Why is a company allowed to change the number of shares it’s divided into after its IPO? I read that even after an IPO, a company can change the number of shares that it’s divided into based on a board vote. What’s to prevent them from arbitrarily increasing the number of shares to raise capital, thereby diluting the value of the outstanding shares? I understand that a company might refrain from releasing all of their stock into the market initially so they can sell it later to raise capital, but it seems strange that they would be allowed to raise money by decreasing the value of an asset that shareholders have already bought. In other words, what’s to prevent a company from saying every quarter: “Instead of being divided into n shares, we’re now divided into n+100 shares. We’re keeping 50, and the other 50 will be offered in a PO (which will decrease the value of the outstanding shares)”?
There are two different kinds of transactions that are implicated by your question. The first is a stock stock split. This simply turns 1 share into X shares and trades out existing shares for new shares. This has no economic effect and is simply done for the convenience of trading shares for prices that are easy to work work on a practical basis, for example, in software listing stock prices. The second is an initial public offering, which, confusingly, means not just the first time that newly issued stock is sold to the public by the issuer, but any time that newly issued stock is sold to the public by the issuer. The possibility of dilution is real in this situation. Abuse of that possibility is primarily managed through the fact that the Board of Directors whose approval is required to issue new stock and sell it to the public, have a fiduciary duty to the company to sell the new stock at a price commensurate with the fair market value of the currently outstanding stock. If the Board of Directors breaches that fiduciary duty to the company, then shareholders may bring what is called a derivative action to enforce the duty that the Board of Directors breached to the company. Lawsuits of this kind make up a significant share of the total volume of cases in the Delaware Chancery Court, a state court in the U.S. state of Delaware where most large publicly held companies are organized. These cases are also often litigated in the state courts of New York State and of California, both of which are also popular states for publicly held companies to be incorporated in. Also, keep in mind that the Board of Directors is elected by the existing shareholders, and while most publicly held companies have &quot;Soviet style ballots&quot; in director elections from a pre-set slate of candidates, a proxy fight to run a competing slate of candidates is allowed is existing shareholders are unhappy with their performance. Normally, as a matter of practical reality, the Board of Directors is quite responsive to coalitions of shareholders with substantial holdings who care about the value of their shares as opposed to political issues only tangentially related to the company. A Board of Directors is usually aligned with the interests of the existing shareholders and doesn't have an incentive to screw them over by diluting the value of their shares. People who don't like how a Board is running a publicly held company usually sell their shares and invest in some other company instead, rather than risk being diluted. SEC approval and approval from state securities regulators is also required for an initial public offering (including a subsequent offering of new shares by a public company) but that approval requires only full disclosure of the transaction and the company's financial situation, and cannot be denied on the basis that the transaction is unfair to existing or to new shareholders on account of the price of the offer. It is allowed because the whole purpose of a publicly held company is to raise capital to engage in business activities. When a publicly held company needs more money to do something it has several choices: An initial public offering of corporate bonds. An initial public offering of new stock. A private loan from a bank or affluent individual. Options 1 and 3 increase the debt to equity ratio of the company and increase the company's risk of default on existing loans, while imposing a minimum cashflow requirement that it may not be able to fulfill in the event of a short term economic disruption (like the current pandemic). In the case of a very big investment, there may simply be no lender who has the capacity to lend enough money privately. Option 2 makes the company more creditworthy and can be economically desirable to existing shareholders is the shares are sold at a price that makes it a cheaper source of capital than borrowing money at the interest rates currently available to the company. If the capital raised makes possible an investment that increases profits for the company by a greater percentage than the existing shareholder's interests are diluted, it is a good deal for existing shareholders.
"Backlogged" has no legal status. Under usual contract terms, all intellectual property you generate as part of your employment belongs to your employer. But "intellectual property" is a category of rights, such as patents, trademarks and copyrights. An idea by itself is not intellectual property. "Wouldn't it be great if ..." cannot be owned by a company. However, specific ideas can be trade secrets, and trade secrets are protected. It's likely that your idea is a trade secret, if the idea applies to the sort of business that your ex-employer is involved in. The fact that it's called promising by the company reiterates that.
Maybe You linked to the publication of a patent application, not to a patent. Based solely on looking at the format of the number the answer would be, Yes, unless it eventually became an issued patent. As it happens, it did become issued patent US9066511B2. That would make the answer no. Since the application was filed before you started selling them, the fact that you were selling them in 2017 could not be used to challenge the patent. I say the answer is maybe because the patent has been disputed in court and I do not know if the outcome has left the patent valid. You can look this up at the USPTO Public PAIR. Then you need to search with either the patent number or the publication number. When you get to the record of the history of that application look at the Image File Wrapper tab.
When you license your IP (like a song) you can specify the terms and conditions of its use by the licensee, including revenue shares from any derived work. However, if, as your comment suggests, you grant an "informal" license, and later decide that you want to "firm things up" with a license having different terms, that's a matter you would have to either negotiate or litigate with your counterparty. If you want a common reference point for negotiation of this sort of license, you might have a look at compulsory license terms.
