do we call a non-pro-rata spin-off when receiving shareholders give up all of their stock in the DC?

9) What is the result of a split-up?

10) In which cases does a company management use a spin-off?

11) Section 335 of the Internal Revenue Code makes spin-offs attractive for corporations and shareholders. Why?

12) When do receiving shareholders pay tax on the gain realized?

UNIT 5

CONTRACT LAW

ACTIVE VOCAVULARY

draft and interpret– составлять и толковать provisions of an agreement – положения договора lease agreement – договор аренды loan agreement – договор займа sales agreement – договор купли-продажи consultancy agreement – договор на оказание консалтинговых услуг hire purchase agreement – договор купли-продажи с рассрочкой hire contract – трудовой договор service contract – договор на оказание услуг binding agreement– соглашение, обязательное для исполнения parties concerned –заинтересованные стороны accept an offer– принять предложение offeror –предлагающая сторона; оферент offeree –получатель предложения; акцептант consideration – материальное вознаграждение acceptance– принятие предложения enforceable/valid contract – договор, имеющий юридическую силу promisor– лицо, дающее обещание или обязательство promisee – лицо, которому дано обещание или обязательство counter-offer – встречное предложение essential terms – существенные условия договора price and the subject matter– цена и предмет договора enforce a contact– требовать исполнения договора (по суду) vague / indefinite contract– договор без четко сформулированных условий terms of the agreement – условия договора

oral contact – устное соглашение rights and obligations – права и обязанности defences– возражения ответчика escape obligations under the contract –снять с себя обязательства по договору fraud in the inducement -введение в заблуждение относительно намерений duress – понуждение, принуждение lack of legal capacity -отсутствие дееспособности при заключении договора attack the validity of a contract -оспорить действительность договора breach a contract –нарушить договор file a lawsuit– подать иск breaching party– сторона, нарушившая договор non-breaching party = injured party – добросовестная страдавшая сторона award damages– присудить компенсацию ущерба remedies– средства судебной защиты specific performance – реальное исполнение договора enforceable rights –права по договору, защищенные законом for the benefit of a third party– в пользу третьего лица transfer the rights/duties – передать права/обязанности assignment of rights– переуступка прав delegation of duties – передача обязанностей assignor - правообладатель assignee – правоприобретатель delegate –лицо, передающее обязанности delegatee -лицо, которому передоверены обязанности

The basic principles of contract law in the English system arise from established custom and rules and are fundamental to all areas of law in practice. Contract law deals with drafting and interpreting the provisions of any legal agreement, such as the lease, or loan agreement, a sales agreement, a consultancy agreement, a hire purchase agreement, a hire contract, or a service contract, etc. The principles of contract law will determine whether and at what point a binding agreement has been made between the parties concerned.

Contract law deals with promises which create legal rights. In most legal systems, a contract is formed when one party makes an offer that is accepted by the other party. The party that makes an offer is called an offeror, and the party that accepts the offer is called an offeree. Some legal systems require more, for example that the parties give each other, or promise to give each other, something of value. A person’s promise is made ‘in consideration of’[3] (because of and in exchange for) the other person’s promise. Thus, in common-law systems, this promise is known as consideration. Consideration is the thing or legal right that one gives up to induce another person to part with something – the price that one pays. Hence, the equation learned by law students: offer + acceptance + consideration = contract. In those systems a one-side promise to do something (e.g. to make a gift) does not lead to the formation of an enforceable contract, as it lacks consideration.

Let us see an example. Ann asks Ben to paint her house for $ 2, 000. Ann is the offeror (the person making an offer) and Ben is the offeree (the person receiving the offer). A contract arises when the offeree (Ben) indicates agreement to, or ‘accepts’, the offer. Ann’s promise to pay money is consideration for Ben’s promise to paint her house. His promise to paint the house is consideration for her promise to pay money. Thus, usually, each contracting party is both a promisor and a promisee.

When the contract is negotiated, the offer and the acceptance must match each other in order for the contract to be binding. This means that one party must accept exactly what the other party has offered. If the offer and acceptance do not match each other, then the law says that the second party has made a counter-offer (that is, a new offer to the first party which may be accepted or rejected). For example, Ann says to Ben, “I’ll pay you $2, 000 if you paint my house. Will you do it on Friday for that price? ” If Ben accepts the offer, it is OK. But if he says, “I’ll do it on Saturday for that price” or “I’ll do it on Friday but for $2, 500”, it is a counter-offer which is to be treated as a new offer and be accepted by Ann.

For a promise to become an enforceable or valid contract, the parties must agree on the essential terms. These include the price and the subject matter of the contract. Nevertheless, the courts will enforce a vague or indefinite contract under certain circumstances, such as when the conduct of the parties manifests sufficient certainty as to the terms of the agreement.

Contracts may be done in writing or by spoken words. If the parties make a conract by spoken words, it is called an oral contact. In some jurisdictions, certain special types of contracts must be in writing or they are not valid (e.g. the sale of land).

Contracts give both parties rights and obligations. Rights are something positive which a party wants to get from a contract (e.g. the right to payment of money). Obligations are something which a party has to do or give up to get those rights (e.g. the obligation to do work). In contractual disputes, certain defences to the formation of a contract may permit a party to escape his/her obligations under the contract. Illegality of the subject matter, fraud in the inducement, duress and lack of legal capacity to contract all enable a party to attack the validity of a contract. For example, an agreement to buy heroin for recreational use or for resale would not be a contract as the agreement has an illegal purpose.

When a party does not want to do what it is required to do under a contract, that party is said to have breached a contract. The other party may file a lawsuit against the breaching party for breach of contract. The non-breaching party (sometimes called the injured party) may try to get a court to award damages for the breach. Damages refers to the money which the court orders the breaching party to pay to the non-breaching party in compensation. Other remedies include specific performance, where a court orders the breaching party to perform the contract (that is, to do what it promised to do).

In some cases, individuals/companies who are not a party to a particular contract may nevertheless have enforceable rights under the contract. For example, contracts made for the benefit of a third party (third-party beneficiary contracts) may be enforceable by the third party. An original party to a contract may want to transfer the rights/duties under a contract to a third party. This is called an assignment of rights or delegation of duties. When a party assigns (‘gives’) its rights under the contract to another party, the assigning party is called an assignor and the party who gets the rights is called an assignee. When a party delegates the duties under the contract, it is called the delegate, and the party who gets these duties is called the delegatee.

LANGUAGE FOCUS

1. Give Russian equivalents for the following English words and phrases:

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