Can bankruptcy be used as strategy to avoid paying back investors? Are there examples of such behavior? In the United States, a Chapter 11 bankruptcy is frequently used as a way to cancel equity investments and to reduce or eliminate long term bond debt (especially subordinated bond investments) by senior management, in an effort to keep the business operating as a going concern and keep their elite senior executive jobs, and the jobs of many subordinate employees and contractors of the business. Pretty much every single business bankruptcy reduces the amount of return that investors in the company can receive from it (although there are rare cases when investors can be compensated in full in an orderly disposition of a company's assets but bankruptcy is filed to prevent a fire sale of assets in a disorderly fashion that would hurt investors, or hurt them more than the alternative outcome). A key factor here is the segregation of ownership and management in most big businesses. A large equity owner in a company is in a poor position to defraud other equity owners in bankruptcy, however, and equity owners are behind debt investors in priority in bankruptcy, so it is also hard for the equity owner to use bankruptcy to defraud debt investors without hurting the large equity owner. In some ways, this is a variant on a leveraged buy-out by management, because usually, in a big business bankruptcy, a key step is for management to secure a third-party lender to the bankruptcy debtor (G.E. Capital was the dominant lender in this market for many years), to finance the continued operations of the business until a plan could be put in the place to reorganize the company with less debt and none of its old equity investors. This is almost never a strategy of the company at the outset. It is one that is chosen once it becomes clear that its business model has ceased to be viable with the amount of leverage that the business has. Often, in such a plan, some long term debt that is not subordinated is converted to equity, although that equity is usually worth less than the original equity investment of the investors in the firm. Typically, this strategy is used when a company with a large initial capital investment is in a market where it can still make a profit relative to its variable operating costs from the revenues it can secure in current market conditions, but can no longer afford to service its long term debt that was used to make that large initial capital investment (e.g. in a building or factory) that has decreased in value because the products made with that investment are no longer as valuable as they used to be, or because, for example, patents expired but the long term debt wasn't paid off during the terms of the patents. For example, many U.S. coal mining companies in the U.S. have recently had Chapter 11 bankruptcies. These companies made large investments in coal mining operations that were economically sensible when coal was worth more and alternatives to coal were not economically viable. But, when renewable energy became cheaper with changes in technology, and environmental requirements made coal fired power plants more expensive, the market price for coal collapsed and those companies could no longer support the debt that made it possible to conduct the mining operations that these companies had incurred. In a reorganized fashion, some of these companies could continue to be viable with lower sales volume and lower coal prices since they now only had to pay current operating costs and not obligations to investors in those companies. What are the mechanisms in place in US law to prevent people from creating a company to attract investors with the intent of filing for bankruptcy as a strategy to not repay their debt? This strategy doesn't really make sense as a plan from the issuing company's point of view, it only makes sense if the person promoting the scheme has some way to extract value from the investment made by the investors. The company itself that issued the securities (typically stock or corporate bonds) in which the investor invested also isn't a suitable target of litigation because the company that issued the securities simply doesn't have the assets to pay damages to the investors. If one can show that the company incurred debt with an intent not to repay it, and is followed by transfers out of the company without receiving substantially equivalent value in exchange to some third party behind the scheme, this can be regulated by fraudulent transfer laws. See Section 4(a)(2) in the Uniform Act numbering although individual states adopting the act as state law invariably number the sections differently). This conduct can also be used to seek securities fraud liability or common law fraud liability from the persons other than the company itself (such as its officers or brokers or promoters of some other kind) involved in promoting the company. Footnote Re Importance Of A Formal Bankruptcy The bankruptcy code component of this analysis isn't a particularly important part of the strategy. A limited liability entity can dissolve itself, or make an assignment for the benefit of its creditors of all of its assets, or be placed in a receivership, outside of bankruptcy, with similar effect, since the discharge of debts is not relief associated with a Chapter 7 liquidation of a limited liability entity (although debts can be reduced or eliminated as part of a Chapter 11 plan so long as the creditors are at least as well off as they would be in a Chapter 7 liquidation or otherwise consent to the plan).
In business dealings, you would have a contract with a company, not with its owner. The new owner inherits both the assets and liabilities of the company. It's up to the buyer of the business to do due diligence before buying the company. The old owner may escape obligations to clients and suppliers once the sale of the business is complete, but the new owner could sue the old owner for fraud. (It may be possible to escape some liabilities by declaring bankruptcy, but that's not the situation you described. One unethical accounting trick that a company can use is to split the company into two corporations such that one branch inherits the liabilities, and it go defunct.)
There is certainly precedent. This list of the 10 biggest class action lawsuits in the world indicates that 8 of the 10 were by investors against their own company. In any event your analysis is flawed. The people who initiate the class action may (probably are) no longer be investors because they sold their shares and realised their losses. Further a legacy investor who didn't buy on the basis of the company's wrongdoing would not be entitled to damages. Finally, an investor who bought at say $100 on the basis of false information (like the cars were legal when the company knew they weren't) and now hold shares worth $40 will wait many years (if ever) to make good their losses: a lawsuit will be quicker and more certain.
Just think of the subtenant cum owner as two separate people with two separate roles. Tenant = T Subtenant = ST Old owner = OO New Owner = NO The rights of the tenant vis-avis the new owner will be informed by the lease and the local laws. Generally, if the sale happens in the middle of the existing lease, the NO is obligated by the terms, as is the T. NO cannot just kick T out, and T cannot just break the lease. The lease may say what could happen and local laws will apply. Likewise, ST has whatever contract with T that previously existed. Pretend NO and ST are different people. If T owes NO $1000 per month, and ST owes T $400 a month, that continues even though ST and NO are the same person. Depends on what kind of dispute. See above. All contracts continue, subject to whatever the lease with the original owner and the subtenancy agreement say abut modifying or breaking the lease and sublease. Local laws apply. Note, if the subtenancy was "off the books" or was done when not allowed by the original owner, and if it was not in a place that the local law says owners cannot deny subleasing, then tenant might not have any protection. ST, now that he is owner could just move out and stop paying. On the other hand, even if he is the owner, he cannot just say "I am the owner now, so I am moving back in for free" because the original lease gave the tenant use of the whole property. But ST could just drop out because T always owed OO, and now NO, the full rent. Do you mean if rather than sublease, they were both on the original lease? Interesting, but just imagine it as the obligations before the sale = the obligations after the sale. I don't know though. There are some tax implications for an owner occupied rental.